Bradley's Political Capitalism Project (Part II: Energy Policy Today)

Yesterday, I fawningly reviewed Robert Bradley’s Political Capitalism Project for providing information and insight to where much of our economy has gone wrong in the last 80 years, i.e., allowing companies to succeed by using political muscle instead of free market acumen.

The Bradley Project provides a sturdy worldview for thinking about energy policy. Today, I will critique both recent and historical energy policy by relying on Bradley’s framework for assessing the implications of political versus market capitalism. Tomorrow I will argue the legitimate role of government in energy markets and give an example where active government policy is needed.

Back to 1973

The modern era of energy policy began on October 17, 1973, the day that OPEC announced an oil embargo against the U.S. With very few exceptions, since that day, energy policy, on both sides of political aisle, deteriorated until finally, and literally, it fell off a cliff with the Obama Administration’s embrace of the “green economy” and its hostility to carbon energy.

We have had our share of “energy crises,” and I would agree with the Bradley Project that all have been self-inflicted by bad government policy advocated and adopted on a bipartisan basis, Democrats supporting distortions on a soft path and Republicans on a hard path.

Unfortunately, we are headed for more crises in energy markets. Washington makes two fundamental mistakes when it comes to energy policy. The first is it focuses on problems that don’t exist (today’s discussion). The second is it ignores problems that do exist (tomorrow’s discussion).

Washington’s Energy Meddling

The Bradley Project does an excellent job of providing the intellectual framework that shows that many of the things that Washington is focusing on are not problems. Here is a brief list:

· Severe curtailment of coal use by EPA; it is at best premature to adopt prohibitions on coal use for climate change purposes.

· Bailouts of car companies; we don’t need the government to own a car company to ensure that electric cars are produced or unions protected.

· Curtailment of oil and natural gas exploration and production by the Department of Interior; we can produce oil and gas in an environmentally responsible manner.

· Subsidies for ethanol; despite a robust global market for oil with no realistic suggestion of limited supplies, the application of comparative advantage, no environmental advantage, and an increase in food prices.

· Promotion of renewables by DOE in too many ways to list (offshore wind happens to be my favorite whipping boy); renewables cannot possibly fill the gap in our electricity needs, even at prices so high as to cause severe consumer dissatisfaction.

· Promotion of natural gas and electric vehicles; gasoline (and diesel) will be the consumers’ fuel of choice for mobility for the rest of our lifetimes.

· Increasing miles per gallon regulations for cars, the so-called CAFE Standards (Corporate Average Fuel Economy Standards); there is no shortage of oil that justifies such coercive and anti-consumer policies.

· Energy conservation and efficiency subsidies and mandates; if markets function properly consumers need no special subsidy or mandate to choose the least-cost energy option.

· Alarmist concern about shale oil and natural gas; we now know we have supplies of oil and natural gas that were literally beyond our comprehension even five years ago.

The Bradley Project provides the intellectual framework that shows the idiocy of these bipartisan policy positions. Well-functioning energy markets render all these efforts a waste of time, money, and intellectual energy. A pox on both their houses.

The Project is also helpful on the second point: that government is not focusing on problems on which they should focus. Of these, there are two varieties: repealing bad interventions into energy markets and enacting good interventions.

Repeal/Reform Areas

The list of “laws on the books” that should be repealed or reformed is again too long for complete explication here. But here are a few that leap to mind:

· The crazy patchwork of energy supply and conservation subsidies;

· The Price-Anderson Act that limits the liability of electric utilities for nuclear energy damages;

· The process of approving new nuclear facilities;

· States that have adopted moratoria on coal plants;

· Access limits on ANWR exploration;

· State and Federal ownership of energy facilities;

· Presidential authorization of facilities that relate to energy imports and exports, like the Keystone XL Pipeline recently disapproved by the Obama Administration;

· CAFE’s impact on the technology of mobility;

· Requirements in more than 20 states that utilities must have a certain percentage of their generation that must come from renewable energy (Renewable Portfolio Standards or RPS);

· A completely superfluous program of cap-and-trade in 10 northeastern states, the so-called RGGI Project; and

· The implications for corporate paralysis caused by Sarbanes-Oxley and Dodd-Frank.

Again, the Bradley Project provides much grist for the mill as to the idiocy of many of these “on the books” laws that promote waste and inefficiency and impede economic growth. America has real problems, but these ain’t them!

Now we get to the good stuff, disagreement. Are there things that the government should be paying attention to but isn’t?  Thus my third act tomorrow.