The United Arab Emirates (UAE) recently announced its exit from the Organization of Petroleum Exporting Countries (OPEC). The rationale was to expand oil production above its OPEC quota. This aligns with and reinforces the view that OPEC controls oil prices by adjusting its production quotas, as a cartel would. 

But the geological and technical realities of oil extraction do not allow production rates to be rapidly increased or decreased without significant tradeoffs. Oil production cannot be varied like water flowing from a spigot. 

As a result, OPEC production quotas are for show. They are not enforced. Cheating is rampant. For example, the UAE exceeded its monthly production quota in 69 percent of the months between 2017 and 2022 (Table 2). 

Additional evidence that OPEC does not control oil production comes from a comparison of UAE and US one-month and three-month production volatility. The UAE’s production profile is similar to the United States’ profile, with its thousands of decentralized producers (Figure 1). In fact, since 1993, its production variation is statistically indistinguishable (Table 3) from the variation of US production. 

If OPEC does not control oil production, what does it do? OPEC is a political club that uses the appearance of oil production control to rally against the “West.” The UAE’s exit from OPEC is a signal that antagonism toward the “West” is of less importance now than foreign policy differences with Saudi Arabia.

Congress has a terrific opportunity to get sober on energy policy. Today, the House Committee on Rules will consider several amendments to the Farm, Food, and National Security Act of 2026. A bipartisan amendment offered by Rep. Michelle Fischbach (R‑MN)—and cosponsored by dozens of members—would set up a huge giveaway to the agriculture lobby and large refiners at the expense of taxpayers, small refiners, and gasoline consumers. 

The vote follows the Environmental Protection Agency’s (EPA) announcement last month that it would grant fuel providers (e.g., gas stations) an emergency waiver to sell high-ethanol gasoline blends for a short period. Each of these moves would entrench the government’s already substantial participation in the transportation fuel business. America’s corn growers and biofuels producers are hooked on an expensive habit of federal support, and taxpayers should do what any compassionate friend or family member would do: stop giving them money and help them overcome their addiction. 

Why Mandate Ethanol in Gasoline?

Even without the federal Renewable Fuel Standard (RFS), which forces refiners to blend certain volumes of biofuels into hydrocarbon fuels, Americans would still likely use some ethanol in gasoline because it increases octane ratings. Beyond performance benefits, supporters of ethanol mandates say higher-ethanol blends can reduce gasoline prices and support American farmers, especially corn growers, by creating stronger and more stable demand for their crops. Interestingly, some supporters cite the “homegrown” nature of ethanol, even though the US has been the world leader in oil production since 2017. 

But trade-offs abound, and consumers should be free to decide what type of fuel they buy. More importantly, there is no defensible reason to subsidize or mandate the production or blending of ethanol into transportation fuels. Typical justifications for government intervention, such as the infant industry argument or concerns about environmental impacts (whatever one thinks of those in the abstract), are off base when it comes to corn ethanol. Ethanol has been used in internal combustion engines since at least 1860 (not an infant), and it creates new environmental concerns. For example, the National Center for Energy Analytics recently found that the RFS actually increased emissions of criteria pollutants and greenhouse gases. 

The RFS still mandates ever-higher ethanol volumes, as it has for 20 years, despite the failure of pro-RFS arguments on their merits. But perhaps the best argument against the RFS is that it fosters fraud. In 2023, the EPA’s Office of Inspector General found:

The EPA has strengthened controls over the Renewable Fuel Standard, or RFS, program since its inception, primarily in response to several instances of companies generating and selling fraudulent Renewable Identification Numbers, or RINs. However, further controls are needed to ensure that only valid RINs are generated and sold on the RIN market. The EPA has not implemented controls to prevent a producer from entering more RINs than the producer is able to generate based on its registered capacity.

The E15 Debate Misses the Point

E15 fuel—also called “Unleaded 88”—contains between 10.5 and 15 percent ethanol. Typical gasoline sold today contains 10 percent ethanol or less (E10), and some engines require ethanol-free gasoline. Pure gasoline or E0 is common in marinas because ethanol can damage boat engines. Ditto for the small engines in everything from lawnmowers to motorcycles. Further, antique car owners prefer E0 because cars weren’t originally designed to use high-ethanol fuel blends, and the water damage and fuel-line corrosion in vintage cars caused by E10 can be explosive.

The EPA emergency waiver and the congressional proposals to expand E15 use miss the opportunity to have a real debate, which should address a more fundamental question: Why keep the RFS at all? As my Cato colleague Chris Edwards has noted, President Trump “has a first-term record of defending ethanol subsidies and handing out more than $20 billion to the agricultural industry.” The E15 campaigns in Congress and at the EPA hijack an otherwise deregulatory agenda—and legitimate concerns over clean air and high gasoline prices—to expand the cronyism established by the RFS. It is the latest example of a “bootleggers and Baptists” coalition—only this time, the corn ethanol will fuel a car rather than a night on the town. 

The American Farm Bureau Federation, the American Petroleum Institute, and others are not fighting for free markets in their coalition letter supporting year-round E15 and Rep. Fischbach’s amendment. To put it bluntly, farmers want to expand their subsidies, and large refiners want to make life harder for the small refiners they compete with. In a letter to Congress, the Small Refiners of America strongly opposed Fischbach’s amendment. Hence, a debate that once pitted the biggest players in the agriculture and oil industries against each other has unified them against small businesses, consumers, and taxpayers—not to mention the notion of a limited federal government. 

Conclusion

Executive waivers and legislative workarounds are no substitute for real reform. Congress should abolish the entire RFS program. E15 should be available year-round for people who want it, of course, but the government should get out of the transportation fuel business altogether and let ethanol find its rightful place in the market. American farmers are exceptional, and they deserve our support. However, if we really want to support corn growers, we should refuse to pay for their destructive addiction to ethanol subsidies.

The Trump administration has been scaling back support for clean energy, generating backlash from those concerned about carbon emissions. Which view is more convincing?

Take as given that carbon emissions are a significant externality. Then, in principle, policies that reduce carbon emissions can be beneficial, even if they decrease measured GDP. This is because they might reduce unmeasured, negative components of GDP—the externalities—even more.

Clean energy subsidies, however, are a blunt instrument for reducing carbon emissions. While they lower the cost of non-carbon energy relative to carbon-based energy, they also reduce total energy costs. This incentivizes greater energy utilization, some of which comes from carbon sources. Thus the net effect of clean energy subsidies is ambiguous, and they have other costs that arise from distorted incentives. 

A better approach is carbon (Pigouvian) taxation. 

A Pigouvian tax unambiguously raises the price of carbon-based energy relative to other sources, thus shifting energy use toward a more efficient outcome. This also avoids the unintended costs associated with clean energy subsidies. Carbon taxes are unpopular, however, because their added energy costs are explicit. In addition, setting the tax at the right level can be challenging due to complexities in measuring the social cost of carbon. 

Therefore, in practice, the least bad response to the risks from carbon emissions might be doing nothing, other than eliminating existing subsidies for carbon-based fuels.

Cross-posted from Substack. Isadora Millay, a student at Harvard College, co-wrote this piece.

Texas is showing the country how to grow its electricity supply faster than anywhere else. The grid operator that covers the vast majority of the state, the Electric Reliability Council of Texas (ERCOT), accommodates growth because it adds supply and integrates new technologies more quickly than other systems. When “speed to power” is the name of the game—as it is for the artificial intelligence (AI) transformation underway—data center developers will continue to choose Texas. 

But even the most flexible system can be improved. ERCOT is not broken, but some of the largest new loads do not fit neatly into the traditional utility service model. Even in ERCOT, delays are stacking up in interconnecting new generators and large new loads (in electricity-speak, meaning customers). In May of 2025, the large load queue of ERCOT was 169,615 megawatts (MW), and last month it reached 410,618 MW. A growing queue means longer delays and a system increasingly unable to meet the AI moment.

Source: ERCOT’s Large Load Interconnection Status Update, March 26, 2026

To help Texas stay ahead, customers should be able to bring their own power or buy it from third parties rather than forcing every project through the same regulatory process. Avoiding the interconnection queue (or operating off-grid while waiting in it) allows projects to come online much sooner than they otherwise would. That is where Consumer Regulated Electricity (CRE) comes in.

CRE would complement the ERCOT system. The idea is simple: if a sophisticated customer wants to finance, build, or simply contract for its own dedicated electricity supply separate from the existing grid, regulators don’t need to second-guess it. ERCOT is already leading in the grid-connected space by embracing the “connect and manage” approach. CRE would essentially be a system that says, “If you don’t connect, there’s nothing for us to manage.”

We both submitted written comments supporting this concept to the Texas House State Affairs Committee ahead of their April 9 hearing on data centers. Travis’s comments emphasized CRE as a solution that can 1) accommodate new data centers while keeping the broader grid reliable and affordable and 2) bring to the electricity sector the same free-market dynamism that helped Texas become America’s economic powerhouse. Travis made some of the same points on a recent podcast hosted by the Competitive Enterprise Institute.

Glen’s comments highlighted another benefit of CRE: it would allow off-grid projects to connect, forming an off-grid grid. Connecting off-grid projects would allow the supporting power systems to scale, lowering costs, improving reliability, and reducing the environmental footprint. Through scale, off-grid systems could approach the high reliability and low cost of utility systems while moving swiftly enough to meet new customers’ timelines.

The concept is moving from theoretical to practical. West Texas offers two good examples. In Pecos County, Pacifico Energy’s GW Ranch is being developed as an off-grid campus designed to provide more than 5 GW of power to hyperscale data centers, with first power targeted for Q1 2027 and a larger phased buildout thereafter. In January, Pacifico announced that the project secured permits for 7.65 GW of generation capacity, underscoring the scale of what developers are trying to build outside the traditional queue-and-upgrade model. 

In Midland County, FO Permian Partners and HiVolt Energy announced in 2025 an off-grid platform for hyperscale and cloud data centers with 150 MW of contractable capacity in the initial phase and expansion potential to multiple gigawatts. In both examples, the developers tout bypassing interconnection queues to rapidly begin operation as the major benefit to the islanded approach.

CRE would simplify similar projects. Increasing the speed of development and supporting larger scale would lower costs, improve reliability, and reduce environmental impact. In other words, through the large-scale enabled by CRE, off-grid systems could approach the attributes of utility systems and help keep more data center projects from burdening the grid.

Conclusion

Texas already has a better electricity model than most states. CRE would improve it by preserving what ERCOT does well while creating room for large new customers to pave a new path. Instead of slowing Texas down, policymakers should give these projects the regulatory certainty they need. CRE is the next logical step in Texas’s success.

Maine is set to pass legislation that would make it the first state to ban the construction of new data centers into 2027. Unfortunately, they are not alone. At the federal level, Senator Bernie Sanders has proposed legislation to enact a federal moratorium on the construction of new data centers. Eleven states have brought similar legislation to enact a moratorium on data center construction.

America’s innovation requires infrastructure. Trillions of dollars in investment are flowing into the construction of data centers. Opponents of this buildout point to the potential impact of data centers’ energy and water consumption on consumer utility costs. But banning the construction of data centers is the modern equivalent of threatening to ban the construction of railroads because the trains might drive up the price of coal. 

Legislators at both the state and federal levels should instead consider how to better enable the market to adapt to existing energy constraints. They should also consider the broader impact that data centers have on innovation and the local economy. 

What Would It Mean to Ban Data Centers

Data centers are necessary for both emerging innovations and established technologies. These facilities help power not only emerging technologies such as AI and quantum computing, but they also provide the cloud computing powering everything from our credit cards to our streaming services. 

The highly sophisticated corporations constructing new data centers are responding to the growing demand for computing through investment in state-of-the-art technology. The resulting centers have benefited both the average consumer and the regional economies that have embraced them. Data center tax revenue helped residents of Loudon County, Virginia, see lower car tax bills. Mississippi’s Governor Tate Reeves has sought to create a “Digital Delta,” recognizing that while some individuals “would rather not have any industrial project in their backyard… being the hub of the world’s most awesome technology will inevitably bring prosperity and authority to our state.”

But banning data centers is about more than losing economic opportunity. It sends a concerning message that the future is not welcome by denying the necessary infrastructure to support it. To ban data centers would be to ban the next great technological revolution already improving the lives of countless Americans. AI is being integrated into our medical system to supercharge drug discovery, allow doctors to spend more time with their patients, and help speed and improve diagnoses. In our day-to-day lives, AI is being used to filter spam calls, break down language barriers, and speed up emergency services. It has also made it easier than ever to start a business, develop a new product, and make our voices heard. 

A Better Approach to a Data Center’s Energy Needs

The regulatory structure of our electric grid is a core driver of increased electric costs and concerns about data center demand. Rather than banning data centers, alternative approaches would allow a state to embrace energy abundance, benefiting both our increasing technological demands and our overall energy policy approach.

Our electric grid was established over the course of the 20th century and enabled universal service at low and stable rates for consumers. However, the regulated system emphasizes reliability and consumer protection while effectively barring competitive entry, thereby incentivizing caution over speed and innovation. While this system may be appropriate for most consumers, data centers have drastically different needs. They require a constant stream of electricity and emphasize speed to power. Instead of gradual growth of 1–2% of electricity consumption per year, utilities are now facing the equivalent of plugging in a new city every time a data center is constructed.

Traditional electric utility companies are not built for this type of demand. Yet, our current regulations keep both residential consumers and the fastest-growing segment of industrial demand—data centers—tied to an industry heavily insulated from competition. This leaves homes and local businesses facing electric rate hikes. Meanwhile, data centers are forced to turn to inefficient, noisy generators to augment electric generation when the grid is stressed. By chaining the new industry to the old, existing regulations create a scenario where everyone loses.

Our Cato colleague Travis Fisher has proposed consumer-regulated electricity as a policy solution that would balance concerns about data center demand with the needs of this infrastructure for the future. His approach would free up a new market for sophisticated, well-resourced firms constructing data centers to be supplied by new, off-grid utilities able to dynamically adapt and innovate. At the same time, it ensures that none of the power required by data centers is subsidized by existing consumers, leaving traditional utilities to continue their work of providing reliable, low-cost energy.

Some states have already taken steps to implement this solution. In Ohio, the 2025 state law HB 15 has enabled developers to pursue the construction of new industry and data centers on timelines that would have been unlikely otherwise. New Hampshire’s HB 672 has fully enacted CRE, allowing independent entities to generate and sell electricity without state approval. Similar measures have been taken in Utah, Oklahoma, and West Virginia. Each showcases the promise of CRE as a serious solution to lawmakers’ concerns over rising energy prices without stifling innovation.

Conclusion

States can be laboratories of democracy, but not all experiments yield beneficial results. Artificial Intelligence represents the next great wave of American innovation. To ban or bar the infrastructure needed for the advancement of this technology is not only economically shortsighted; it is antithetical to human progress and the principles upon which America was founded. 

The policy response to AI’s energy should not be to ban the construction of its infrastructure, but rather to consider alternative approaches to our current grid system. Consumer-regulated electricity is one such alternative. Lawmakers seriously engaging with the issues surrounding data centers should consider it as a policy with a proven track record for rapid increases in generative capacity without hiking rates for the average constituent.

Our current AI products are the worst they will ever be. Future products, applications, and infrastructure will improve in a variety of ways, including not only technological abilities but likely also energy efficiency. Bans could have far more long-lasting impacts than policymakers realize. The states that choose to embrace energy reform and this unique technology moment may find themselves the beneficiary of others’ policy regrets.

Economists’ understanding of oil shocks has evolved over time. The original view was that reductions in supply from Middle East wars or OPEC decisions were important causes of oil price increases. But the more recent conclusion (p.142) is that “most major oil price fluctuations dating back to 1973 are largely explained by shifts in the demand for crude oil.”

The start of the Iran-Iraq war in the fall of 1980 is instructive about the effect of supply reductions not accompanied by major changes in demand. In late September 1980, Iraq invaded Iran, disrupting oil exports from both Iran and Iraq. The reduction in oil supply was about 12.2 percent for the Persian Gulf and 2.6 percent for the world (p. 312). And the price of West Texas Intermediate increased from $36 per barrel in September 1980 to $38 in January 1981, a rise of only 5.6 percent. 

The conclusion (p. 146) was that “the ongoing Iran–Iraq War had little effect on the price of oil in the 1980s, notwithstanding considerable damage to oil shipping in the Persian Gulf with as many as 30 attacks on oil tankers in a given month.”

The current shutdown of the Strait of Hormuz reduces world supply by about 20 percent, almost 8 times larger than we experienced in 1980. And markets are reacting differently than in 1980. The price of oil has increased by about 50 to 60 percent from about $60 a barrel to $90–100. Such an increase is consistent with estimates (p. 1887) of the price increase required to reduce demand by 20 percent in the short run. 

The International Energy Agency, a consortium of 32 oil-consuming nations, has announced a release of 400 million barrels of oil from public reserves, including 172 million barrels from the US Strategic Petroleum Reserve. Economists have concluded that such releases modestly stabilize oil prices, but the current releases are much larger than the historical releases (30 million barrels, for example, in 2011 during the Libyan civil war) used to calculate those price effects.

One window into possible outcomes is the price of oil futures, which lock in today the right to buy oil at a given price in the future. When I checked today, the price in 6 months (September 2026) is about $81 a barrel and in one year (March 2027) about $72 a barrel.

Millions of Americans are bracing for a days-long winter storm that could potentially cause major damage, including extensive power outages. Ahead of the storm, we should reflect on the source of our safety against extreme weather. 

We are resilient to winter storms like Fern because of the economic development that comes from free markets and free societies. The policy implication is clear: Wealth is health, and we should keep developing the energy resources we need to drive America’s economic engine.

The mayor of New York City, Zohran Mamdani, said in his inaugural address that he would “replace the frigidity of rugged individualism with the warmth of collectivism.” Unfortunately, the track record of collectivism is one of cold destruction, death, and deprivation, not productive warmth. The track record is so clear that such a statement is absurd.

We are better now, in the US, at handling extreme weather than any society in human history. But we risk backsliding on our resilience if we choose the degrowth of collectivism over the warmth of rugged individualism. The examples abound—the new governors of Virginia and New Jersey have signaled their intent to double down on a forced transition to green energy rather than ensuring a reliable and affordable power grid.

We can look to our own past to gain perspective. For much of American history, winter storms were genuinely dangerous. Before widespread electrification and central heating, cold spells routinely translated into spikes in mortality, especially among the elderly and the poor. Winter did not grow gentler over time. America grew richer—and far more energy abundant.

Another real-world example: Which of the societies below would you expect to be warmer during a cold snap? 

Source.

As my colleagues at Human Progress point out, climate-related deaths globally have fallen by 99 percent since 1920 thanks to human adaptation. A high-energy society brings heated and insulated homes, mechanized snow removal, real-time communication, and prediction and warning systems. Energy abundance turns extreme cold weather from a mortal threat into a mere logistical problem.

Here’s the policy lesson: Societies that make energy scarce make weather more dangerous. As Winter Storm Fern approaches, it is worth remembering how different this moment is—not only from America’s past, but from life in much of the world today. Millions of Americans will remain warm, connected, and safe not because Mother Nature has grown kinder or because of the rhetorical warmth of collectivism. We will thrive this weekend because, in America, we embrace human ingenuity, growth, and abundant energy.