During the easy-come, easy-go dot-com craze of the 1990s, talk abounded of a new economy. It was an economy in which cash “burn rates” mattered more than profitability, in which information worked as currency, in which physical assets counted for little. People made a lot of money at the dawn of this new economy. They lost it when reality struck.
Like the ill-fated new economy, a new energy vision has taken wispy form in the popular US imagination. It’s a vision quivering with hope for energy independence, renewable supply, and no environmental consequence. It’s a vision that can make a Republican president talk like a Democrat.
Vision vs. choice
The new energy vision clashes with fuel choice by the market, which has had a good run in the US. After price controls and manipulations imposed by the National Energy Act of 1978 gave way to reality, oil and gas prices vacillated for a quarter of a century in a range that, usually, encouraged production and allowed consumption to grow. Excursions outside this range of comfort never lasted long. Oil and gas attracted little attention except to the extent their production and use affected the environment. Energy consumers enjoyed ample supply and low prices.
Because prices recently have risen in an evident market correction, however, politicians from both major political parties now want to nationalize fuel choice. The abrupt change of political mood threatens to generate endless policy mischief. It was on display Oct. 12 in a speech by President George W. Bush at a renewable-energy conference in St. Louis.
“We’re too dependent on oil,” he declared in a reprise of the “addicted to oil” theme from his 2006 state-of-the-union address. The statement raises important questions. How dependent is “too dependent?” What’s the basis for this judgment? Where, in fact, does the Constitution give the president responsibility for assessing oil dependency?
These questions could be ignored if Bush’s assertion of a national problem didn’t lead him into potentially expensive ideological territory. Has the president forgotten that government energy prescriptions usually cost too much and seldom work?
In the president’s view, the problem isn’t only that the US is “too dependent on oil,” whatever that means. There’s also national security, Bush reminded his audience in St. Louis. “We get oil from some countries who don’t particularly care for us.” And this is relevant to-exactly what? Mutual adoration has never before been a precondition of commerce. Why make it one now? In fact, business can stabilize international relations when governments don’t use it as a cudgel. Reciprocal economic needs deserve more attention than they receive as influences on national behavior and factors in the security of energy supply.
“This country has got to use its talent and its wealth to get us off oil,” Bush insisted with no mention of how much this ambition might cost energy consumers. Then he went on to boast about money he’s committing the government to spend on hybrid vehicles, battery technology, hydrogen as a vehicle fuel, and, of course, renewable energy. He further asserted the need for the government to change American behavior. “We’ve got some interesting initiatives at the federal level to help change habits,” he promised. What’s most interesting, in fact, is the confusion evident in a Republican president who feels compelled to manipulate individual behavior.
Which party?
To his credit, Bush did speak of the need to increase domestic production of oil, gas, nuclear power, and coal-energy sources with much greater supply potential and much less need for subsidies from taxpayers than the less traditional fuels on his wish list. All in all, though, he sounded on energy, less than a month before a pivotal national election, like a Democrat. No wonder Republicans are worried.
That this can happen is important beyond political outcomes. A market adjustment is no reason to usurp economics. It’s no reason to throw public money at uncompetitive energy forms. It’s no reason to adopt the energy equivalent of dot-com economic fantasies. And it’s no reason to limit freedom of economic choice.