Energy and US elections

Nov. 6, 2006
Yes, Nancy Pelosi has argued for a windfall profit tax on oil companies. Yes, that position reflects misunderstanding of US energy needs.

Yes, Nancy Pelosi has argued for a windfall profit tax on oil companies. Yes, that position reflects misunderstanding of US energy needs. And, yes, the California Democrat will become speaker if her party wins control of the House of Representatives in this week’s general election. But no, Democratic takeover of the House and, maybe, Senate wouldn’t mean ruin for US energy.

Republicans have controlled the House since 1995 and the Senate most of the time since then. They’ve controlled the White House since 2001. Has Congress approved leasing of the Arctic National Wildlife Refuge coastal plain? No. Has it dismantled hurdles to leasing of the Outer Continental Shelf off the East and West Coasts and in the Gulf of Mexico off Florida? No. Although proposals have come and go, there’s still no leasing. So Republicans have dominated US politics to varying degrees for a decade but haven’t managed to implement either of the two most important steps the US government can take on energy supply.

Supply steps?

It hasn’t been all bad with Republicans. There have been some improvements to taxation of domestic producers and to leasing and permitting of onshore federal acreage. And the Republican administration has tried to clarify the confusion into which its predecessor threw refiners by retrospectively reinterpreting the Clean Air Act’s New Source Review program.

But the need for big energy-supply steps and the inescapably large involvement of hydrocarbons should have become clear. With one qualified exception, no such step has been taken.

The exception is passage of the Deepwater Royalty Relief Act of 1995, which fostered an industry that now represents the principal growth area for US oil and gas supply. While enactment came after Republicans claimed Congress, the political work got done before the power change. Without the sponsorship of former Democratic Sen. J. Bennett Johnston of Louisiana and support-which took a while to materialize-of the Democratic Clinton administration, this most important energy-supply move since price decontrol wouldn’t have occurred.

Republicans can claim no such triumph of their own. In fact, under the Republicans, energy policy has degenerated into a competition for taxpayer funding of marginal energy forms.

Bush has set the regrettable tone for this with his optimistic push for hydrogen vehicle fuel, declaration that his country is addicted to oil, and repeated calls to move the US away from oil. Sensible Republicans in the congressional leadership could have given these ambitions helpful perspective by asking how much it all might cost. But House Speaker Dennis Hastert of Illinois and Senate Majority Bill Frist of Tennessee have been too busy calling, hand-in-hand with their Democratic colleagues, for investigations into gasoline “price-gouging.”

With energy, Republicans have renounced markets. They have abandoned the only ideological platform from which they can do legitimate battle with the state-centered energy fantasies normally associated with the other party. So energy policy has become a catalog of political wishes, marketed under the delusion of energy independence.

Democratic takeover of at least the House would help clarify beliefs about what’s sensible and what’s not in energy policy. And it would force the oil and gas industry, acting in self-defense, to withdraw from the cannibalistic power cycle of political incumbency and embrace a new constituency.

The industry’s constituency should be energy consumers. As has been argued here before, that group gets little attention when politicians and regulators begin promoting-which means throwing public money at-exotic fuels for gauzy reasons. When this happens, consumers, who also are taxpayers, get stuck with sneaky bills for hopeless energy programs.

Limiting damage

The oil and gas industry can limit the damage by making consumer interests its political priority. It should support no energy proposal and accept no political compromise that raises private or public costs without producing certain and measurable benefit. Consumer protection is a void in modern energy politics. Filling it represents an opportunity.

So here’s a practice question: If Pelosi becomes speaker of the House, why should energy consumers resist the proposal she probably will make for a windfall profit tax on oil?