INDUSTRY MUST AVOID GAS VS. OIL CIVIL WAR

Will this be the year of civil war in the U.S. oil and gas industry? The potential exists. The incoming Clinton administration seems not just to like natural gas but also to dislike oil. How this might translate into policy remains to be seen. But it will certainly present dangerous temptations to the industry.

Jan. 5, 1993

3 min read

The promise of new competitive advantage might lead gas producers and pipelines to support such antioil proposals as new taxes on gasoline or imported oil, forced manufacture of gas-fueled vehicles, tougher gasoline mileage standards, or a carbon tax. These measures might lift gas sales, but they would do so for faulty reasons.

There's nothing wrong with promoting gas use. Promoting gas use at the direct expense of oil is something different. More is at stake here than fuel markets.

ANTIOIL CASE WEAK

The political case against oil consumption is weak. Most of it now centers on oil's environmental disadvantages, which are grossly exaggerated. In the U.S., air pollution from vehicles has plummeted, leaving Los Angeles as the only area with chronic troubles. The Clean Air Act amendments of 1990 will handle remaining problems, bludgeoning them with more costly requirements than are necessary. The other environmental rap on oil-its role in alleged global warming-hinges on computer models and assumptions that don't hold up under scientific analysis.

It's refreshing to hear President-elect Clinton base some of his gas preference on concern about rising oil imports. In recent years, officials haven't wanted to think about imports and what they mean to U.S. security. But worry over oil imports makes a better argument for drilling off-limits frontiers, which Clinton opposes, than it does for government meddling in energy markets.

The president-elect's statements and personnel appointments point to a campaign against oil consumption in general, a disturbing omen for all of the energy industry. Government intrusions into energy markets always come to economic grief. Governments never know better than markets do which fuels should be consumed and in what quantities. If the Clinton administration tinkers away some measure of oil demand, who's to say it won't turn next to gas, coal, or nuclear? Decreed oil consumption limits can serve as a precedent for arbitrary constraints on total energy use.

And where's the consumer in all this? Market freedom, benefits of which by now should be beyond question, implies consumer choice. Yet all possible government efforts to suppress oil use in favor of pet alternatives would reduce or distort choices available to individuals. Such an undemocratic step isn't worth taking for the sake of doubtful environmental gains and security interests that the government refuses to pursue in other, more meaningful ways. Furthermore, the inefficiencies of nonmarket fuel selection would hurt the economy.

TREAD CAREFULLY

The industry must tread carefully in this gas-friendly administration. Gas producers and pipelines must not support the flawed environmental litany against oil in pursuit of market advantage; bad science eventually hurts everyone. They should urge government not to mandate fuel selection or control demand; policy should promote consumption efficiency and the economic development of energy from all sources.

Above all, industry and government both must keep in mind the paramount rights of U.S. consumers to act in their own economic interests, as they see them. In any civil war that oil and gas interests fight on government turf, the first casualties will be economic freedoms of individuals. The industry doesn't need that kind of blood on its hands.