Laboratory rats, scientists say, are capable of one-trial learning. If the reward is sweet enough or the punishment harsh enough, they can learn a complex lesson in one encounter. Not so, it seems, for Americans and energy.
Our attitude toward the central commodity of modern economies can be roughly summarized this way:
While energy is cheap, use all you can. Respond in a crisis. When those measures work, abandon them. Return to the old ways, and forget the long term. Never on any account take command of energy availability by managing demand through price or policy. Leave that, by default, to OPEC. Instead, wait until supply gets tight again and foreigners raise the price. Then pay them what we might have paid to ourselves.
We've ridden this roller coaster up and down the energy price-and-demand-curve twice already; after the 1973 embargo and again after the '79-'80 price increase. Both times we've absorbed staggering economic shocks without ever seriously reexamining the notion that there is nothing we can do about energy other than respond to crises caused by others. Our unwillingness to act on energy is an inexplicable and hideously costly national blind spot.
Our third ride up the coaster began in 1986, when oil prices fell sharply. While other countries raised taxes to keep their energy-use trends constant, we prepared to enjoy another binge. Energy use, which had been declining in relation to GNP, took off again and has grown steadily ever since.
After the 1973 embargo, there was talk of invading Saudi Arabia. Rapid deployment forces for use in the Middle East were proposed and funded. Over the ensuing years, administrations proved willing to spend vast amounts of political capital accommodating Iran and Saudi Arabia with controversial arms sales. Now we are again poised on the brink of war and economic turmoil.
Yet never in all of this have we connected energy self-reliance with national security. At his most recent press conference, the president's flip response left little doubt of his views.
Q: We haven't really heard you call upon Americans to conserve as part of this crisis.
A: I call upon Americans to conserve.
Q: Will you elaborate?
On second thought, he added, "We are doing everything we can to guarantee ... that there will be an adequate supply of hydrocarbons."
The president's mind was clearly on the immediate crisis, but in the broader sense nothing could be further from the truth.
Insofar as the United States has had a national energy policy, it has focused single-mindedly on energy supply, whereas adequate energy is equally a matter of supply and demand. Our assumption has been that we need all the energy we can get. The truth is that energy demand is far more malleable than are the ineluctable geological limits of fossil-fuel supply.
We've nearly used up the U.S. oil resource. Production in the continental United States peaked in 1970 and has been declining for 20 years despite large price increases and intense exploration. In 1988 Alaskan production, too, passed its peak. North America holds 4 percent of the world's proven oil reserves. Iraq, Kuwait and Saudi Arabia together own 44 percent. OPEC as a whole holds 75 percent. Nothing the United States can do on the supply side -- including drilling every drop of expensive and environmentally risky offshore oil -- can even slightly alter these numbers.
There is, however, much we can do. Step 1, without which nothing else follows, is to recognize that the era of cheap energy is over. That means using taxes to price energy commensurate with its value. The small price increases caused by the Middle East crisis are no reason not to act. The real price of gasoline is still less than it has been for 40 years. The price swings we will see in the coming weeks are irrelevant to the underlying need to set oil prices on a slow but steady long term incline. The prices of other forms of energy will follow. Taxes should be designed with the costs of air pollution and the eventual need to slow greenhouse warming in mind.
Step 2 is to recognize that the value of a barrel of oil not burned because of cost-competitive efficiency improvements is actually greater than the value of a barrel burned, because it performs the same services but produces no pollution. From this insight many changes flow. Federal law should require state regulators to allow utilities the same profit on each kilowatt hour they save as on every kilowatt hour they generate. This simple regulatory change will unleash a vigorous new industry of mining waste in the electric sector.
In transportation, we need cars whose mileage is not equal to but better than anyone else's, because our population density is so low and our suburbs enshrine a heavy reliance on the automobile for years to come. Today Detroit is way behind. But this can be changed through a combination of innovative price and regulatory signals. In residential and commercial buildings, too, energy demand can be dramatically cut.
Step 3 is to get serious about developing new efficiency technologies and alternative energy sources. Nuclear energy should remain an option, but only after we have a hardheaded answer to the question of why a technology that has been commercialized for decades, which should be mature, should still require the lion's share of public R&D funds. Dollar for dollar, solar technologies and hydrogen as a replacement for gasoline show greater promise, as do energy storage technologies and other new opportunities.
Presidents Reagan and Bush have given us 10 years of non-leadership and worse on energy. But it must be said that leaders need followers, and so far we Americans have punished any politician with the courage to say out loud that energy prices are too low. We are properly consumed right now with resolving the immediate crisis, but five years from now what will most matter to us is not the fate of Saddam Hussein or the house of Saud, but whether three oil crises were enough to learn the energy lesson.
The writer is vice president of the World Resources Institute.