Instead of talking and not acting on meaningful energy supply, Congress now will stop talking. That’s the biggest change likely to come from takeover by the Democratic Party of the House and maybe Senate in the Nov. 7 congressional elections. The Democrats will talk about energy supply, of course-just not meaningful supply. If they manage in the 110th Congress to implement any of the priorities they set for the 109th, the only thing meaningful about what they achieve will be uncompensated cost.
The priorities appear in a document entitled New Direction for America, produced while Rep. Nancy Pelosi of California, the new speaker of the House, was leader of the opposition party. Among her promises in a cover letter was “to energize America with energy independence.” Random specifics follow, but the slogan itself sets the unrealistic tone.
Energy independence
The US won’t achieve energy independence. If it produced every quantum of energy it needed, which it never will do, it still would not be energy-independent. It can’t shut itself away from global economic forces, powerful among which are conditions in the international energy markets. National leaders should quit pretending otherwise.
The Democrats’ document sets a specific goal of “eliminating reliance on oil from the Middle East and other unstable regions of the world” by 2020. This is a feel-good expression of the energy-independence fantasy. The US can refuse to buy oil from Middle Eastern producers and any other supplier of its choosing and still, because the oil market is global, be reliant on them. Just as the US would have to seek out new sellers, the targeted sellers would sell to new buyers. The imposed dislocation thus would raise transport costs. That’s all.
From futile goals arise faulty strategies: “Increase production of alternate fuels from America’s heartland, including biofuels, geothermal, clean coal, fuel cells, solar, and wind; promote hybrid and flex-fuel vehicle technology and manufacturing; and enhance energy efficiency and conservation incentives,” the Democrats say. This is the venerable “renewables-and-conservation” pincers movement, which can alter the energy mix to whatever extent consumers and taxpayers are willing to spend money on it.
So how much extra cost and new tax burden do Democrats-or like-minded Republicans-think Americans will devote to vapid ambitions like energy independence? If memory serves, motorists didn’t favor $3/gal gasoline earlier this year. Supply from the energy-form wish-list costs much more than that. Subsidies just paper over the economic corrosion. Trying to pry more contributions from renewable sources and conservation than evolve naturally in the market is always an expensive mistake.
Congress once debated these issues in the context of market realities. But Republicans have abandoned economic discipline in an ideological lapse that partly explains the shellacking they brought upon themselves in the elections. Too many of them now chase the same energy chimeras the Democrats do. Consumers should be worried. And the oil and gas industry should be resisting the nonsense by focusing on the threats to consumer interests.
Beyond the fuel-choice blather, the New Direction for America proposes to “end tax giveaways to Big Oil companies and enact tough laws to stop price-gouging.” This is big and empty talk. Industry should call the hand. What are the “tax giveaways” that big oil companies supposedly enjoy? How do they measure up against, say, tax incentives for ethanol and biodiesel? And what, exactly, do Democrats mean by “price-gouging?”
Windfall profit tax
Democrats also might try to breathe new life into a windfall profit tax on oil. On Nov. 7, however, Californians showed, by defeating an initiative to tax oil production to pay for renewable-fuel programs, that they recognize the folly of taxing away domestic oil production. Most other Americans have similarly good sense.
The new power mix won’t yield legislation to lease off-limits federal acreage in Alaska or on the Outer Continental Shelf. But the old mix didn’t either. Maybe Republicans shorn of majority prerogatives will rediscover the efficiency of markets and the benefits of domestic oil and gas production. If so, the election results will have been good for Americans.
