WATCHING WASHINGTON DIBONA FAULTS CLINTON ENERGY POLICY

With Patrick Crow Charles DiBona, American Petroleum Institute president, says the Clinton administration is crafting a fundamentally unsound energy policy. He told the National Economists Club in Washington last week the administration wants to pry the U.S. economy away from oil, using a BTU tax as the lever. DiBona said this seems to be based on flawed premises. "The first is that there exists an enormous untapped reservoir of costless conservation 'savings' waiting to be exploited to

April 19, 1993

3 min read

Charles DiBona, American Petroleum Institute president, says the Clinton administration is crafting a fundamentally unsound energy policy.

He told the National Economists Club in Washington last week the administration wants to pry the U.S. economy away from oil, using a BTU tax as the lever.

DiBona said this seems to be based on flawed premises.

"The first is that there exists an enormous untapped reservoir of costless conservation 'savings' waiting to be exploited to substitute for imported oil.

"The second is that there are enormous new quantities of natural gas and renewables that can significantly displace oil imports without major increases in industry investment.

"Finally, it fundamentally ignores the signal of the world energy markets: Oil has become more, not less, attractive relative to other fuels. In doing so, it is reminiscent of many past failed and costly energy policy initiatives."

CONSERVATION SAVINGS

He said the administration's hope for large conservation savings stems from the fact the U.S. economy grew 20% from 1973 to 1983 while energy consumption dropped 5%. But that conservation was price induced and cost the nation half the economic growth otherwise possible.

DiBona said taxes and mandates could be used to force conservation and halt the growth of energy demand, but that would require massive intervention equivalent to as much as a tripling of current energy price levels.

"But most important, such induced 'savings' are illusory. They save energy by sacrificing growth because energy is a productive input, just like capital and labor."

He said true conservation savings can come from research and development and investment in new capital equipment. Those savings are less amenable to mandates and taxes than to a healthy investment climate.

DiBona said other industrial countries use less energy per unit of gross domestic product than the U.S., but those differences can be explained.

"The myth of U.S. energy wastefulness is a fiction that serves no useful basis for the formulation of policy."

OIL RELIANCE

Further, DiBona said, natural gas and renewable fuels are unlikely to seriously offset U.S. reliance on oil.

For one thing, the high energy density of oil gives it a versatility in movement, storage, and handling that is an overwhelming advantage relative to other energy forms.

And without extensive changes in market conditions and government policies, natural gas supply is far more likely to decline along with oil than to increase.

DiBona said, "As gas producers, our companies share the administration's optimistic hopes for the future of natural gas. Nonetheless, we appreciate that those hopes are based on fragile foundations which 91 could be easily undermined by either regulatory policy or market weakness.

"Moreover, even if such hopes should be realized, new domestic gas supplies are not expected to displace more than about 5% of U.S. oil imports by the end of this decade."