In an intensely political year, the US oil and gas industry should seek opportunities to reconcile energy politics with consumer interests. Politicians and consumers now travel contradictory paths.
The current political agenda on energy emerges from an undisciplined legislature taking its cues from environmental extremists, fuel suppliers seeking favors, and a president eager to distance himself from oil and gas. The product is a regulatory system certain to collapse under the burden it is creating for consumers. Its centerpiece is an ethanol mandate that makes no energy or environmental sense, that saps the federal treasury, and that drives up food costs.
Yet Congress just quintupled the ethanol requirement to make corn growers and distillers happy. It acted even though costs of the original mandate have come into clear focus. It acted when no politician of either party dared anger the farm business: just weeks before fateful presidential caucuses in Iowa. And it acted in a way that makes the political agenda look not only confused but also corrupt.
The agenda now
Ethanol draws specious intellectual support from a political agenda obsessed with conservation and alternatives to oil, gas, and coal. In an energy market that the Energy Information Administration expects, under reference case assumptions, to grow by 24% during 2006-30, conservation and alternative energy forms are surely necessary. They just aren’t sufficient. The US can’t conserve away expected market growth without requiring economic sacrifice Americans won’t and shouldn’t be forced to accept. And alternative sources, important as they are as supplements, can’t fill the supply void.
If it is to sustain standards of living and grow, the US needs not only more conservation and more alternative energy but also more oil, gas, coal, and nuclear power. Focused as it is on conservation and alternative energy, however, the US political agenda ignores and in many ways disparages traditional energy forms, the forms with commanding shares of the market and therefore those best able to address US supply problems promptly and economically.
The agenda must change. The US needs a political agenda on energy that’s centered on the interests not of environmental extremists, fuel suppliers, and politicians but of energy consumers. Those interests are easy to identify. Consumers need reliable supply of affordable energy; mitigation of the health, safety, and environmental risks of energy production and use; and freedom of economic choice.
An agenda that includes those elements of consumer interest doesn’t exclude conservation and alternative energy. It simply makes room for essentials such as currently dominant energy forms, which will not disappear under any circumstances, and market freedom.
The oil and gas industry must find a way to advance a political agenda on energy that’s broader than the one now in place. It won’t change the agenda in Washington, DC, where it has limited credibility. It has to start with energy consumers, the interests of whom any replacement agenda must have at its core.
Focus on consumers
A consumer-centered agenda works. One of the most hopeful developments in energy politics in recent years was the discussion in 2005-06 of federal oil and gas leasing—or at least gas leasing—off the East Coast. The effort stalled when Democrats won control of Congress and exploited rising energy prices for political theater instead citing them as the reason they are to act meaningfully on supply. What remains important is that the push for East Coast leasing came less from oil and gas producers than from consumers—industries and states hurt by rising prices of natural gas and recognizing how new supply would solve their problem.
Under the current political agenda, an agenda that forces conservation and the use of nonhydrocarbon energy to the exclusion of cheaper and larger sources of supply, consumers face a future of too little energy and too much cost. As those costs become clear, they’ll listen to suggestions for something better. The oil and gas industry should be ready to offer a superior agenda—not to politicians but to the consumers the agenda must serve.
