A phantom energy crisis

The Bush administration has convinced the nation that we're in the middle of a power emergency, but the facts indicate otherwise.

Published May 8, 2001 3:09PM (EDT)

The Bush administration's new energy policy is, in a word, "more." The administration wants to mine more, drill more, generate more, use more. Vice President Dick Cheney, in a speech last week in Toronto, pointed to the situation in California as a harbinger of doom and said the government needed to encourage increased production. He also mocked conservation as a "sign of personal virtue" -- Jimmy Carter in his cardigan.

It looks like the administration's public relations efforts are bearing fruit. A recent poll indicates that 53 percent of Americans believe we are in an energy crisis and a like number are willing to put the extraction of new supplies ahead of environmental concerns.

In fact there is no crisis, and conservation is a big part of the reason. Despite declining real prices, Americans have barely increased their energy consumption. Between 1980 and 2000, overall consumption grew by just 26 percent, even while the nation's GDP increased by 90 percent. Although consumption has risen in absolute terms, there has never been a greater abundance of known oil, natural gas and coal reserves.

California's rolling blackouts have made headlines and Cheney has used them to sell his plan. But the Golden State's problems are unique and are caused by a massive regulatory failure. Indeed, the "crisis" does not even cover all of California. Los Angeles, for example, is unaffected because it has its own municipal power service.

"The potential crisis we face is largely the result of shortsighted domestic policies -- or, as in recent years, no policy at all," Cheney said, blaming the Clinton administration. But the United States has never had more abundant supplies of power selling at very low prices.

The country has also never been smarter about energy use. Since 1973, fuel efficiency for the economy overall has improved by more than 42 percent. This dramatic gain in what energy analysts call "energy intensity" was not caused by fuel becoming more expensive. Indeed, the opposite has occurred. Between 1980 and 2000, energy prices rose by 44.8 percent, most of that rise occurring in the past two years. During the same 20-year period, non-energy prices increased almost three times as fast, by 119 percent. The price of a gallon of gas has declined by 39 percent in real terms.

Low prices, efficient use, abundant supply: some crisis.

American homes and workplaces have become dramatically more energy efficient, but not because Americans have become more "virtuous" (though perhaps they have). The reason is that refrigerators, lamps, buildings and factories have been redesigned with fuel efficiency in mind. No matter how cheap heat and electricity become, using less is cheaper still.

Conservation is not, despite Cheney's derision, about putting on an extra sweater or sitting in the dark. It's about technology. It's employing a light bulb or a washing machine that uses much less power than the ones we used in years past.

As well as Americans have done to conserve, however, they can do better. Between 1980 and 1995, the fuel efficiency of U.S. automobiles improved quickly. Since then, the trend has stalled and even reversed. But it's not because cars have become less efficient. It's because many drivers -- encouraged by low gas prices -- have switched from ordinary cars to light trucks or sport utility vehicles, which are less fuel efficient than smaller cars.

One reason Cheney is selling the idea of an energy crisis is so the administration can also sell the idea of drilling for oil in the Arctic National Wildlife Refuge. But the administration's phony crisis cannot justify the drilling. Slight, even trivial, gains in automobile fuel efficiency would conserve far more oil than the U.S. could ever hope to extract from the Alaskan preserve.

In fact, we have reduced our dependence on oil as a source of energy. Between 1980 and 1998, U.S. petroleum consumption hardly increased at all, from 34.2 quadrillion British thermal units to 37.39 quadrillion Btu. Petroleum consumption has plateaued because Americans used to get 44 percent of their energy from oil. Now the figure is 39 percent, though more of it is imported. Coal provides a greater share of U.S. energy than it did 20 years ago, as does nuclear power. Nuclear plants accounted for 3.6 percent of power in 1980. By 2000, that number had jumped to 8.1 percent.

And no amount of drilling in Alaska or anywhere else is likely to have any impact on the financial and political crisis in California. Nearly all of the state's electricity is produced by natural gas and hydroelectric power. But Bush wants to capitalize on the fear that blackouts might occur elsewhere. "We need a full affront on an energy crisis that is real in California and looms for other parts of our country, if we don't move quickly," Bush told the Dallas Morning News last month.

Cheney used to work in the energy business, as did the president, so they should know better. The crisis hype is phony. Is the administration talking up a crisis to help pay back its buddies in the oil business? Certainly, the false cries of crisis indicate a dark motive is afoot.

By Dan Ackman

Dan Ackman is an editor for Forbes.

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Dick Cheney George W. Bush