Fort Worth Star Telegram, TX
08-27-07
Stop Congress before it makes another big mess
By Bernard L. Weinstein
Special to the Star-Telegram
The Baltimore pundit H.L. Mencken once opined that for every complex problem,
there's a solution that is simple, neat and wrong. We have no better example of
that dictum than the energy bills passed this summer by the U.S. House and
Senate that will go to conference committee when Congress reconvenes in
September.
Our legislators want to raise taxes on oil and gas companies; repeal most of the
incentives enacted in 2005 to encourage offshore exploration and production;
require utilities to generate at least 15 percent of their power from renewables;
and subsidize ethanol and other biofuels like crazy. In addition, the Senate bill
would impose stricter efficiency standards for appliances and lighting while
mandating a 40 percent increase in automobile and light-truck fuel economy.
Congress is behaving just as it did in 1973 after the OPEC embargo. The same
caterwauling about alleged obscene profits and price gouging that is being
sounded today was reverberating 34 years ago, and Congress' response was to
pass a series of laws that did little or nothing to enhance the nation's energy
supply.
Instead, the heavy hand of government intervention distorted the marketplace
and wasted billions of taxpayer dollars on impractical or uneconomical
alternatives to conventional energy supplies. Sometimes referred to as a
"travesty in five acts," our national energy policy in the early 1970s actually
increased rather than decreased our dependence on foreign sources of supply.
Today's fashionable energy alternatives are biofuels (such as ethanol) and
windmills. Sure, these can provide some modest percentage of our motor fuel
and electric power needs. (They currently supply less than 3 percent). But even
with their huge subsidies, they can't produce the billions of BTUs required to fuel
America's economic engine -- regardless of how energy-efficient we become.
What's more, the law of unintended consequences is writ large over the two
pending energy bills.
For example, the House provision calling for a 15 percent renewables standard
for utilities by 2020 fails to recognize there are significant regional differences in
the availability of renewable energy sources. Subsidizing biofuels and forcing
automakers to build more fuel-efficient vehicles, often portrayed as the keys to
countering high gasoline prices, will do little or nothing to curb costs at the pump.
With a growing share of the nation's corn production being diverted to ethanol,
the cost of animal feed, as well as most corn-based food products, has been
skyrocketing. According to a recent study by Iowa State University, the
increase in ethanol production has raised food prices by $47 per person over the
past year alone. More grocery store and restaurant inflation is all but guaranteed
if these bills become law.
What's more, some oil industry executives no longer believe there will be
sufficient demand for gasoline over the next decade to justify the refinery
expansions they anticipated earlier this year. That could keep gasoline prices
high for years to come. As one executive put it, "Why would I invest in a refinery
when Congress is trying to make 20 percent of the gasoline supply ethanol?"
Because there is virtually nothing in the House or Senate energy bills that would
help increase the nation's energy supply, President Bush should veto whatever
comes out of conference committee. Then Congress can go back to the drawing
board and come up with a bill that restores and enhances incentives to expand -not reduce -- domestic oil and gas production, including opening up new areas
for exploration and production on the outer continental shelf.
Bashing the oil and gas industry doesn't produce a single additional BTU. It's
time for the congressional leadership to acknowledge that America's energy
industry isn't the problem. It's the solution.
Bernard L. Weinstein is a professor of applied economics and director of the
Center for Economic Development and Research at the University of North
Texas in Denton.