It might have been Sen. John Kerry (D-Mass.) who started it. In October 2004, near the end of his unsuccessful campaign for the presidency, Kerry suggested in a speech in Santa Fe, NM, that the country commit itself to independence from oil from the Middle East. The effort, he said, could replicate the Manhattan Project, the all-out push by the US government during World War II for development of the atomic bomb. More recently, Sen. Charles Schumer (D-NY) has invoked the bomb program on behalf of energy. “We need to develop new energy sources-a crash program for alternatives, a Manhattan Project,” he said in April.
Proposals based on the analogy continue to appear in commentary about energy. At their core are the twin assertions that the government has an obligation to intercede in this important area of economic and personal behavior and that it can do so constructively. Such heavy reliance on government represents a sharp turn in American political thinking. For the past couple of decades, US energy policy has mostly left fuel choice and pricing to market forces and focused regulation on environmental goals. Results, on balance, have been positive. Energy for most of that period has been abundant and cheap. And despite strong increases in energy consumption, air and water quality have improved while the surface disturbances of activities related to energy supply have diminished.
Reversing the trends
Built into the policy equation, however, was a tilt that ensured a reversal of these happy trends. While demand grew without restraint, supply had limits related to environmental regulation, such as foreclosed access to hydrocarbon resources and impediments to refinery construction. An oversupplied market was destined to shed its comforts.
A market swing, though, is not a good reason to nationalize energy choice. The government cannot reconcile all the supposed compulsions for it to act aggressively on energy. Most of the compulsions arise from objections to oil, most of which in turn grow out of real disadvantages of the substance.
The combustion of oil creates air pollution and puts greenhouse gases into the atmosphere. Oil sometimes spills. The need for oil makes the US reliant on trade with oil exporters, some of which are politically unstable and some, downright unsavory. Money from the sale of oil finances terrorist groups. The price of oil fluctuates and is now distressingly high. What’s a government to do? Supporters of state activism say it should promote nonpetroleum fuels and force consumers to conserve energy. Yet if the aim is to quit using oil altogether, that strategy will fail. Even with maximum feasible growth of petroleum alternatives and ardent conservation, oil and natural gas will dominate the energy market for many years.
Beyond futility lie questions about which nonpetroleum fuels deserve official encouragement. All have disadvantages of their own. How does the government choose between one alternative and another? How does it keep incentives for an energy source that looks appealing today from foreclosing development of something that may prove technically and economically superior tomorrow? That’s a good question-but moot. In government choices, technology and economics always yield to politics. When politics drives energy choices, environmental values become distorted. The supposed environmental gains achievable from blending ethanol with gasoline, for example, have been greatly exaggerated by ethanol makers and their friends in Congress. In fact, all energy sources have environmental disadvantages that must be acknowledged and balanced against other factors. Politically driven decisions by governments can’t do the job.
Price pressures
The distorting influence of politics is especially pronounced in the matter of price. Pressures to develop oil substitutes are extreme now because oil prices are high. Yet, the prices of favored substitutes, even now, are higher. Absent technical breakthroughs nowhere in sight, antipetroleum energy choices motivated by price-based political pressure would only aggravate the problems they were supposed to solve. The US needs no Manhattan Project on energy. It does need sound energy decisions based on solid principles, about which more will appear here next week.
