Government fuel choices costly in energy policy

Bob Tippee

The making of energy policy is at its worst when policy-makers assign themselves responsibility for decisions best left to markets.

Omnibus energy legislation is taking the US down that dangerous path.

The bill under discussion in the Senate has taken aboard a renewable-fuel mandate for generators of electricity. It already had an expanded mandate for renewable fuel, meaning ethanol, in gasoline.

And it's much more generous than the House bill with tax breaks for politically preferred energy consumption and production technologies that now don't pass economic muster.

The conference that eventually must try to reconcile the House bill with whatever the Senate passes will be messy. Under heavy pressure from the White House to pass a bill, lawmakers will compromise serious energy issues against parochial favors. The product, if any, could be ugly.

There's nothing wrong with the renewable fuels and other alternatives to conventional sources of energy upheld in the House and Senate bills and in the Bush administration's push for energy legislation.

What's wrong is fuel selection by government. If the market needs alternative fuels, as it does, it will have them in the quantities and according to the schedules that make economic sense. Government efforts to force choices and timing create only inefficiency and cost.

The administration's energy vision illustrates the point. President Bush, leveraging his arguments against exaggerated hope for reducing US reliance on foreign oil, trumpets ethanol and hydrogen as vehicle fuels.

The superficial appeal is great: home-grown energy with diminished carbon emissions. But the production of hydrogen and ethanol requires energy, the preponderance of which comes from fossil fuel, much of it imported.

Forcing ethanol and hydrogen into the market would substantially raise energy costs without delivering on domestic-supply promises fully if at all.

Historically, the US has tended to see its energy priorities most clearly when confronted with a crisis of supply.

Oil and gas prices now demonstrate the verge of such a crisis. They also signal opportunity for new sources of supply—including some, probably, of those that the politicians like and some, almost certainly, that the politicians have yet to imagine.

(Author's e-mail: bobt@ogjonline.com)

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