Proposals for Oil Conservation More of a Threat than Energy Dependence

Competing proposals to curb fossil fuel consumption are pending in Congress, with proponents claiming that U.S. energy "dependence" threatens national security.  But there is no shortage of oil worldwide, and costly conservation mandates would actually undermine American strength.

Michigan, as an industrial state, is particularly vulnerable to federal interference in the energy market.  Automakers, for example, would have taken a huge hit had U.S. Sens. John Kerry, D-Mass., and John McCain, R-Ariz., succeeded last month in dramatically tightening fuel economy standards.  Although reason prevailed, a good many elements of the Energy Policy Act proposed by Senate Majority Leader Tom Daschle, D-S.D.—including 61 new federal programs costing tens of billions of dollars—would have jeopardized state jobs and the economy.  And while less grandiose, the White House's proposals are likewise ill conceived and potentially costly.

Emboldened by the terrorist attacks of Sept. 11, lawmakers and the Bush administration have resurrected the scare tactics of the 1970s.  It's as if Washington learned nothing from the policy debacles of the Carter era—the huge subsidies for windmills and solar panels, the federal requirements for bacteria-breeding, air-tight buildings, all of which utterly failed to reduce consumption of foreign oil. 

The fact is that oil imports per se pose no threat to national security.  There is more oil to be had today from a wider variety of sources than ever before.  According to economist Donald Losman of the National Defense University, the United States now is actually far less dependent on Middle East oil supplies than three decades ago.  Venezuela and Saudi Arabia alternate as our No. 1 and No. 2 suppliers, while Mexico and Canada rank third and fourth, respectively.

Moreover, world oil reserves have increased dramatically thanks to technological advances in locating and extracting fuels at lower cost. 

Robert L. Bradley Jr., president of the Institute for Energy Research, has calculated that known world oil reserves are more than 15-times greater than when record keeping began in 1948.  Gas reserves are almost four-times greater than in the 1970s, and coal reserves have risen 75 percent in the past two decades.

If the United States limits oil imports it will become more dependent on its remaining sources, thereby increasing its vulnerability to supply disruptions.  Artificial conservation measures, meanwhile, actually invite increased consumption, as demonstrated by the doubling of vehicle miles traveled since the federal fuel efficiency regime began in 1975.

An oil embargo of any significance is highly unlikely.  As Bradley points out, "Although neither Saddam Hussein nor Iran's rulers find favor with the United States, they are desperate to sell their oil."  In 1973, for example, OPEC shipped oil to Europe well knowing that it was being resold to the United States.

America is far more vulnerable to artificial restrictions on energy use that reduce industrial output and, therefore, undermine economic stability.  Existing regulations already are creating conditions similar to an embargo by inflating energy prices.  This drain on capital inhibits investment in new, more efficient energy infrastructure.

Throughout history, a free market unconstrained by government interference has proven the most effective means of balancing resource supply and demand.  When prices can transmit real-time information about supply, energy consumption adjusts naturally.  Alternative energy sources will evolve when oil prices exceed research and development costs. As it is, however, oil prices remain at historic lows.  Thus, to force the nation to convert from fossil fuels to so-called renewable sources would impose economic and social costs far graver than any national security threat posed by the importation of oil.

The pending energy proposals are irrational and internally inconsistent.  The Daschle measure, for example, advocates energy independence, yet precludes tapping new domestic reserves such as the Arctic National Wildlife Refuge.   Limits on fossil-fuel consumption, meanwhile, are prescribed to prevent global warming.  But either the prospect of oil shortages constitutes a danger to our national security, or an abundance of oil does.  Which is it?

It's understandable that Congress and the president feel compelled to "do something" about national security in the wake of Sept. 11.  But limiting the nation's energy options would do more harm than good. Far more national security can be had by freeing the energy market from artificial government interference.

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(Diane Katz is director of science, environment and technology policy at the Mackinac Center for Public Policy.  Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)