Because political promises exist to be broken, no one would feel morally usurped if President-Elect Barack Obama ignored the energy program on which he and his running mate campaigned. According to early reports, however, energy will receive high priority when Obama and his vice-president, Sen. Joe Biden of Delaware, take office in January. The prospect is troubling.
The Obama-Biden energy platform calls for heavy spending by government on uneconomic forms of energy in pursuit of three overall goals: energy independence, a “solution” to climate change, and the creation of 5 million “green” jobs associated with governmentally sponsored energy. These goals are, at best, dubious.
Energy independence is unachievable. Under any set of regulatory and economic circumstances, the US will continue to need more energy than it can produce. To think otherwise is delusional. Policy predicated on energy independence is doomed to wasteful failure. Similarly, climate change is not something to be solved; it is natural. Even if human activity influences climate change—a proposition that is by no means certain—the effect can’t be great. People might change their activity profoundly and expensively without affecting climate change much, if at all. And jobs “created” by government energy programs inevitably come at the expense of jobs destroyed by the forced substitution of costly for cheaper energy.
In pursuit of these popular but misguided goals, the Obama-Biden energy program would, among other things:
- Divert profits from oil companies to rebates for energy consumers.
- Close regulatory “loopholes” that encourage “excessive energy speculation.”
- Draw light crude from the Strategic Petroleum Reserve to be replaced later with heavy oil.
- “Tackle climate change” with an aggressive cap-and-trade system for managing carbon emissions, and use proceeds from the auction of emission credits to fund “the next generation of biofuels and clean energy vehicles.”
- Create those “green jobs” with a variety of programs funded by $150 billion in federal spending over 10 years.
- Tighten vehicle fuel-efficiency standards.
- Set mandates for sales of electric and flexible-fuel vehicles.
- Raise the mandate for fuel ethanol to 60 billion gal/year by 2030.
- Set a “national low-carbon fuel standard” that would require fuel suppliers to cut the carbon content of fuel by 5% within 5 years and by 10% within 10 years.
- Require oil and gas companies to drill on or lose federal leases.
- Promote specific oil and gas activity, such as production from unconventional resources in areas already producing, construction of an Alaskan gas pipeline, and enhanced oil recovery by carbon-dioxide injection and sequestration.
- “Diversify” energy sources with a renewable fuel standard for electricity and incentives for clean coal technology and nuclear energy.
- Use regulations to cut energy consumption.
This approach, heavy with regulation, has been tried before and only wasted public money. Overregulation creates little more than the chance for energy opportunists to enrich themselves at the expense of consumers and taxpayers. It inevitably gives way to market forces that the government can neither anticipate nor supplant.
The impending regulatory assault on energy would occur not only in service to illusory goals but also in an economic context much different from that in which it first appeared. Obama outlined his energy agenda while oil, gas, and other energy prices were extraordinarily high and while the economy seemed reasonably healthy. Those conditions have changed. As usual, market responses have relieved consumers of the pain of high energy prices before the government could act. And the economy has taken a frightening downturn that should make the government loath to undertake any expenditure that doesn’t promise certain benefits.
The context changes give Obama an escape route. He should take it. The US can’t afford more energy mistakes. The country has steered itself onto a fanciful energy course by choosing to indulge mindless outrage over high gasoline prices rather than give careful thought to why prices got so high. On energy, America needs to grow up. If Obama is serious about change, there’s a place to start.