The decision announced by US President George W. Bush last month to increase military strength in Iraq by 20,000 troops wasn’t the only surge of January 2007. From initiatives during the month by both houses of Congress and the White House it is clear that the US government wants to surge back into the energy business.
This page previously addressed the initiatives individually (OGJ, Jan. 15, Jan. 22, and Feb. 5, 2007). But a full appreciation for what’s happening on energy in the US requires a combined assessment. Consider:
- On Jan. 4, among its first acts with Democrats in control, the Senate passed a bill calling on Congress to require cuts in emissions of greenhouse gases, expand the use of specified types of energy, lower energy costs, eliminate “tax give-aways to large energy companies,” and prevent “price-gouging, profiteering, and market manipulation.”
- On Jan. 18, the House, also newly controlled by Democrats, passed a bill that would cut or repeal a range of tax and other incentives for the production or processing of oil and gas and spend the assumed savings on renewable and other alternative forms of energy. The bill also would coerce holders of Gulf of Mexico leases providing deepwater royalty relief uncapped by price thresholds, which were issued in 1998 and 1999, to renegotiate. Because some of the incentives under threat had been passed only recently, and because some of the targeted tax preferences remain available to other industries, the bill obviously aims to punish the oil and gas business.
- On Jan. 23, in his state-of-the-union speech, President Bush called for a 20% cut against projection in gasoline use by 2017 and an increase in the federal requirement for renewable and alternative fuel to 35 billion gal/year by the same deadline. Without providing details, he called for reform of vehicle fuel-economy standards. He also announced a doubling of capacity of the Strategic Petroleum Reserve to 1.5 billion bbl. On the same day, the Department of Energy began buying 100,000 b/d of crude for the reserve.
Look closely. It was just such a mixture of official groping that produced the National Energy Plan of 1977. For anyone who has forgotten or is too young to have known, that experiment in central energy planning failed. It failed spectacularly. It wasted public money and didn’t deliver on its promises. It mainly enriched entrepreneurs with energy schemes that unfettered markets wouldn’t support.
Motivations that led the US government into its energy mistakes of the 1970s have reemerged: recent experience with a run-up in oil and gas prices, anger at oil companies, anxiety over dependence on foreign oil, concern about the environmental effects of burning hydrocarbons, and political pressure from marketers of uneconomic fuels. Instead of oil from shale, the government now mongers ethanol from corn. Instead of smog, carbon monoxide, and other pollutants now impressively diminished as constituents of US air, politicians fret about global warming. But the motivations yield the same tactics: regulation of the quantities and forms of energy people use.
Those tactics failed before, and they’ll fail again. Those tactics wasted Americans’ money before, and they’ll do so again. Americans never fare better on energy than they do when their government does nothing with energy markets except ensure that they work. History makes that clear to anyone clear-headed enough to see back past recent oil-price jumps.
The Senate’s sense-of-Congress bill is political bluster, its hard talk about gouging and profiteering devoid of meaning, and its discussion about “reducing the burdens of consumers of rising energy costs” suggestive of price controls. The House bill is a political double-cross that, if passed, would only chase out of the country capital that US citizens need to see invested domestically in sound energy ventures. And the president’s plans would squander money on expensive energy substitutes and unnecessarily hoarded crude oil.
Worst of all, these plans would rush the government back into a business about which it has learned nothing from past failure.
This is a surge Americans can’t afford.
