There can be no worse time than the summer of 2000 for the US to act on energy policy. Gasoline prices are very high. And it's a presidential election year. The potential for costly error is extreme. Someone should call a truce.
Of course, the federal government seldom addresses energy directly except in the throes of crisis. And most direct action by the government on energy has come to grief. In fact, most federal triumphs concerning energy involve the restoration of distance between the government and energy markets.
To be sure, much remains for the US to accomplish in the area of energy policy. A map of acreage that the federal government refuses to make available for oil and gas leasing tells the story. Environmentalism takes consistent priority over energy supply in US policy-making. And the pattern affects more than resource development foresworn through skimpy leasing. The refining and distribution systems, for example, have problems now painfully evident in dealing at the same time with environmental regulations and a period of crimped supply.
Bad ideas
Because of the price spurt, bad ideas are gushing from both major political parties. Republican legislators have filed bills aimed at curbing the price-fixing they allege to be under way by members of the Organization of Petroleum Exporting Countries. And an omnibus energy bill from the Republican side encompasses generally proper initiatives yet hinges the package to a meaningless and inevitably self-destructive target for import dependency.
The Republican frenzy over OPEC and imports overlooks a development far more significant to the oil market than anything Congress might do: this month's unilateral announcement by Saudi Arabia of a 500,000 b/d increase in production. How do OPEC-bashers square that with the antique assumptions they bring to energy issues? And are legislators transfixed by import dependency prepared to resist price relief resulting from an increase in non-US supply?
Democrats in Congress are reduced to calling for antitrust investigations of oil companies and groping for reasonable excuses for the Clinton administration's energy negligence. Neither endeavor will turn up anything.
Energy lunacy from the administration reached a new level last week when Energy Sec. Bill Richardson and Environmental Protection Agency Administrator Carol Browner announced they would travel to the Midwest to seek "solutions" for elevated gasoline prices. Richardson, whose pretension to price influence has backfired into blame, can do no greater service than point to the explanation of current phenomena that John Cook, director of the Energy Information Administration's Petroleum Division provided the Senate Committee on Governmental Affairs on June 29. It would at least refute Browner's self-serving insistence that no one can explain current prices. She is just dodging blame for the undeniable damage her overly aggressive regulation has done to the ability of refiners to meet demand for oil products.
Then there's Vice-Pres. Al Gore, who wants to be president. On June 28, his campaign proposed an energy policy based on tax subsidies for vehicles that don't burn petroleum and for fuels that aren't oil.
"We can have a next-stage prosperity where you don't have to build your lives around a fuel source that is distant, uncertain, and easily manipulated," he said. Republicans and US producers should take note: It is to energy policies based on just this type of wishful thinking that demonization of OPEC and imports ultimately leads.
Let market adjust
The most helpful thing anyone from either political party can do is promise to do nothing until the market adjusts. Such a promise would accomplish two useful goals: 1) assure everyone that the government won't repeat historic errors, and 2) reassert confidence in the self-corrective tendency of the oil market.
Gasoline prices in the US are not high because the US lacks an energy policy. They are not high because OPEC influences total world supply. They are not high because the US imports significant volumes of oil.
They are high because of general and regional shortage, in which OPEC miscalculation and excessive regulation both share blame. But they won't stay high if governments don't intrude. Supply and demand will return to more-healthy balance. Inventories will rebuild. US politicians should let markets work and not even think about energy policy until passions subside along with the price of gasoline.
