How Government Can Help: By Getting Out of the Way

When the initial rescue efforts wind down in the ravaged <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Gulf Coast area, the much longer process of cleanup and recovery will begin. In this effort, while government will be involved, millions of people will be picking up—literally—the pieces of their lives. To be able to do this quickly they will need energy to power their trucks, cars, generators, and pumps—and effective tools to ward off disease in the affected areas. To that end, federal and state governments need to think about how they can help these men and women get the energy and resources they need at the most affordable prices possible.<?xml:namespace prefix = u2 /> <?xml:namespace prefix = u3 /><?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />


<?xml:namespace prefix = u4 />There has already been a good start. The Environmental Protection Agency announced that it is waiving certain restrictions on air pollution requirements for gasoline and diesel fuel until September 15. This will reduce delay and unnecessary cost in the fuel supply process. The EPA has also allowed retailers to sell gas normally restricted for sale in the fall and winter, when air pollution is less of a concern. This too will help reduce prices and increase the supply available. Moreover, the EPA, after initially restricting these waivers to the states affected, has extended them to all 50 states. This will also help in the relief effort, as people who need to spend less on gas will have more money to give to charity.


This is all to the good, but more could be done. It is likely that many of those affected will still be refugees on September 15, so the waivers will need to be extended as much as possible. Indeed, with so many jobs and opportunities lost as a result of the storm, people will need more affordable energy for the foreseeable future. The pollution justification for the gasoline standards is largely theoretical, and needs to be weighed against the genuine needs of people in a continuing emergency. Indeed, the Hurricane Katrina crisis provides an opportunity to see whether those requirements are genuinely beneficial. If air pollution does not turn out to be a problem during the period when the requirements are lifted, the federal government should reconsider their usefulness.


On the other hand, governments should be wary of interventionist measures intended to keep down prices. Gas price caps, which Hawaii recently adopted, would be a terrible idea, since they create the worst energy problem of all—shortages. No one will be helped by long lines at gas stations like the ones we saw during the 1970s gas crises. Instead, unadulterated prices remain the best method we know of to allocate supply to demand. To that effect, rather than cap prices, governments should remove taxes that artificially raise gasoline prices until the Gulf Coast's recovery is well under way.


There are also issues on the supply side, although they are rather longer term. The only immediate relief on this front is release of oil from the national strategic reserve, which was designed for exactly this sort of emergency (and not to alleviate routine gas prices hikes, as some politicians seem to think).


Yet most actions that can be taken on the supply side would be extremely helpful if another such disaster occurred. First, a new oil refinery has not been built in the United States since 1976 because of various environmental regulations. A waiver of these rules—combined with some political leadership—would allow energy companies, which have plenty of money to invest in business-enhancing infrastructure, to ease the supply bottleneck.


In addition, the recent Energy Bill, though filled with pork, contains some good points, such as permission to undertake a seismic inventory of the potential oil and gas reserves around the U.S. Finding and exploiting new oil and gas fields, whether offshore or beneath the Rocky Mountains, will reduce our reliance on the Gulf Coast resources.


We have built up a frightening array of environmental regulations over the years. The EPA's recent actions constitute an admission that these are a luxury we cannot afford when lives are at risk. As we recover from this disaster, perhaps we can also recover from the disease of over-regulation.