Most presidential seekers want energy socialism

Sheldon Richman, 2008-01-24

WASHINGTON - One of the great unnoticed curiosities of the presidential campaign is that even the party that claims devotion to free enterprise is full-out socialist - or, more precisely, fascist - when it comes to energy policy. Listening to the presidential forum the other night, I was struck by how anti-free market all but one of the Republican candidates, Ron Paul, are on this matter.

Of course, Mitt Romney, John McCain, Rudy Giuliani, Mike Huckabee and Fred Thompson, who has since dropped out of the race, pay lip service to the free market on many issues. However, when it comes to energy, they don’t do even that.

At a recent ABC forum, these candidates recited a list of things “we must do to end our dependence on foreign oil.” “We” means the “we who are forced by government.” Not one of the five showed even a glimmer of understanding that a truly free market would be more than up to the task of ensuring steady and plentiful supplies of energy.

A truly free market would move us smoothly from oil to something else as conditions warranted by providing the profit incentives for innovative people to find efficient alternative fuels. In fact, only the free market can do a good job of this without the corruption and the boondoggles that mark politically managed programs.

The free market - which is what we need, but do not have - is much smarter than any cast of bureaucrats and politicians. Entrepreneurs have two characteristics that serve the public well: The price system to guide them and their own capital at risk. The price system provides critical feedback, signaling which projects have the potential to succeed and which do not. Unlike bureaucrats, entrepreneurs risk their own wealth, so they have a direct stake in getting things right.

Prices guide consumers as well as entrepreneurs. If prices go up, we can expect appropriate conservation efforts without government mandates. Government-backed fuels, however, will not be subject to free-market pricing. Ever eager to dispense favors to their patrons, politicians will manipulate the tax and regulatory system to give their pet energy products a price advantage over other alternatives. But any fuel that needs government help to make it in the marketplace is uneconomical and represents corruption.

Take ethanol. The only reason anyone is making it is that the tax system treats it more favorably than gasoline. A special interest - corn farmers supported by food processor Archer Daniels Midland - favored the creation of this artificial market. There’s no other reason for it. Ethanol doesn’t save energy, once you account for how much energy is required to make it, and it has its own environmental drawbacks. Moreover, the government-fueled boost in demand for corn has distorted that market as well, raising food prices and drawing land out of the production of other needed crops.

Yet most Republican (and Democratic) candidates blithely promise to mount more costly programs that would foist a variety of “alternative fuels” on us. Such hubris! As though these politicians know what’s best for such a large, diverse society as ours.

The cry for “energy independence” is peculiar for self-styled advocates of free enterprise. The global division of labor is a pillar of the free market, and any drive for self-sufficiency would retard economic growth.

Why would we want to stop buying economical fuel from foreign sources? The Republicans’ reason is the threat of terrorism from the Middle East. But the oil market is global, with diverse suppliers. According to the American Petroleum Institute, “less than 15 percent of the oil the United States consumes comes from Persian Gulf countries.” Of the top 10 crude-oil exporters to the United States (86 percent of our imports), only Saudi Arabia and Iraq are even in the Middle East. Two of our top three suppliers are in North America: Canada and Mexico.

The federal government should repeal all energy subsidies and privileges, including intervention in the Middle East, that shield the oil companies and everyone else from the full costs of their choices. In other words, contrary to what most of the candidates say, we need a real free market in energy.