In her request for a study of links between energy and the U.S. economy, Energy Sec. Hazel O'Leary has given the oil and gas industry a fascinating challenge. The request, to the National Petroleum Council, suggests that such a relationship might indeed exist. This is a very good start.
Policy decisions affecting energy should have their deepest roots in economic considerations. For too long, other agendas have prevailed.
CENTRAL CONCERNS
After World War 11, the principal policy concern was ensuring that the military had sufficient fuel to wage World War III. After the Arab oil embargo, policy aimed at protecting consumers from major oil companies and the Organization of Petroleum Exporting Countries. More recently, policy has focused on protecting the environment from overdrawn threats.
Somewhere in all this, economic priorities lapsed. It's easy to see why. On a subject like gasoline taxes, which discussion plays better on television: one about economic consequences or another about saving the planet?
Whatever attention they receive, economic interests are always at stake in policies that affect energy. It will be interesting to see how NPC, which is made up of industry representatives, defines them.
A few suggestions then.
First, energy is an indispensable ingredient in economic activity. It is nothing less than the ability to perform work. For any country concerned about economic growth, efforts to use less energy for the sole sake of using less energy are self-defeating. The aim should be to use energy with improving efficiency, to use less energy without sacrificing work. The distinction is too seldom made in policy-making.
Second, the most important energy forms in terms of market share, the fossil fuels, are natural resources that occur to a great extent beneath federally owned land. It is in the public interest for the government to extract maximum value from the resources for which it is responsible. The government extracts no value from natural resources that are not explored and developed. Federal land not offered for oil and gas leasing generates no royalties or tax income for the public treasury and contributes far less than its potential to employment and economic growth. Unleased federal land is a failure of government.
Third, the economic interests of the industry extend well beyond the important sectors that explore for and develop natural resources. The industry has transportation, manufacturing, and financial dimensions as well, all linked through a spectrum of businesses that, as a whole, profits by helping people perform work. To the extent the government considers people working to be in the national interest, the nation has an inescapable interest in energy. There will, therefore, always be policies affecting energy, even if there is no overarching energy policy. The importance, diversity, and capabilities of the modern energy business suggest that the most effective possible policies are those that ensure that nothing official, in the U.S. or elsewhere, stands in the way of getting the job done.
ANOTHER STUDY?
Industry's skeptics will scoff at O'Leary's request as promising nothing more than another study. That will be a mistake. Energy governance works when guided by good ideas. Official acceptance of the idea of deregulation, for example, has revitalized the gas business. Nothing says good ideas, such as the preeminence of economic interests in policies affecting energy, cannot originate or gain credence in studies. Someone just needs to put them there.
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