10-14-2000

ECONOMICS: A Gusher of Blather

In the waning days of the presidential campaign, energy prices have
emerged as a contentious issue. Republican nominee George W. Bush hammers
Vice President Al Gore, his Democratic foe, on the Clinton
Administration's supposed mishandling of U.S. energy policy.


Certainly, the Clinton-Gore team has not done enough to push energy
conservation or to encourage the use of renewable energy technologies,
such as windmills, which have proliferated in Texas during Bush's six-year
tenure as governor. But Bush's attacks on much of the Democratic energy
record reflect muddled economic thinking, jingoism, shortsighted national
security policy, and miscast blame. A national debate over energy policy
may be long overdue. But given the level of discourse to date, a
presidential campaign is not the best time to start it.


In the days ahead, amid the charges and countercharges, remember that this
controversy is not about energy policy, it's about ...


Greed. Consumer bellyaching about high gasoline prices during a time of
unprecedented prosperity exposes an unappealing side of the American soul.
The price of gasoline, when inflation is factored in, is lower today than
it was two decades ago. The pain consumers feel at the gas pump often
reflects their own foolish buying decisions in the auto showroom. Shunning
more-fuel-efficient cars, Americans for years have been gobbling up
gas-guzzling sport utility vehicles as fast as Detroit could spit them
out. Now those choices have come back to haunt them. "I think that
people need to be held responsible for the actions they take in
life," Bush said in the first presidential debate, in a pointed
reference to what he regards as shortcomings in Gore's character. Does
responsible decision-making apply only to presidential candidates? How
about to voters?


In an election year, politicians will always pander to voter self-pity.
But Bush eagerly touts his willingness to stand up to Saddam Hussein. And
Gore burnishes his leadership credentials by citing past dustups with
Slobodan Milosevic. Real leadership is not confronting distant
challengers; it's telling your own countrymen things they don't want to
hear. It's time for some straight talk with American consumers about their
gas-guzzling behavior and the fact that they have never had it so
good.


Protectionism. "Today we import 56 percent of our oil," Bush
lamented in his Sept. 29 energy speech in Saginaw, Mich. "Never
before has our country been more dependent on foreign supplies."
Free-trader Bush should be ashamed of such hypocritical protectionist
poppycock. Where are Bush's crocodile tears for the American auto
industry, which has watched the Japanese increase their share of the U.S.
car market in the past few months? Such selective concern merely reaffirms
the maxim that business executives-be they steel CEOs, or, in this case, a
former Texas oilman-are ardent supporters of free trade except when their
own industry's ox is gored.


Moreover, oil imports are a sign of the success of the U.S. economy over
the past decade, not a sign of failed energy policy. Net oil and gas
imports cost the United States 1.9 percent of the value of the U.S.
economy in 1978. In 1999, energy imports cost only 0.7 percent of the
gross domestic product, even though the amount of oil and natural gas
bought abroad has increased. Buying more with less makes economic
sense.


More important, consuming more domestic oil supplies would have been bad
energy policy. Crude is a finite resource. Because Mother Nature isn't
making any more of the stuff, oil will only be more valuable tomorrow than
it is today. Over the past few years, why should Americans have used up
limited U.S. energy reserves when foreigners were willing to part with
their petroleum at bargain basement prices? Nor should the energy needs of
future generations of Americans be shortchanged to satisfy Alaskan
wildcatters.


No Free Lunch. Americans can underwrite their national security at the gas
pump or through the Pentagon's budget. Low oil prices, not high ones, are
the real threat to international stability. When oil sold for $10 a
barrel, the Russian economy was imploding. As world oil prices have risen,
Russia's oil revenues have grown 40 percent this year alone and the
economy is bouncing back. A Russia with an economic future is much less of
a military threat to the United States than a Russia on the verge of
collapse.


Similarly, while oil prices were low, Saudi Arabia's domestic debt rose to
more than $100 billion. The House of Saud was living beyond its means,
drawing it ever closer to its day of reckoning with Saudi fundamentalists,
whose ascendance to power on the Arabian peninsula could only wreak havoc
on international oil markets. Thanks to the recent rise in prices, Saudi
oil revenues will increase 76 percent this year, to $67 billion. It's a
small price to pay for greater stability in a highly volatile
region.


Once the American election is over, watch how fast the national energy
debate quiets down. That's because no new President in his right mind will
want to acknowledge that higher prices and imports are not necessarily
bad. Nor will he want to acknowledge that the real problem in America's
oil drama may be the soccer mom in her SUV, not the oil sheikh.


Bruce Stokes

National Journal