Nation’s energy shortage highlights the need for free markets

Nation’s energy shortage highlights the need for free markets
July 1, 2001

James M. Taylor

James M. Taylor is senior fellow for environment and energy policy at The Heartland Institute, and... (read full bio)

The current debate over tapping energy reserves in such places as Alaska, the Great Lakes, the Rocky Mountains, and the Gulf of Mexico illustrates the shortfalls of taking the free market out of our national energy policy and giving government ownership of huge tracts of our nation.

Some people argue our natural resources are so important they require a healthy dose of government oversight. Let’s examine this argument in the context of other societal goods.

The three most basic necessities of life are food, clothing, and shelter. Although government has imposed a certain amount of interference in the free market for each of these items, by and large the government’s oversight of these goods is no more intrusive than its oversight of any other goods and services.

What is the result of allowing the free market to work virtually unencumbered on behalf of these basic necessities of life? You will find no rolling food blackouts, clothing blackouts, or shelter blackouts in California or anywhere else. Food, clothing, and shelter may be purchased at any time and virtually any place. Price variables are rather minor and predictable. Rational self-interest induces producers to meet the current demands of the populace and to anticipate and inspire future needs and tastes.

On the other hand, our current energy woes can be directly traced to the well-intentioned but nevertheless destructive interference of federal, state, and local government. Despite foreseeable growth in our nation’s energy demands, federal and state governments have rendered some of our nation’s most promising energy reserves off-limits to American energy producers. Each time we discover a new and promising oil or natural gas field, the decision whether to tap this resource is given to the politicians rather than the free market. The results are predictable.

For any opportunity to tap a new energy source, there will always be a number of anti-production extremists who will object to new drilling or other recovery efforts. On the May 7 edition of Fox News Channel’s “Hannity & Colmes,” for example, Greenpeace Executive Director John Passacantando was asked to name a single location where he would support future drilling for oil or natural gas. Passacantando repeatedly dodged the question until he finally answered, facetiously, “under Detroit”—an obvious jab at the American automobile industry.

In addition to the “no drilling anytime anywhere” lobby, any specific proposal arouses local environmentalists. People who have no general objection to tapping natural energy reserves frequently rise up to object to such recovery efforts in their backyard.

A classic example of this is Florida Governor Jeb Bush’s strident opposition to President George W. Bush’s plans to allow recovery of vast oil and natural gas reserves in the Gulf of Mexico. Never mind that modern offshore drilling technology ensures almost zero environmental risk, and that Florida is unlikely to be affected even in the unlikely event of an accident. The simple fact is that people will always demand that necessary natural resource recovery happen in somebody else’s backyard.

As a result, decisions over if, where, and when to drill for oil and natural gas are made by pork-trading, logrolling, reelection driven politicians far removed from, and often unconcerned by, the nation’s energy needs, the location and cost of exploiting potential reserves of a given location, or even the environmental impact or aesthetic qualities of one region over another.

What would happen if other important decisions were made in a similar manner?

Let’s say we allowed politicians, rather than the free market, to decide where our major commercial ports would be located. Does anybody doubt Senate Majority Leader Trent Lott would ensure that the Mississippi coast supplanted New Orleans as the Gulf Coast’s most significant port of call? Does anybody doubt the immortal West Virginia Senator Robert Byrd would see to it that we built a series of locks and canals over the Appalachian Mountains so that Morgantown would replace the docks of Baltimore and Philadelphia?

Although the free market clearly does a better job of allocating major ports of call than would our politicians, we nevertheless have discarded free market energy recovery decisions and have instead placed them in the hands of these same politicians. Is it any wonder we now face a severe energy shortage and an ever-growing dependence on other nations for our energy needs?

The answer to the energy shortfalls that have periodically plagued our nation since the 1970s is to allow the free market to work in the resource recovery arena just as it is allowed to work in the food, clothing, and shelter arenas.

If Americans citizens owned the hundreds of millions of acres of “public” lands in the West and in Alaska that are now owned by the federal government, the free market would ensure that each parcel of land was put to its most beneficial use. If the Arctic National Wildlife Refuge is indeed among our most beautiful and treasured natural resources, then groups such as the Sierra Club would use their economic resources to purchase and preserve the refuge.

If, instead, there is nothing so distinctive about ANWR, or at least the small portion of it contemplated for oil and natural gas drilling, to make it stand out above and beyond the hundreds of other national parks and preserves, then the Sierra Club would pass on the steep price that would reflect the societal value of the refuge’s immense oil and natural gas reserves. Producers and consumers, through voluntary transactions taking place in a free market, would determine the highest and best use of each parcel of land.

James M. Taylor

James M. Taylor is senior fellow for environment and energy policy at The Heartland Institute, and... (read full bio)