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The Energy Policy Morass

‘Think, Baby, Think’

Apr 26, 2010, Vol. 15, No. 30 • By STEVEN F. HAYWARD
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The Energy Policy Morass

If you think the health care debate is a tangled mess, try wading into the thickets of the energy sector, which is high on the Obama administration’s list of targets to subjugate. Few areas of national policy offer as bad a ratio of blather to substance as energy. It is a field where cliché, wishful thinking, and wince-inducing ignorance dominate the discourse. No matter how patiently or repeatedly the myths and realities of energy are explained, a large portion of the public, along with giddy pundits like Tom Friedman, persist in thinking an energy revolution is one government-sponsored gadget away from being willed into existence. Liberals are the worst offenders, but conservatives have their own energy shibboleths that deserve to be candidly recognized as such. The energy industry itself, meanwhile—including old-line fossil fuel companies, but also rent-seeking manufacturers such as GE and Siemens—contributes to public ignorance and confusion by jumping on the “green energy” bandwagon for mostly bad reasons. Everyone from T. Boone Pickens to Ralph Nader has a plan to “solve” America’s energy crisis, while Obama is practicing Clintonian triangulation to see whether Republicans will be cheap dates on an energy bill. 

For more than three decades American energy policy has mostly been a muddle, and often a farce. But the time for muddling through is over. As the global economy recovers, oil prices will likely head back over $100 a barrel, with $4 gasoline returning to the United States. American oil production continues its needless long-term decline. Our electricity grid is antiquated and vulnerable to disruptions. As the economy recovers, electricity shortages may begin to appear, even in (or especially in) anemic California. New discoveries of domestic natural gas, however, are revolutionizing our energy outlook, but also complicating ambitions to develop more costly non-fossil fuel energy. Polls reveal significant shifts in long-term public opinion about energy, with majorities now expressing support for more domestic fossil fuel exploration and expanded nuclear power. This is no doubt a large part of the reason for Obama’s insincere recent initiatives on oil drilling and nuclear power. But it may be possible to press for more serious steps over the next few years.

The chief reason for the lack of a coherent or serious energy policy is that we’ve never been able to decide exactly what problem we are trying to solve. At the time of the first “energy crisis” in the early 1970s, the chief concern was the purported scarcity of oil along with worry about securing an adequate supply of electricity for future population and economic growth. The Arab oil embargo of 1973-74 that helped plunge Western economies into recession highlighted the geopolitical risk of dependence on the Persian Gulf for oil. But there was another new force that arose coincident with the awareness of geo-political risk: environmentalism. In the early 1970s we were getting serious about reducing air pollution, predominantly the byproduct of fossil fuels, although the harmful effects of mining and oil exploration on land and oceans were also prominently on the mind of environmentalists and added to their animus against fossil fuels. So from that very early moment the energy debate has broken down along the familiar fault line of whether to emphasize production (more supply) or conservation (less use), with a dollop of “alternative” or “renewable” energy romanticism thrown in.

The first innings of energy policy in the 1970s saw an old-fashioned compromise.  We adopted fuel economy mandates for the auto fleet and several other conservation measures (most notably the 55 mile per hour speed limit), but also okayed the Alaska pipeline, enabling the development of the huge North Slope oil field, which went from producing almost nothing in 1973 to nearly 2 million barrels of oil a day by 1988 and accounted for much of the increase in domestic oil production in the late 1970s and early 1980s—the last time American domestic oil production increased. Since then environmentalists have successfully lobbied Congress and several presidents of both parties to bottle up development of major new fields in Alaska or offshore, putting off limits nearly three-quarters of an estimated 112 billion barrels of oil recoverable with existing technology. Obama’s recent announcement of expanded offshore oil drilling is largely a sham, despite the howls of protest from environmentalists. Obama’s policy involves a very slow rollout for new leases and locks up many areas that were in play with the Bush administration’s lifting of the offshore moratorium in 2008.

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