Costing Out Our Energy Options

Mark Green
Posted August 2, 2011

An illustration of the energy impasse in Washington - former U.S. Sen. Byron Dorgan, speaking last week during a "Conversations with Power" panel discussion at the Newseum:

"We are a country with 3 percent of the world's oil reserves, we're 5 percent of the population, we produce 10 percent of the world's oil and use over 20 percent of the world's oil. ... We need a new energy policy that makes us less vulnerable, less oil intensive. ... We're going to have to have a price on carbon. ... We're always going to need fossil energy and use fossil energy. We need to use it differently. We're too oil-centric. ... We could wake up some morning and discover that the energy with which we run our economy doesn't exist or the supply was interrupted and we'd be in big trouble."

Then there's the U.S. Chamber of Commerce's Karen Harbert, from the same panel:

"I think the approach has been ... let's make oil more expensive than the alternatives. Now we're at a point where we recognize that we do have a lot more oil here than we recognized, a lot more natural gas, and maybe we should have an energy policy that seeks to provide affordable energy to everybody given our economic straits and make those alternatives commercially viable, let's make them affordable for everybody. That changes the paradigm from making oil more expensive to making alternatives cheaper."

You can check out video of the whole discussion, which included former Pennsylvania Gov. Tom Ridge, here. The focus here is on the difference between an outcomes-based approach to policymaking - in which government chooses a result and tries to tilt the playing field in ways that lead to that result - and an approach that identifies a broad policy goal but allows for flexibility in reaching it.

In this case, Sen. Dorgan specifies an energy future that's less "oil-centric." He and others believe America's oil use makes the country vulnerable because of how much it is imported, which is a valid concern. Their solution is to steer the U.S. away from oil. A carbon tax would make using oil more expensive - reducing its market edge over costlier alternative fuels and reducing the amount of oil we consume.

Harbert argues the equation should be turned around. Instead of making alternative energies more competitive with oil by raising the price of using oil, work to make alternative energies less expensive and market viable in an all-of-the-above strategy:

"Nobody wants to make something on which we depend more expensive. (Americans) want to have affordable energy. So we've got to look at ways we can make alternatives more commercially viable and less expensive, and that way we'll have more opportunity, more options out there for the consumer rather than fewer and more expensive ones."

One approach sees oil as the problem, the other sees it as an important part of a larger energy strategy. And more realistic, too - given U.S. Energy Information Administration projections that oil and natural gas, which currently provide 61 percent of our energy, still will provide 55 percent of it in 2035. One approach would artificially burden consumers and businesses with higher prices, trying to steer the economy toward a desired outcome; the other would maintain options and trust the marketplace to develop new, affordable technologies.

Of course, there's also the piece of the puzzle some refuse to acknowledge: that the statement about U.S. oil reserves is misleading, and that the country's ability to reduce vulnerabilities associated with certain oil sources actually is great - as in a future where the U.S. and Canada supply 92 percent of our liquid fuel needs by 2030.

It's a scenario, as Harbert said, that offers energy affordability and security - if policymakers are willing to acknowledge it.