It is gratifying to see contenders for the US presidency argue about energy policy (see related article, p. 20, and Watching Government, p. 22). The subject needs attention. But it needs attention more sophisticated than it has received this year, with the peak of an exaggerated oil-price cycle coinciding with a presidential campaign.
The US always has an energy policy. It always has regulations and statutes with a net positive or negative effect on national energy interests. But it does not have a collection of regulations and statutes labeled "energy policy."
Energy interests
The absence of energy policy so labeled does not necessarily work to the country's detriment. No energy policy is better than a bad one. The main problem with not having an energy policy is that interests that a good energy policy would address receive insufficient attention in relation to others, especially those involving the environment.
So what is a good energy policy? What goals does such a policy pursue, and what actions make it good? Attention brought to the subject by the presidential campaign makes this a good time to suggest answers.
Goals are simple. A proper energy policy pursues security of energy supply in service to national economic growth and military defense. That's all. The goals don't need the lattice of environmental qualification that obscures official attention to energy matters these days. The economy has tuned itself to economic values. Energy initiatives that serve national economic initiatives and comply with nonobstructionist environmental regulation strike the best possible balance between economic reward and environmental risk.
In pursuit of these goals, a good energy policy acts in four broad areas.
First, it lets the market work. It does not interfere with fuel prices, which naturally rise and fall over time. It does not make fuel choices for consumers or try to influence consumption levels of specific fuels or of energy in general. To the extent good energy policy concerns itself at all with consumption, it addresses efficiency, not isolated quantities. It thus relates energy consumption with economic growth. Consumption efficiency-the amount of energy used for each increment of growth-improves steadily when consumers are free to make their own fuel choices in response to freely fluctuating prices.
Second, a good energy policy encourages development of economically sensible supply. Doing so promotes both security and prosperity. A good energy policy thus:
- Makes federal land available for oil, gas, and coal leasing. Undeveloped resources contribute nothing to energy supply and nothing to regional and national economies.
- Sustains the oil and gas-producing infrastructures in times of price-related economic distress. The government can preserve long-term tax revenue and access to important natural resources by easing tax burdens on marginal producers in periods of depressed commodity prices.
- Treats refining as an essential element of supply security. Because crude oil has little value as an energy source until it is refined, the ability of refiners to process crude oil into products required in the US market should receive priority concern.
- Accepts the need for and availability of imports of crude oil and petroleum products without letting these inevitabilities compromise domestic capacities to produce and process hydrocarbons. The US will not discover and produce its way out of reliance on imported crude. And a growing deficiency of refining capacity relative to product consumption increases US reliance on product imports. Modernization of market mechanisms and economic maturation of the world's key exporters make import dependency less of a security concern than it once was. Good energy policy adapts itself to market evolution yet prefers domestic to imported supply for mostly economic reasons. It also acknowledges the importance of oil in trade to national economic and security interests and of the military readiness needed to defend those interests.
- Helps with development of economically promising technology not yet supported by the market.
Help for needy
Third, good energy policy helps needy energy consumers. No US citizen should suffer illness or death for being unable to afford energy for basic human needs. Most US citizens do not fall into this category and, as a matter of energy policy and humanitarian concern, should help those who do.
Finally, good energy policy involves itself with environmental policy-making and complies with the result. Energy and environmental policies should complement and accommodate one another. The heretofore underacknowledged reality is that they can.
Energy policy involves much more than the price of gasoline and heating oil. It deserves more attention than it receives in those long stretches of time when prices are not as high as they have been this year.
