The House recently passed a bill purportedly for the purpose of improving our ability to produce energy. President Bush has called it “a good energy bill” and has urged the Senate to act so that Congress can send him a bill by this summer that he can sign into law. However, the proposal passed by the House makes many concessions to environmentalists and therefore won’t achieve its purported end if signed into law. Why is this the case?
While the bill increases access to federal lands for oil and gas exploration and eases some regulations (such as speeding up the approval process for certain new refineries), it also provides billions of dollars in subsidies and tax incentives for various environmentalist-inspired endeavors, including the promotion of energy efficiency and the development of “alternative” fuels.
It also adds a number of other environmental restrictions (such as eventually banning the use of the octane-booster MTBE and imposing stricter regulations on underground storage tanks). Banning MTBE alone will probably more than offset any gains from the positive aspects of the bill. One problem is the MTBE replacement, ethanol, must be trucked to refineries because it cannot be produced in refineries and doesn’t travel well through pipelines. As a result, it’s been predicted that removing MTBE could add 35 to 40 cents to the price of a gallon of gas. This prediction probably isn’t too far off since gas prices rose almost 30 cents per gallon after MTBE was banned in some states.
Providing a candy store full of subsidies and tax incentives will indirectly lead to higher costs. For instance, subsidies promote wastefulness because those who receive them are usually less concerned with being efficient since their costs are covered, at least partly, by the subsidy. By subsidizing companies to develop alternative fuels, for example, we’ll be encouraging the development of expensive energy sources that aren’t economically feasible. If they were feasible, the profit motive would give companies the incentive to develop them without the subsidy.
One might think subsidies can be used to give companies an incentive to develop alternative fuels until the fuels become economically feasible. But given that politicians aren’t even responsible enough to balance the federal budget (most of the time), why should we trust them with determining which sources of energy might be economically feasible in the future? Only the profit motive can provide the appropriate incentive to develop and exploit the most cost effective products, and right now gasoline is it in motor fuels.
What should the federal government do to make it easier for us to meet our energy needs?
It must consistently protect freedom in the energy industries to provide the maximum incentive for energy producers to be efficient and innovative, and make it as easy as possible for consumers to purchase energy products.
It can start to do this by eliminating the federal gas tax. That would reduce the price of a gallon of gas by more than 18 cents. If state governments join in, the price could be reduced, on average, by more than an additional 24 cents.
This tax cut could be partly financed by eliminating environmentalist-inspired subsidies. The rest could be financed by reducing other inappropriate government spending.
Requirements for different gasoline formulations used at different times of the year and in different geographic regions must also be abolished. Currently 18 gasoline formulations are in use across the United States, making it much more costly to produce and distribute gasoline. These blends aren’t needed because of the requirements of automobile engines, nor are they required by oil companies. The blends are forced on Americans by environmental regulations. By eliminating these regulations, refiners won’t have to incur costs to switch from producing one blend to another, including switching to a more costly “summer blend,” which occurs every spring along with a sharp rise in gas prices.
Refiners produce much more inefficiently when they’re forced to produce a multitude of blends, and supply deficiencies occur more frequently because local suppliers can’t purchase gasoline from around the country, which also drives up prices.
While speeding up the approval process for certain new refineries and opening federal lands to oil and gas drilling are good, the bill needs to go further. The same applies to Bush’s proposal to make it easier to build more nuclear plants and refineries. With regard to refineries, not one has been built in America since 1976, and there are no current plans to build any.
Environmental regulations (such as those on refinery emissions) make it prohibitively costly to build refineries. Such regulations must be eliminated. Furthermore, all restrictions on drilling must be lifted (including, ultimately, privatizing government land containing energy resources) and no new restrictions on gasoline production must be imposed (such as the ban on MTBE).
Ultimately, all restrictions that prevent us from meeting our energy needs must be removed, and not only in the oil and gasoline industry but in all energy industries (such as natural gas and electricity).
Some might wonder, how will land be preserved and people be protected from harmful pollutants if we privatize government land and eliminate environmental regulations?
Preservation should occur privately, by people buying land and setting it aside if they choose, which many people already do. Further, evidence doesn’t show that environmental regulations exist to protect people. For instance, the ban on MTBE is being pushed, in part, because of claims that it causes cancer. However, these claims are based on experiments in which mice were fed doses almost 70,000 times larger than typical exposure levels for humans. No scientist worthy of the title would make claims based on that kind of extrapolation.
Environmental regulation isn’t the appropriate way to deal with harmful pollutants. If any actual physical damage occurs to persons or property due to pollution, people can gain compensation through the courts (as long as they can prove that damage occurred).
Environmental regulations merely cater to environmentalists’ desire to sacrifice man to nature by stopping industrial activity, which is what they explicitly say they want to do. For instance, David Graber, a research biologist with the National Park Service, said, “We are not interested in the utility of a particular species, or free-flowing river, or ecosystem, to mankind. They have … more value–to me–than another human body, or a billion of them.” This statement captures the essence of the environmental movement.
To create an energy bill that’s friendly to man, it must be consistent with the requirements of human life. That is, it must protect man’s freedom to pursue his own rational self-interest. This will make it possible for him to do what’s necessary to further his life and well-being, including producing the energy he needs to go to work and earn a living, provide electricity to homes and offices, and enjoy his life.