The Energy Fiasco

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Put the government in charge of anything, and sooner or later there will be gluts, shortages, or some other crazy dislocation. Thank goodness the government never decided to impose a National Footwear Plan—with special taxes, subsidies, and contradictory rewards and punishments for making or wearing them. We would all be scrambling for shoes instead of regarding them as just another good that we buy at the store.

Why isn’t our access to energy, the lifeblood of advanced society, as trouble-free as our decision to buy Rockports or Johnston & Murphys? For no good reason, energy is put in a special category. That energy is so essential to our way of life is a reason why government should not be given any power to manipulate this market.

The government isn’t in charge of energy as such, but the Bush administration sure talks as if it is. Richard Cheney wonders about whether "we" are going to conserve or drill or tax or subsidize. Even Bush himself sometimes gets confused as to whether he is setting energy policy, or is an essential part of the industry itself.

The problem of government intervention is getting worse, not better. Cheney has mapped out a plan modeled on the ethanol program that would, according to the New York Times, attempt to convert agricultural, animal, and human waste into energy. The entire earth consists of potential sources of energy, and the government wants us to run our cars on potato peelings? It’s nuts.

Besides, the NYT observes, to do so "would require hundreds of millions of dollars in government tax incentives and research spending." Now, the tax incentives are irrelevant; who cares if the government doesn’t collect all it wants from one industry? Research spending is another matter. That’s the kind of program that drains money from the private sector to subsidize activities that may or may not have any market demand. What’s more, "alternative energy research" won’t add much if anything to our energy supplies.

More bad news from the NYT: "In a surprise, Mr. Cheney said the administration had not ruled out raising government-mandated fuel economy standards for cars and light trucks." It’s been shown again and again that these are killer regulations, because they forcibly reduce the size of vehicles and thereby make them far less safe to drive.

If Clinton had hinted at the possibility of raising CAFE standards, at least a few Republicans would have been unhappy. But conservatives have become so uncritical toward this administration, which seems good only because of the horrors of the Clinton years, that they are looking the other way when it does terrible things. Not even Bush’s attempt to centralize "antiterrorism" policy in the hands of the Federal Emergency Management Administration has led to rebuke.

Despite early promise, the Bush administration’s recent energy comments suggest that it doesn’t really understand the source of the problem. Here we are living in the most prosperous society in the history of the world, and there is widespread fear that we won’t be able to air-condition our houses this summer or take the road trip we’ve been planning. And what does the administration propose? Nothing far reaching; just a bit of tinkering here and there in our grand "national energy strategy." This is not progress.

True, the Bush administration appears to be far more sensible than a Gore administration would have been. For example, Cheney caused left-liberal pigeons to scatter when he made the simple, undeniable, and incredibly obvious comment that conservation alone will not take care of the problem. Government commercials saying "Save energy by turning off the lights" just aren’t going to save us.

What will save us, Cheney implies, is the right kind of energy policy. But the truth is nearly the opposite. We need less policy, not more. The government needs to get out of the way so that energy can be produced, refined, and distributed according to free-market principles, just the way shoes are produced and distributed. We need to get to the point that we don’t even think about energy: it is always there and always affordable for everyone.

How to do it? Repeal, repeal, repeal. First repeal the crazy environmental regulations that inhibit the production and refining of oil. That will require unlocking all public lands to development, repealing all mandates that affect the mixing of fuel to eliminate pollution (some pollution is the price we pay for advanced civilization), getting rid of (and certainly not adding to) fuel economy standards, and otherwise coming to terms with the reality that there is no limit to energy demand and hence there must be no limit to energy supply.

Repealing regulations would save the industry $9 billion in out-of-pocket costs immediately, but won’t solve all problems. All price controls need to be repealed, starting in California. It is absurd for the state of California to blame refineries and distributors in El Paso, Texas, for its energy problems. California’s problems are entirely homegrown, a result of the restrictive policies that control the retail price of energy.

Also, why isn’t anyone talking about energy taxes, which add to the price and discourage new entries into the market? Federal excise taxes are 19 cents per gallon of gas, and state taxes make the total per gallon nearly 40 cents. Severance taxes add even more. Just paying for the right to bid to get the right to drill on federal lands is taxed. Electricity and natural gas are taxed and controlled at every step. It’s important to remember that all these taxes were imposed precisely for the purpose of punishing the market for producing and consuming energy. They cause, because they are intended to cause, a mismatch between supply and demand.

The government has always been shortsighted in its management of energy. In 1939, the Department of the Interior predicted we would run out of oil supplies in 1952. The State Department in 1947 said no reserves were left. Two years later, Interior weighed in again with a claim that reserves were running dry. And State spoke up again in 1951 that the year to dread was 1964.

The government has been engaged in a sixty-year campaign to tell us to stop using energy, to stop consuming, to stop producing and transporting, and to otherwise become less dependent on private energy and more on the government. More recently, the government has begun telling us that we use the web too much and that this too must be unplugged, else calamity is around the corner.

The only calamity that threatens us is the one imposed by the central planners who claim to have a better solution than the one the market economy provides. They never have, and they never will.

Llewellyn H. Rockwell, Jr. [send him mail], is president of the Ludwig von Mises Institute in Auburn, Alabama. He also edits a daily news site, LewRockwell.com.

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