In a fight over energy policy that is fast becoming fateful, the US oil and gas industry has more than a political problem. It has an intellectual problem. Americans don’t think well about energy. The deficiency is manifest in President Barack Obama’s federal budget for the 2009-10 fiscal year—a proposal with menacing portents.
In the political arena, the industry has no choice: It must oppose the budget—with its new taxes, repeal of capital-formation tools essential to small producers, and other horrors. Industry associations and lobbyists are responding in Washington, DC. A few company chiefs are speaking out. But a political response isn’t enough.
Thorough misunderstanding
The industry reels from a thorough misunderstanding in the US about nearly everything having to do with energy, from dimensions of the need to relative costs and the role of markets. The misunderstanding drives politics. It explains how ideas rejected for lack of merit, such as punishing taxation of the industry responsible for 60% of US energy supply, keep squirming back onto the political agenda. And it won’t be fixed in Washington, DC. Too many politicians profit from treating the oil and gas business as a demonic force.
The repair must occur in the minds of Americans where Americans live and work. It can occur only if industry leaders—not actors in television ads—speak directly and honestly to people about energy and human welfare and do so without the soft-pedaling and fear of controversy that emasculate too much industry communication.
The problem is urgent. It’s also bipartisan. It developed because Americans quit thinking about energy during a long period of comfort that began with the lifting of oil price controls 30 years ago. While prices were low and the economy strong, Americans didn’t worry about energy. In fact, their insouciance mated with a loophole in vehicle fuel-efficiency standards to breed uniquely American symbols of energy profligacy: the sport utility vehicle and gargantuan pickup truck.
When, inevitably, the market tightened and prices rose, political leaders exploited the new discontent by touting fantasies instead of facts. The result has been a steady degradation in American thinking about energy, which can be traced through recent political history.
A place to start is the 2003 State of the Union address in which former President George W. Bush held up “energy independence” as a national goal. He wasn’t the first to trumpet the futile slogan, of course. But he gave it the stature of his office, forfeiting a chance to bring realism to energy policy-making.
In 2005, Congress passed and Bush signed a comprehensive energy bill that reestablished a governmental role in fuel choice. The law enshrined the discredited misapprehension that energy is too important to leave to markets. Early the next year, Bush stooped to extremist rhetoric when he declared in his state-of-the-union address that the US was “addicted to oil.”
Thus inspired, Congress in 2007 passed a bill toughening fuel-efficiency standards and, dangerously, expanding to possibly unachievable levels already-costly mandates for renewable fuel additives. Framing that law, the Energy Independence and Security Act, is the view that conservation and renewable energy represent the beginning and end of energy policy. While both goals are righteous, they can’t be pursued economically at the exclusion of oil and gas. Yet that’s the course implicit in the get-out-of-town budget of a president who last month bewailed “the tyranny of oil.” As Obama unveiled his hostile fiscal agenda, moreover, his interior secretary was restricting producer access to federal land every way he could find.
Mountain of cost
This scenario can’t get much worse for the industry, energy consumers, and taxpayers. Yet most Americans remain oblivious to the mountain of cost into which their sputtering economy and overextended government soon will crash.
The industry can no longer afford to treat chronic ignorance as just another frustration. Its leaders need to spend more time than they do now behind podiums and microphones outside Houston and Washington, DC, while at least some Americans who don’t live in producing states think they have something relevant to say.
