Commentary

Free market trumps policy

By Jerry Taylor
This article appeared in USA Today on July 17, 2001.

Today’s debate: Bush’s energy plan

Opposing view: Government subsidies, programs can aggravate energy problems.

The Bush administration hits the road this week to make the case that “we” need to produce more energy, that “we” need to conserve energy and that “we” need to invest more in nuclear power, clean coal and renewable fuels.

A question: Who’s this “we”? High prices in oil, natural gas and electricity in the West signaled to any who would pay attention that those commodities were in scarce supply. Consumers responded by cutting back on energy. Industry responded by investing in new supply — not out of kindness, of course, but in a bid to get their share of the spectacular profits available in the energy business. And what do you know? Energy prices collapsed across the board.

Free markets, not government programs, achieved all of that in a matter of months. “We” didn’t need a government energy plan then, and “we” don’t need one now. High prices, while politically unpopular, are the only sure ways to encourage conservation and new supply. The best energy plan is to let markets work and get the government out of the way. Sure, there may still be bumps on the road ahead, but government’s record at smoothing out those energy-market bumps is abysmal indeed.

President Bush thus deserves applause for bringing to the debate the long-neglected truth that government policies can aggravate energy problems. Unfortunately, the administration proposes to do little about it.

You can count the concrete initiatives to reduce barriers to new energy suppliers on a single hand. And while you can certainly make a case for increasing oil and gas production on federal lands, it’s hard to argue that those reserves would significantly affect domestic energy prices. The oil beneath the Arctic National Wildlife Refuge, for instance, would add only about 1% to global oil supplies, if industry estimates are to be believed.

Instead, the administration is trotting out the same old 1970s stew of subsidies to the same old basket of energy dreams: renewable energy, nuclear power, energy-efficient whiz-bangs and “clean” coal (the modern equivalent of President Carter’s “synfuels”). But if those technologies are good investments, no subsidy or mandatory-purchase requirement is necessary.

If they’re not, then no amount of government subsidy will make them so.

Jerry Taylor is Director of Natural Resources Studies at the Cato Institute.