THE ALLURE OF AN OIL-FREE ECONOMY

War in the Middle East has intensified a singular U.S. fantasy about life without oil. Recognizing a connection between oil and soldiers dying on Arabian deserts, many Americans have been tempted to think their country should quit using foreign oil altogether and all oil if possible. Economically, this is nonsense. Politically, it's a different matter. Alarms should be sounding in the petroleum industry. The allure of an oil-free economy already influences debate.

Feb. 11, 1991

3 min read

Economically, this is nonsense. Politically, it's a different matter. Alarms should be sounding in the petroleum industry. The allure of an oil-free economy already influences debate.

ENERGY POLICY WATCHWORDS

"Conservation" and "alternative fuels" have become watchwords of energy policy making in the U.S. They are important goals. But political arithmetic too often says conservation plus alternative fuels equals zero petroleum. Every time someone in the energy strategy debate trumpets conservation or alternative fuels, therefore, the oil industry should request definitions.

As a policy goal, "conservation" must mean more than simply using less. In the popular view, Americans use too much energy, so using less must be better. But how much is too much? What's an acceptable level of energy use for one of the world's largest countries populated by one of its most advanced civilizations committed to one of its most vigorous economies? The popular view offers no answers.

To be meaningful, conservation must relate to economic growth. Can the nation use less energy and still grow economically? If not, using less doesn't make sense. Conversely, can the nation grow faster economically than its energy consumption grows? In fact, it can and has for many years. In these terms, the U.S. conserves even as its energy use climbs.

Alternative fuels, too, must relate to economics. Why replace oil in the energy mix if the replacements cost more than oil and don't provide offsetting benefits? The popular view doesn't consider costs; it simply assumes that anything must be better than oil. Like the less-use theory of conservation, this is a wildly subjective judgment that deserves no place in policy making.

That's not the only problem with the anything-but-oil approach to conservation and alternative fuels. Implementing it inevitably compromises freedom.

How does a government make conservation happen? It sets mandatory energy use limits, which, except to the extent anyone is burning fuel for the simple fun of it, forces people to do less work. Or it raises energy taxes, which has the same economic effect.

How does a government promote alternative fuels? At the wrong extreme, it commands people to use pet fuels instead of oil, which is economically the same as raising taxes to the extent pet fuels cost more than what they replace. Or it subsidizes them, which just camouflages the costs.

IMPLEMENTATION, OBJECTIVES

Conservation and alternative fuels programs must be part of U.S. energy policy. But they must not pretend to represent the beginning and end of energy policy.

Conservation and alternative fuels programs must be implemented fairly. They must not force people into new lifestyles and costs or proscribe economic options.

And conservation and alternative fuels programs must pursue sound objectives. They must not function as excuses to underdevelop-and thereby waste-the still-promising, still-under-evaluated petroleum resource.

The U.S. has a chance to correct its energy policy lassitude of the past. War in the Middle East gives the Bush administration's pending energy "strategy" political impetus it lacked before. The petroleum industry's challenge is to keep debate focused on energy security, the proper aim of policy, and to avoid a lapse into economic tyranny.