With 470 congressional seats up for grabs and Bush hunting for his legacy, more punitive energy and environmental legislation may be coming in the year ahead.
John McCaughey, Contributing Editor, Washington
Now that leftist Democratic candidates Dennis Kucinich and John Edwards have dropped out of the race, there seem to be no substantial differences in energy policy among the presidential aspirants, regardless of party.
All mouth the conventional blather with which politicians have been boring us for years: climate change, renewables, sustainability (whatever that is), greenhouse gases, energy efficiency and the need to attain US energy independence, which is clearly impossible. Hopeless rubbish, in other words. Meanwhile, Bill Richardson, the candidate who (in theory at least) should know the most about energy, dropped out of the presidential race on January 10.
Gasoline prices are on people’s minds, but no politician has come up with a plan to do anything meaningful about them and the soccer mums seem entirely resistant to abandoning their SUVs and Hummers. Some economists believe that the economic burden of high gasoline prices today is greatly overstated vs. median household income, and they may well be right.
Presidents going as far back as Richard Nixon, Lyndon Johnson and earlier have frequently vowed to do something about gasoline prices. Nothing has ever happened. Ronnie Reagan promised to abolish the useless Department of Energy (a laudable goal) and failed: An entrenched bureaucracy is a hard thing to kill.
On the whole, it is probably a good thing that the politicians have failed to affect oil prices. Being suspected of integrity is a terrible thing for a politician, but if he is found guilty, it can be a career killer. The kindest thing one can say about a politician is that he achieved nothing. Well done, George! Good job, Capitol Hill!
On Dec. 19, President George W. Bush (after much political jostling) signed an energy bill into law. He called the bill a “major step” that will “address our vulnerabilities and dependency” on foreign oil. It was stuffed with more taxes, regulations and subsidies, although in the end it averted the loss of about $13 billion in tax incentives to oil and gas companies. Its centerpieces were a boost in the minimum fuel efficiency standard for passenger vehicles, tougher appliance efficiency standards and hugely expanded use of ethanol.
The libertarian Cato Institute’s energy guru, Jerry Taylor, wasted no time or words commenting on the new law. He wrote: “[The bill] is arguably the worst piece of energy legislation ever enacted into law. It will substantially increase the price of automobiles, increase highway fatalities, increase fuel prices, worsen air pollution, and force consumers to buy products (like super-efficient light bulbs) that they manifestly-and for very good reason-do not want to buy. It will transfer huge amounts of wealth from the consumer to the farm lobby in the course of promoting a dubious product-ethanol-that will make energy supplies less reliable and greenhouse gas emission higher than necessary.”
Earlier last year, Taylor and Peter Van Doren, also of the Cato Institute, argued against the bill in National Review: “Increasing CAFE standards will not decrease the amount of pollution coming from the US auto fleet. That’s because we regulate emissions per mile traveled, not per gallon of gasoline burned. Improvements in fuel efficiency reduce the cost of driving and thus increase vehicle miles traveled. Moreover, automakers have an incentive to offset the costs associated with improving fuel efficiency by spending less complying with federal pollution standards with which they currently over-comply.”
They conclude: “Congress has no business dictating automotive fuel efficiency. That’s a job for consumers, not vote-hustling politicians. There are no problems for CAFE standards to solve. Hence, they shouldn’t be tightened; they should be repealed.”
If the United States devoted its entire corn crop to producing enormously subsidized ethanol (subsidized both by the federal government and the states), it would still supply only about 6% of US oil needs, according to a recent Washington Post column by Robert Bryce. (That translates to 12-13% of US gasoline consumption.) Furthermore, food prices would see astronomical inflation, a taste of which we’ve already experienced in the last year as ethanol production has pushed out corn for human consumption and animal feed.
Ethanol, the greatest beneficiary of the new energy law, is simply not economically viable. The so-called cellulosic ethanol (made from grass, wood and the like) is an even less commercially viable proposition. Corn ethanol’s fuel savings are meager, as are the attendant environmental benefits. But politicians love it because it buys the farm states’ and the environmental vote.
Bush signed the energy bill anyway, most likely because he is preoccupied with his political “legacy” and will sign anything put in front of him that might help him attain it. And more kooky environmental bills are sure to come across his desk in the year to come, such as the carbon cap-and-trade proposal authored by Sens. Joe Lieberman (D-Conn.) and John Warner (R-Va.).
Meanwhile, the Washington political chattering classes busy themselves with peak oil and global warming. The problem with the former issue is that oil is manifestly a finite resource, so of course it will run out sooner or later, but no one knows when that will happen, and the politicians will only pass laws to mitigate the disaster after it has already happened. By that time it will be too late and the mitigation virtually unaffordable. Climate change (such as it is) is probably caused much more by solar phenomena than by human activity, and there is no point in wrecking the economy trying to achieve the impossible, like cooling down the planet.
Of course, there is always the great exchange from Lewis Carroll’s Alice in Wonderland:
“There is no use trying,” said Alice; “One can’t believe impossible things.”
“I dare say you haven’t had much practice,” said the Queen. “When I was your age, I always did it for a half hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
The Queen’s line could almost be a mantra for Washington. And perhaps subsidizing new nuclear plants would be a better solution than subsidizing ethanol and Big Agri.
But the environmentalists, whose hidden agenda often is to destroy capitalism, will continue to push global warming, and the politicos, who see it as a fashionable cause, will join in. President Bush (again obsessed with his legacy) has already done a near-180° position change on the issue. It seems he has at long last been brought into the Al Gore camp.
With about 470 congressional seats up for grabs in November, nervous lawmakers are capable of doing anything. One hopes that they will restrain themselves, but that scenario is doubtful. At 26% and lower, Congress’s public approval rating is now such that one might suspect that the only people nowadays who do approve of Congress are paid staffers and blood relatives.
Voters threw out the Republicans in 2006 in the hope of a change. But the Democrats have proved to be just as dysfunctional. Where will it all end? Given luck, higher oil and attendant energy prices will not precipitate a recession. Undoubtedly, higher oil prices make producers richer and the rest of us poorer. But they do not necessarily make for a recession.
Still, what if Lady Luck takes a day off work?
Just thank God that it’s an election year, which tends to make it harder for Washington’s incurably bossy and conceited politicians to pass substantive or controversial legislation. They are too busy getting re-elected to pass stupid wage and price controls that are the source of so much economic mischief.
We need more election years. 
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THE AUTHOR
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John McCaughey edits and publishes Energy Perspective, a Washington-based, fortnightly publication featuring in-depth coverage of major energy topics. Mr. McCaughey has written and edited for Irish newspapers, an international news agency, the London-based Financial Times and the US-based Energy Daily newsletter, and contributed to many other newspapers. He regularly contributes to this column.
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