The Great Energy Confusion
Forget about a candid national conversation on energy. As John McCain and Barack Obama campaigned last week, that much seemed clear. To lower oil prices (which were already dropping), Obama proposed releasing 10 percent of the Strategic Petroleum Reserve. This is an atrocious idea. The SPR was intended as insurance against a catastrophic loss of oil from wars, embargoes, terrorism or natural disasters. It should not be manipulated cynically for political advantage. Earlier, McCain suggested suspending the 18.4-cents-a-gallon federal gasoline tax; that was another bad and expedient idea.
No doubt Obama and McCain want to relieve Americans' discomfort at the pump. The trouble is that Americans should feel discomforted. We want a return to cheap, secure oil; we want painless pathways to lower greenhouse-gas emissions. These are fantasies; they should not be indulged.
In 2006, coal, oil and natural gas provided 85 percent of U.S. energy. In 2025, regardless of what we do, they will almost certainly remain the leading energy sources. We will still import huge volumes of oil and face global disruptions. And any serious effort to curb oil use and greenhouse gases will require high energy prices -- whether imposed by the market or taxes -- to induce conservation and conversion to nonfossil fuels.
Judged by their rhetoric, you might conclude that McCain and Obama differ dramatically on energy. Actually, their agendas overlap substantially. Both advocate a "cap and trade" system to reduce greenhouse gases; that's essentially a tax on fossil fuels, though neither describes it that way (candor grade for both: D). Both hold out, in similar language, the vision of resurgent American technology riding to the rescue.
To be sure, some contrasts are glaring. McCain and most Republicans support more offshore drilling for oil and natural gas; most Democrats don't (Obama has said he might consider more offshore drilling). The Democrats are deservedly getting pounded on this. Of course, "we can't drill our way out of this problem." But if we don't increase drilling, import dependence will worsen as production from mature fields ebbs. Since 1990, U.S. oil production has dropped 23 percent, while imports have gone from 42 percent to 58 percent of consumption. Greater exploration is common sense, as more Americans recognize (Democrats' candor grade: F).
McCain proposes achieving "strategic independence" by 2025 -- a seductive but empty phrase. In 2025, oil would still represent a third or more of total energy use (it was two-fifths in 2006), with more than half imported, forecasts the U.S. Energy Information Administration. Although these figures could change, dependence on foreign oil is unavoidable. The projection already assumes big gains in fuel efficiency (the average for new vehicles goes from 25 miles per gallon now to almost 37 mpg). But the gains are diminished by a 25 percent increase in cars and light trucks, mainly reflecting population growth. Even if oil imports came mostly from Canada and Mexico, flows could still be affected by global disruptions (McCain's candor grade: D).
It's easy to exaggerate how quickly new technologies can improve our situation. Obama says that we can have a million plug-in hybrids averaging 150 miles a gallon on the road within six years (plug-in hybrids run on electricity and gasoline). Sounds impressive. But that would be less than one-half of 1 percent of all vehicles, and the forecast is probably a stretch. The battery technology required for plug-in hybrids is still not competitive, adding $7,000 to $10,000 per vehicle, says Brett Smith of the independent Center for Automotive Research. Obama would address this problem by providing a $7,000 tax credit (in effect: a rebate) on plug-in hybrids. These subsidies might go mainly to upper-middle-class buyers, permitting them to flaunt their "green" credentials (Obama's candor grade: C).
We are not powerless, and some policies would help more than others. A straight carbon tax, for instance, would be better than a complex cap-and-trade program. But with a growing population and the existing stock of vehicles and buildings, even good policies and technological breakthroughs will only gradually shift our energy consumption. In the government's projection, renewable energy (wind, solar, some biomass) grows seven times faster than average energy use; still, it's only 7 percent of total consumption by 2030.
All this can be seen as the messy process by which democracies reach consensus. "Crises are the only times when we are capable of making difficult decisions," says former Democratic representative Phil Sharp, who heads the think tank Resources for the Future. High pump prices, he says, "are drawing both parties toward the center": Republicans will be more open to regulation, Democrats to offshore drilling. The next president will find it easier to act. Maybe. But the preamble has involved so many exaggerations and simplicities that it's uncertain whether the ultimate response would make us better off -- or worse off.