TCS Daily

Remember the Energy Crisis? It's Back

By James Pinkerton - August 11, 2004 12:00 AM

Editor's note: This is the second of a continuing series on energy and the 2004 election

Remember the Energy Crisis? It's back, at least as a political issue. Today, the challenge is to avoid making the mistakes we made back in the 70s -- in a nutshell, overregulation and underproduction -- so that America can achieve genuine energy security. But first, we must deal with John Kerry.

With war raging in Iraq, with trouble in Russia, with surging worldwide demand from such booming economies as China's and India's, it's no wonder that oil has hit almost $45 a barrel. And maybe it will head even higher, as speculators attempt to "price" the cost of future mayhem in Iran and Saudi Arabia.

To be sure, thanks to the rise of the information and service economies, plus higher value-added manufacturing, energy is only about half as important to the US economy as it was in the 70s. Indeed, the latest data from the Institute for Supply Management show that America's manufacturing sector sped up in July, spelling the longest stretch of rapid growth in more than 30 years.

But still, energy accounts for eight percent of GDP, and the impact of rising prices is being felt. "Thanks to Oil, Economy Faces Headwinds in Political Season" was the headline in Monday's Wall Street Journal.

So now comes Kerry. The junior senator from Massachusetts is generally regarded as a talkative fellow, but in his two decades in Washington, he said little about energy issues, beyond occasionally voicing support for a 50-cent-a-gallon gas-tax increase -- and constantly voicing opposition to drilling in the Arctic National Wildlife Refuge.

Moreover, since he's been campaigning for the presidency these past two years, he's been absent for the debate over the energy bill that's been stalled in the Senate those same two years. Some Republicans, most notably Dick Cheney, have linked Kerry's energy-AWOLitude to high energy prices. Failure to enact a comprehensive domestic energy policy, the Vice President said earlier this month, means that "we are at the mercy of those international oil prices."

However, most Americans, perhaps because they are hearing more about Cheney & Halliburton than about supply & demand, don't see things the administration's way. A Gallup Poll taken in June found that just 33 percent of Americans approve of the way the Bush-Cheney team is handling energy issues, with 58 percent disapproving. Most Americans, to be sure, aren't following the day-to-day details of energy policy; besides, as we have seen, there's not much going on. Most likely, voters are simply blaming the incumbents -- faultless as they may be -- for high gasoline prices.

That's a weakness that Kerry has understandably chosen to exploit. Last month at the Boston Democratic convention, he roared, "I want an America that relies on its own ingenuity and innovation -- not the Saudi royal family." Thank you, Michael Moore, Kerry must've thought to himself as he uttered those cheer-words.

The Massachusetts man has kept it up since. On Friday he was in Missouri, proclaiming, "We are going to reach for energy independence." More cheers. That same day he released -- or re-released, more about that in a moment -- his plan for "an energy independent America." It sounds big and impressive, this $30 billion program of Kerry's, carefully calibrated to spread money around for an electoral-college-friendly group of recipient states. There's money for ethanol (hello, Iowa!), "clean coal technology" (hey, West Virginia!), and "cars of the future" (yo, Michigan!). Interestingly, there's no mention of a gas tax; the Bush people, who once ran ads denouncing Kerry for his past gas-tax support, should be kicking themselves for easing off the throttle on that wedge issue.

Interestingly, some potentially dicey specifics were left out. The document contents itself with a call to "strengthen the fuel efficiency of automobiles" -- which could be read by the careless as an argument for more frequent tune-ups. But in fact, as recently as 2002, Kerry was actively agitating to increase the CAFÉ -- corporate average fuel economy -- standards for automobiles from the current 27.5 miles per gallon up to 36 miles per gallon. This might be an energy-saver, but it's also a vote-loser; now that Kerry needs votes in the automaking Midwest, talk of CAFE has been parked in the back of the lot. Oh and by the way, did I mention that there's no mention of the Kyoto Treaty? It's not in Kerry's acceptance speech, either, nor is it in the Democratic platform.

Indeed, some might argue that Kerry, who, thanks to wife Teresa, owns five homes, a Gulfstream jet, and an undetermined number of SUV's -- all emitting a substantial amount of CO2 -- might be vulnerable to the charge of energy-pocrisy. Perhaps trying to stave off such criticism, both Kerry and running mate John Edwards announced that they have each put themselves on the waiting list to buy a Ford Escape hybrid car. Yet parenthetically, one might wonder, when does either man plan on driving these new wheels? After all, both are riding around in campaign airplanes and campaign buses, plus maybe the occasional limo. And if the Kerry-Edwards ticket wins the election, as the candidates presumably assume, it's unlikely that the Secret Service will let them tool around in their His and His Fords.

But Kerry and Edwards are Democrats, so the plan earned some laudatory headlines: "A Push for Freedom from Oil" was the header in the next day's Washington Post. Yet spin aside, it soon became obvious that there was less to the new plan than meets the blow-dried hair. In fact, it wasn't a new plan; most of it was released last fall. "We're not trying to pretend this is all new stuff," said issues adviser Sarah Bianchi, although the closest thing to a date on the document is August 6, 2004.

Moreover, when once actually plows through the re-packaged plan, it soon becomes clear that the text is meeker than the tout. Instead of the bold-color commitment to "energy independence" that one sees up top, the actual words are pale-pastel: an expressed hope to "make America independent of Middle East oil."

Of course, being "independent of Middle East oil" is not the same as being independent of all foreign oil. As Arnold Kling observed here in TCS last year, "oil is oil." That is, it's fungible. As Kling explained it, if the US passed a law against importing Saudi oil, and Venezuela picked up the slack, the Saudis could sell their oil to Venezuela's former customers. And so Saudi Arabia's income would not fall by a dime. And to the extent that other oil importers are American allies, the US would face the same constraints upon possible action against the desert kingdom that it faces now -- the fear of an "oil shock."

In fact, Kerry seems little interested in doing anything about an oil shock. The Arctic National Wildlife Refuge is thought to contain as many as 16 billion barrels of oil -- about six or so years' worth of Saudi Arabia's total production. And yet Kerry bragged last week, "I led the fight" against developing ANWR.

But OK, leaving the idea of actually producing more American oil aside, what does the plan have to offer? Interestingly, for all the verbiage from the candidate and from his document, the number-specific goals of the Kerry plan are few. Two, to be precise:

First, "put America on a path to meeting 20 percent of its motor fuel demand with domestically-produced alternative transportation fuels by 2020." Today, that percentage is about 1.5 percent.

Second, "ensure 20 percent of our electricity comes from renewable sources by 2020." That's up from about 1 percent today -- if one excludes, as Kerry does, such politically incorrect renewables as hydro- and nuclear power.

Experts are skeptical that either of these 20 percent goals can be achieved, at least without enormously more investment than Kerry is proposing. "You'd like to believe some of these things, but they don't seem realistic," said MIT Richard K. Lester to The Wall Street Journal last week.

Indeed, Kerry's plan has caused controversy inside his own campaign. In an ominous sign of internal fissures becoming visible to the public, The New York Times reported last week that some Kerry advisers worried that the plan was "unrealistic and misleading and that hammering away at it would erode Mr. Kerry's credibility with business, the news media and other countries." Yikes, not the news media! But obviously reporters aren't all on board; the Times' Neela Banerjee jibed that the plan's elements are "diverse and often vague, in an effort to have as many people as possible sign on." Ouch!

Still, Kerry makes a good point when he notes that America's percentage of foreign-oil imports has risen from 58 to 61, just in the last four years. It's hard to win the War on Terror when we're sending $30 or $35 billion a year to Saudi Arabia. And it's hard to argue with Kerry when he argues that energy research could be "America's next great wave of discovery." We could use a little job-creation in this country right now.

So there's much to be said -- and more to the point, done -- about energy. But first, in the spirit of fair-and-balanced, we need to hear from the Republicans, who will be unveiling their agenda for the next four years over the next four weeks.


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