Has the world's largest energy-consuming country learned anything from its recent bump against the limits of supply?
A presidential election campaign should be a test.
In discussions of energy policy in the US, supply receives secondary attention, which tends to focus on the margins of potential. Priority goes to environmental caution, which is assumed to conflict with energy supply. A strong view has emerged that the US should cut its reliance on oil, mandate conservation, and subsidize renewable forms of energy.
Nearly every voice raised in support of supply promotes some particular source: renewable energy as a category, a specific alternative fuel, natural gas from one place or another, oil from a certain type of well.
Policy-making thus treats energy supply as a smorgasbord of political choices.
The physical and economic worlds don't work that way.
US energy needs are large and growing and must be satisfied in a world with larger energy needs growing even faster.
This year, the US has experienced the effects of intensifying competition for crude in international trade.
It has experienced the effects of refining capacity operating at near-maximum rates and falling increasingly short of demand for oil products. It has experienced the effects of natural gas production unable to satisfy demand and of the inability of imports to compensate without major expansion of infrastructure.
It has repeated a fruitless contest over energy legislation offering incentives for development of marginal energy sources without acting on sources able to make a meaningful difference—because access to those supplies would require oil and gas leasing subject to controversy.
So energy consumption strains the limits of dangerously static capacity at crucial points in the supply system. And prices of oil products, natural gas, and electricity reflect the strain.
Markets will adjust, as they always do.
The question for policy-makers is whether they'll accommodate or constrict growth—not just of any one country's economy but also, and more importantly, of the world's population.
Energy policy that cherry-picks energy sources and treats conservation as an alternative to supply drowns itself in false choices.
A growing world needs it all.
(Online July 2, 2004; author's e-mail: [email protected])