Real and Phony Energy Policy
By Benita Dodd

It doesn't look good. Fuel prices are soaring in Georgia and across the nation. The hot air surrounding climate change spurs finger-pointing at this nation's alleged propensity for producing global-warming greenhouse gases. Complaints abound about autos, industry and oil. And there's concern about the lack of energy alternatives; after all, what will we do when we suddenly run out of fossil fuels?

Causes and solutions run the gamut. "We must continue working to boost clean energy, implement a mandatory program to address the threat of global climate change, and take a more aggressive approach to curbing our nation's dangerous overdependence on foreign oil," wrote U.S. Sen. Maria Cantwell (D-Wash.), a member of the Senate Energy and Natural Resources Committee, in a Seattle Times op-ed after President Bush last week signed the 1,724-page Energy Policy Act of 2005.

There's no denying the growth in energy demand. But who's to blame? China, exempted from the expectations of the Kyoto Protocol to reduce emissions of greenhouse gases (a treaty U.S. legislators wisely decided against), is now using 14 percent of the world's total energy. In 2004, the latest figures available, China's demand grew 15 percent, accounting for 43 percent of global energy consumption growth, according to BP's 2005 Statistical Review of World Energy. By contrast, global energy demand grew 4.3 percent, the highest in more than two decades, driven mainly by China.

Consider the facts behind the fear. First: The peak oil prediction - the "halfway point" where production of "cheap" oil resources begins to decline and we start running out - remains unknown. Peak oil predictions are the doomsday assumption of the stagnation of civilization. According to BP's 2005 statistical review, in 1984 global proven oil reserves were estimated at 761.6 billion barrels. In 1994, it was 1,017.5 billion barrels; in 2004, it was 1,188.6 billion barrels. When we run out of "cheap" oil, there's tar sand, oil shale, heavy oil, deep drilling - and technology. At the current rate, we have more than 40 years of global reserves remaining, BP reports. That, again, assumes stagnation in technology, resources and American resourcefulness.

Concern about U.S. dependence on foreign oil impacted much of the 2005 energy legislation. Yet, according to the Energy Information Administration, U.S. petroleum imports from the Persian Gulf constituted 19.3 percent in 2004; in 1961 it was 18 percent. OPEC imports, which were 72.4 percent of imports in 1960, were 43.6 percent in 2004. But the myth that we can reduce global trade when it comes to gasoline is exacerbated by paranoia about tapping domestic resources.

The inefficiency of current renewable sources of energy is indisputable. The vagaries of weather impact wind farms (aka "Cuisinarts" of the wild for killing birds) and solar power plants, not to mention their space needs. Hydropower - more than 2,000 plants nationwide - generates about 10 percent of U.S. energy, but is increasingly unpopular because decomposing vegetation underwater is a source of greenhouse gases.

As for clean energy: Clean Air Act amendments mandated the use of oxygenated gasoline in high-smog areas. The additives are MTBE and ethanol. MTBE's tendency to infiltrate ground water has increased the demand for ethanol. Ethanol, manufactured from farm crops, is a boon for agribusiness. But it takes more energy to produce ethanol from corn than the energy it produces. Soy diesel (biodiesel) faces the same challenge. The Government Accountability Office, Congress' watchdog, also reported in June that, "findings specifically linking air quality improvement to the use of special gasoline blends are limited and incomplete because of the inherent difficulties in isolating the effects of special gasoline blends from other efforts to improve air quality."

Supply has not kept up with demand. The last U.S. refinery built came on line in 1976 in Garyville, La. The nation's operable refineries numbered 296 a half-century ago, now there are 149 refineries. In 1981, there were 324 operating at 68.6 percent of capacity. Now they operate at 92.8 percent of capacity. That's not much room for error. It's no wonder that even the hurricane season, an annual, expected event, makes oil companies antsy. Oil profits may be up, but refinery profits are dismal and red tape insurmountable.

Still, mobility appears to outweigh the costs of gasoline in Georgia. Despite soaring prices, commissioners at the Aug. 18 state Transportation Board meeting heard that gas tax revenues were up 16 percent over a year ago. Drivers are demonized, but today's average light truck gets better mileage than an average '70s compact car; the average 2004 SUV got 50 percent better mileage than the average 1974 car did.

If there's a positive legacy of higher fuel prices, it is a growing openness to seeking new sources of energy. A Rasmussen survey conducted Aug. 12-14 found that 64 percent of respondents believe it's more important to develop new sources of energy versus 26 percent who say it's more important to conserve energy. Fifty-five percent said it was important to build U.S. nuclear plants again.

And if there's one lesson to be learned from this, it's that oil companies don't need handouts and subsidies; they need government to step out of the way. And that instead of propping up inefficiency, government should focus its energies on facilitating research and development of innovative and workable new sources of energy.

Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

Email the Editor