Pity George W. Bush. No sooner he announced that energy policy will be a top priority of his administration---a most welcome development, it must be said---than the atmosphere of crisis that prevailed throughout the winter and spring began receding.

The global economic slowdown is having a profound effect on petroleum demand. Alarmed at the prospect of flooded global oil markets, OPEC nations in 2001 have announced reductions in production quotas nearly almost as often as Alan Greenspan’s Federal Reserve Board has cut interest rates. Natural gas, which quadrupled in price last year, is now selling at $3/MMBtu, 70% less than what it fetched last December. And, through a combination of mild weather and effective applications of conservation, California hasn’t experienced a Stage 3 electricity emergency—resulting in rolling blackouts--since mid-May.

A temporarily stabilized electricity supply picture in California and sinking prices of crude oil, gasoline, and natural gas spells bad news for the White House’s plan to increase energy supplies. Certainly the sense of urgency needed to justify building a new generation of coal-fired power plants, reviving nuclear power, and opening up more public lands to oil and gas exploration has all but evaporated. The White House hadn’t factored in economic weakness in its forecasts of continued shortages, in particular softening industrial demand for petroleum and natural gas. When the current slowdown will end is anybody’s guess, but until it does, Bush’s energy plan will most likely founder on the shoals of public opinion, a casualty of its own unfortunate timing as well as its extraordinary lack of balance.

This mismatch of policy relative to current commodity market realities provides environmentalists and other critics with more than enough ammunition to torpedo the Bush Administration’s production-heavy plan. Among the pointed questions posed by environmental organizations are: If Persian Gulf nations are so worried about excess inventory and slumping prices, what’s the logic behind barrelling into remote, ecologically sensitive locations like the Arctic National Wildlife Refuge in search of more expensive oil? And if California’s success in reducing electricity demand is attributable in significant part to a revived interest in conservation—and no one is suggesting otherwise—wouldn’t it be more prudent to make conservation the centerpiece of an energy plan instead of deriding it as a “personal virtue”?

Considering how the Administration’s proposal took shape and who shaped it, one is hard-pressed to extend any sympathy toward the White House. Any plan that is formulated almost exclusively by representatives of fossil fuel interests, utilities, and large power plant contractors is bound to reflect their business imperatives. How could it be otherwise with an administration headed by two former oil industry executives and deeply indebted to the likes of Exxon/Mobil, Peabody Coal, and the Southern Company? In return for their generous support during the presidential campaign, the Bush Administration provided their benefactors with a smorgasbord of policy proposals that, when the accounting is done, would amount to a decade-long all-you-can-eat buffet underwritten by present and future taxpayers.

Given all the digging, drilling, burning, laying of pipelines and stringing of transmission wires contemplated in this proposal, it’s clear that several inconvenient questions were never asked during the planning meetings. Here are three that come to mind. Do the recommendations contained in this proposal reduce this nation’s dependence on fossil energy sources? What specifically will be done to mitigate the environmental impacts from increased coal mining and combustion? How is long-term energy security, defined here as extending beyond 2010, ensured by accelerating the depletion of the very energy resources thought to be in short supply right now?

One issue the White House energy team apparently considered was the relationship between its blueprint and the Kyoto Protocol for reducing greenhouse gas emissions. On that matter the Bush Administration recognized the obvious impossibility of reconciling the two, and opted to withdraw unilaterally from the Kyoto process. That decision generated far more outcry and condemnation than the White House had anticipated, though it’s hard to see how it could have come to any other decision, given its cozy relationship with and indebtedness to Big Coal. Perhaps the Bush Administration honestly thought that few people would have a problem letting West Virginia dictate our national energy policy. If that’s the case, then the White House, to put it in Bushspeak, “misunderestimated” the degree to which its rejection of Kyoto would “resignate with the voters.”

In the future that is depicted by Bush’s energy plan, traditional power sources will go on being the workhorses of the American economy, and the federal government will go about weakening or removing all the regulatory barriers shackling coal, oil and, at some point, nuclear energy. Even though the plan cuts renewable energy sources in for some modest policy crumbs, the underlying assumption is that they aren’t ready to do the heavy lifting yet, and as such they are undeserving of the generous tax incentives proposed for “clean coal” technologies. While the blueprint sprinkles a few assorted conservation and energy efficiency measures into the recipe, the Bush Administration appears unwilling to let them make a dent in our nation’s enormous appetite for energy. Indeed, the relationship of conservation to conventional fuels in this plan can be likened to a sprig of parsley sitting on a standing rib roast, a speck of greenery adorning a dangerously unbalanced energy diet.

In light of the current easing of prices, it is tempting to dismiss Bush’s concern over petroleum and natural gas supplies as an overreaction to a passing phenomenon. To do so would be a grave mistake, however. There is strong evidence supporting the conclusion that the recent drop in natural gas prices is a response to reduced industrial demand, which has allowed supplies to build back to historic levels. Analysts have not detected an increase in extraction volumes, notwithstanding the considerable upsurge in drilling activity over the last year. This is worrisome. If natural gas yields do not pick up significantly, the stage is set for another round of price spikes when demand rebounds. Unfortunately, while the White House is rightfully alarmed about the economic havoc that would cause, its prescription—tax incentives and relaxed regulatory treatment for new “clean coal” and nuclear generating units—is fraught with environmental and financial risks that many would find unacceptable as well as unnecessary.

Given the lingering uncertainties over energy supplies and future regulations governing air emissions, a more rational response would be to prescribe a new energy diet for the United States, one that emphasizes conservation and efficiency while providing for more generous helpings of carbon-free renewables. By limiting domestic consumption of fossil energy sources, we would not only reduce the load of harmful pollutants discharged into the atmosphere, but also have more time to prepare for the energy-constrained future that awaits us. Whether it’s the specter of climate change or energy depletion that worries you the most, there’s no disputing the fact that what’s left in the ground below stays out of the skies above. But until the Bush Administration stops equating conservation and renewable energy development with Jimmy Carter’s cardigan sweater, energy security and clean air will remain elusive goals.

Sources:

California Energy Commission, Reduction in Monthly Peak Demand/Electricity Use, Updated August 1, 2001. Web address: www.energy.ca.gov/electricity/peak_demand_reduction.html.

“U.S. Natural Gas Output Slowed in 2nd Quarter; Prices May Rise,” by Chip Cummins, Wall Street Journal, August 6, 2001.

---

Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the supply-demand equation for these imported fuels, and analyzing its effects on prices, consumption levels, and the development of energy conservation strategies and renewable energy alternatives.

For more information on the global and national petroleum and natural gas supply picture, visit "The End of Cheap Oil" section in RENEW Wisconsin's web site: www.renewwisconsin.org

"...the White House, to put it in Bushspeak, 'misunderestimated' the degree to which its rejection of Kyoto would 'resignate with the voters.' "