U.S. Energy Policy Perspectives

Abstract

The overriding weakness of the present U.S. energy policy debate is that it focuses too heavily on short-term considerations. The real problems we face are long-term problems, and energy policies must be shaped accordingly. In the long-term perspective, the objectives cited by President Carter in his 1977 national energy plan are valid objectives. They speak to these major plan are valid objectives. They speak to these major points: We must make sacrifices in conserving energy points: We must make sacrifices in conserving energy … Yet healthy economic growth must continue…Energy prices must reflect true replacement costs… prices must reflect true replacement costs… Government policies must be predictable and certain… And we must start now to develop the new and unconventional energy resources that will be vitally needed before the next century damns. The trouble is that we have not yet framed the means for reaching those goals. Those proposed by the President and debated by Congress focus on mandatory conservation, more government control, and new energy taxes. As reflected in the National Energy Policy Act of 1978, those approaches result in substantially more regulation but do little to promote development of our domestic energy resources. promote development of our domestic energy resources. To strengthen our nation's energy position, we need to develop policies for the future that are responsive to the realities of the problem we face. To do so, I suggest that energy policies should be shaped within the parameters of six major considerations. First is the recognition that our primary goal is fueling the energy needs of the U.S. economy as efficiently as possible, so as to maintain a healthy and competitive economy. This goal has a number of implications. We must develop our domestic energy resources in a planned and systematic way. But we must avoid investing huge amounts of scarce capital in massive development of new forms of energy that are not now economic. The reality is that we must continue to use large amounts of foreign oil. And we must expand exports to compensate for these imports. Second, we must recognize the essentiality of getting to work on energy development now. In the short term, this means accelerating the development of present fuels such as oil and natural gas. Longer range, it means preparing now for that point in the future—1990, 2000, or whenever—when we face the potential for real energy shortage. This requires a potential for real energy shortage. This requires a heavier focus on research and technology development for new energy sources such as synthetic fuels and solar, which are not now economic. Many years of lead time will be required to bring these sources into commercial production—to have supplies available when they will be vitally needed. Third, we must give up the notion that we can deal with energy problems through the political quick-fix. There are no quick-fixes—political or otherwise—that will get us more domestic energy. Government rules are not an effective substitute for the multitude of decisions that are made daily in the market place. Distortions arising from price controls are a case in point. In future energy policy decisions we must begin to dismantle the policy decisions we must begin to dismantle the framework of counter productive regulation that has been erected around the energy business. Fourth, our future energy policies must be framed in recognition of the fact that energy costs must rise. In the long-term perspective, there is no way that we will get the energy we need without paying the real costs. Those who say otherwise are paying the real costs. Those who say otherwise are cruelly misleading consumers and recklessly courting more severe energy supply problems. In fact, current efforts to hold energy prices down are costing us dearly. It has been estimated that price controls could be responsible for adding up to 3 million bbl daily in additional demand and suppressing up to 2 million bbl daily of additional production. Price controls must be phased out in production. Price controls must be phased out in accordance with the provisions of existing law. Fifth, we must recognize the growing interdependence of the nations of the world in relation to energy. It is highly unrealistic for us to think in terms of energy independence, or to shape energy policies that are designed primarily to reduce oil policies that are designed primarily to reduce oil imports.