Attention to US energy policy will revive in 2005 after an impressive string of failures by Congress to enact comprehensive energy legislation. The degree to which Congress and the energy industry pursue a new approach this year will be a test of seriousness. The past approach doesn't work.
The past approach tries to do too much at once. Comprehensive energy legislation, enacted or not, is destined to fail. It inevitably becomes a special-interest free-for-all. And the oil and gas industry gets drawn in, compromising its way into support of subsidies for chronically uneconomic energy sources and of wealth transfers such as mandates for ethanol in gasoline.
Guilt by association
The industry should recognize the hazard of guilt by association and quit making passage of an energy bill an end unto itself. The US fares better with no energy bill than with a bad one. The legislation Congress almost passed last year was too big, too complex, too misshapen by political trading, too full of favors to parochial interests, and too changeable to keep track of. Its large initiatives, such as an ethanol mandate, were wrong moves. And the large initiatives that survived the political grind didn't include essential changes such as anything more than token expansion of oil and gas leasing of federal land. On balance, the bill would not have served national interests. Despite its press notices, the bill didn't satisfactorily address energy supply.
That's another failure of the past approach to energy policy: It's more about fuel choice than energy supply.
The main energy problem the US faces is not that more than half the country's oil supply comes from abroad. It is not that petroleum and natural gas account for nearly two thirds of the energy market. It is not that the US consumes energy at great rates. Those are simple facts. They reflect geologic and economic realities—among them that the US is a large place and has the world's most vibrant economy.
The main energy problem the US faces is that systems for supplying and delivering oil and gas have reached their physical limits and need to expand. Much of what blocks expansion has to do with government.
The problem is most pressing in the case of natural gas. The market would absorb more gas if the gas were available. The gas would be available if the US produced and imported more of it. But more production largely requires leasing of federal land now off limits to producers. And increasing imports requires pipelines and LNG-receiving capacity not now in place. A priority of energy policy should be to relieve those bottlenecks.
Yet the past approach to energy policy-making subordinates issues like those to wishful thinking about alternative fuels. It becomes more about cosmetics than economics. It begins by asserting the disadvantages of fossil energy, of which there are some, and by ignoring the disadvantages of other energy forms, of which there are even more—including stout costs and puny supply potential. So promoters of uneconomic, niche energy sources line up at the political buffet, and the nation gets comprehensive energy legislation that does too little for substantial supply.
Lifestyle choices
Repair of this flawed approach to energy policy must begin with recognition that the choices are less about fuels than lifestyles. If the US is to maintain the economic progress and advancing standards of living that make it the envy of the world, it will consume energy at great and growing rates. Much of that energy must be oil and gas because nothing else can replace them anytime soon. This is nothing to regret. A happy byproduct of economic progress—progress made possible by fossil energy—is the technical improvement that yields steady gains in energy-use efficiency and steady declines in the environmental consequences of energy use. As long as prosperity remains a national priority—as it appropriately will—energy policy should concern itself with supply of economic energy and leave fuel selection to markets.
Assertion by energy policymakers and legislators of the priority importance of energy supply to national economic interests would be a good start to a new political year. A welcome second step would be recognition that energy issues can't all be resolved in one bill.