Ever since 1973, Americans have been crazy about energy. The trauma of that year's gas lines and heating-oil shortages—reinforced in 1979—has now outlived "the Vietnam syndrome." As U.S. troops return victorious from the Persian Gulf, the great off-stage agenda setter has determined that the next big issue will be energy policy. We oughta have one, everyone seems to think.
In part, the enthusiasm for an energy policy stems from the war itself. Had we had better policy, the purveyors of conventional wisdom declaim, we wouldn't have had a war in the Persian Gulf. "American blood soaked into the sands of the Middle East provides a tragic reminder to us all that this nation's political processes have failed to come to grips with our addiction to imported oil," writes John E. Petersen in Governing.
Ever accommodating, the Bush administration has sent a 214-page energy policy proposal to Congress. Of course, nobody—at least no Democrat—likes it. Sen. Al Gore (D–Tenn.) called it "breathtakingly dumb." Like many critics of U.S. energy policy, he condemned U.S. energy use, employing the always-damning rhetoric of addiction. With its emphasis on expanding energy supplies, Gore declared, Bush's proposed policy is "kind of like somebody who is addicted to alcohol or drugs confronting the problem and deciding the solution is to get a lot more of it."
Alden Meyer of the Union of Concerned Scientists used similar language to express what many environmentalists want out of the American public: "As Alcoholics Anonymous has proven, admitting you have a problem is the first step on the road to recovery." First, we have to acknowledge that our dependence on energy is sick and dangerous Then we have to kick the habit.
This is all nonsense, "breathtakingly dumb," to quote would-be President Gore. The United States has no more need for an "energy policy" than it has need for shampoo policy or a socket-wrench policy. Fuel is just one good among many. And we are no more "addicted" to energy than we are to silicon or aluminum or anything else that goes into producing the goods and services traded in the U.S. economy. It is not evil to use oil to make things.
But what of the Persian Gulf? Weren't we willing to sacrifice blood for oil?
Well, no. Contrary to Bob Dole, the Gulf War wasn't about o-i-l—at least not about keeping the oil flowing to U.S. consumers. The one thing oil-producing nations, including Iraq, will always want to do is sell oil.
The problem with Iraq, aside from the general issue of aggression, wasn't that we'd lose access to oil. It was that controlling a lot of oil makes it possible to get very rich, which makes it possible to buy lots of weapons…which can lead to very unpleasant situations. The only energy policy that would have countered Iraq would have been the one that only the most honest and extreme greens advocate: not using any oil at all. And even that policy would have worked only if everyone else in the world went along with it.
When people bemoan "our dependence on foreign oil," whether they want to expand domestic supplies or cut consumption, they ignore a fundamental fact. Oil is oil. Its molecules don't come with little PUMPED IN SAUDI ARABIA labels. As MIT energy economist M.A. Adelman writes in Foreign Policy, "The world oil market, like the world ocean, is one great pool. The price is the same at every border. Who exports the oil Americans consume is irrelevant."
Not everyone calling for a U.S. energy policy uses the hysterical language of addiction. Calmer voices speak instead of efficiency. We ought to conserve energy, they say, simply because it makes good sense. If a car getting 35 mpg can take you places as well as a car getting 20 mpg, you're a fool to buy the 20-mpg model. And the car companies are fools or villains to make it. Congress should pass a law to require cars to get better mileage.
The efficiency argument is appealing: Why not do more with less? But it ignores the big picture. Fixated on energy, its advocates tend to forget the rest of the economy. And they disregard the way real producers and consumers make decisions.
Consider the Sun Frost refrigerator. Touted by Sierra magazine's upbeat energy issue, the 16-cubic-foot model reportedly uses one-fourth to one-third as much energy as a standard refrigerator. The cost: a mere $2,400. An ordinary 16-cubic-foot fridge runs about $800—a third the cost of the nifty Sun Frost. Unless electricity rates are very high and interest rates are very low, you're better off saving the money up front.
Efficiency fans tend to make the Sun Frost mistake a lot. They forget that upfront investment, whether to retool a factory or buy a more-expensive refrigerator, matters a lot. A dollar spent today is worth more than a dollar saved in three years.
And it's not just money. The money means something. These prices aren't set by a czar in Washington (though when oil prices were set more or less that way we had those lines…). Prices reflect the value producers and consumers put on goods, relative to other goods. If people do value good mileage—presumably, because gas prices are high—they'll pay more for cars that get 35 mpg.
But people may not be willing to pay extra for better mileage. Maybe they don't drive a lot. Maybe gas is cheap. Maybe they'd just rather spend the money on new clothes for the kids. Energy freaks want to make everyone else love gasoline they way they love gasoline, and, if not, they'll pass a law to get the same results.
Even when people make energy saving investments for completely voluntary reasons, those investments exact a price. When rising gas prices make airlines buy new, more-efficient planes, they can't spend the money on employee training or improved safety equipment. And the capital they raise to pay for their new fleets can't go to fund startup companies, finance more-productive widget plants, or underwrite new housing.
Writes Adelman: "Throughout the 1970s and 1980s, investment in conservation measures, made in order to achieve lower energy consumption, inevitably diverted investment from other uses. Sluggish growth in productivity created sluggish growth in living standards." It's one thing to make such trade-offs because real energy prices are rising. It's another to force them on your fellow Americans because you think energy is the most important thing in the world.