Instead of a Manhattan Project for energy, the US needs coherent policy-making. Instead of an urgent mobilization of federal resources, the country needs a system for making judicious decisions about an important national interest. Instead of another initiative that tries to do everything at once, it needs a logical framework able to align government decisions about energy with technical and economic imperatives. It needs, in other words, a set of principles.
As suggested here last week, sound principles would orient energy policy to consumers, leave energy choices to free markets, protect taxpayers from unwarranted burdens, favor standards-based approaches to environmental and safety regulation, and make energy and related environmental goals realistic (OGJ, Aug. 21, 2006, p. 17).
Policy coherence
Principles such as those would give energy policy-making coherence it now lacks. Because energy tends to go unnoticed when oil and gas prices are low and get savaged when they’re high, that part of US governance is wildly uneven, given to wishful pursuit of hopeless goals, and therefore usually wasteful.
Attention to the interplay of reasonable principles would help policy-makers avoid such mistakes. For example, energy decision-making oriented to consumers yet committed to markets would approach oil and gas prices with more sophistication than is evident now. The traditional response to elevated prices is outrage, from which nothing constructive emerges.
Some conditions, in fact, make it altogether appropriate for oil and gas prices to rise to stressful levels. When supply can’t keep up with demand, prices need to rise enough to restrain consumption. A policy framework that joined concern for consumer interests with an understanding of markets would not lose its bearings over this proposition. It would instead seek adjustments that make markets work for consumers while remaining free, such as removing impediments to supply.
Until recently, attention to supply has been meager. Bills passed recently by the House and Senate to relax bans on leasing of the Outer Continental Shelf are, therefore, welcome, even if their wide differences put prospects for enactment of a compromise bill in doubt. While neither bill would accelerate leasing as much as it should, any political effort motivated by supply as a priority interest of consumers represents hopeful change.
This coupling of consumer interests with supply can bring perspective to environmental regulation, which has tended to run rampant as a principle unto itself. A major reason the US finds itself with too little refining capacity, for example, is that the government has piled laws and regulations onto refiners without considering how its actions affect the manufacturing costs, supplies, and retail prices of petroleum products. Since Hurricanes Katrina and Rita delivered harsh lessons about the importance of refining capacity, politicians have begun paying attention to this crucial part of the oil business. As with federal offshore leasing, however, progress is slow.
Behind any issue involving oil and the environment lurks an extreme agenda to quit using fossil energy altogether. Its effectiveness as a stealth principle of environmental politics is manifest in arguments, advanced even by reasonable people who would scoff at the no-oil extremism, that any kind of energy must be better than hydrocarbon energy.
Sounder principles
Sounder principles can prevail. When alternatives to hydrocarbon energy are promoted simply for being alternatives, questions should arise about their effects on consumers, about their costs to taxpayers, about their own environmental consequences, and about how much energy they really can provide. This doesn’t mean resisting nonhydrocarbon energy, the development of which now is crucial to supply later. It means simply that nonhydrocarbon energy will fare best in the long run if decisions about it are made within a framework of market-based principles, oriented to consumer and taxpayer interests and designed to keep expectations realistic.
Principles can affect energy decisions in these and other ways. They can be practical. And they beat raw politics every time.
