Policy Documents

Costs and Consequences: America’s Misguided Energy Policies

Mario Loyola –
January 1, 2012

The Obama administration’s rejection of the Keystone XL pipeline was obviously driven by considerations other than expanding our energy resources or creating more jobs. Alas, that is true of this administration’s energy policy across the board.

Indeed, the administration’s energy policies often suppress job creation, and do so quite intentionally. This is because the administration targets fossil fuels in order to favor alternative energy. Its official energy plan, Blueprint for America’s Energy Future (March 2011) consists of the following major components: (1) envelope fossil fuel production in restrictive regulations; (2) impose highly expensive efficiency standards on homes and vehicles; and (3) favor the development of alternative energy.

Whatever its potential benefits, the one certain result will be to make energy more expensive. In times of economic hardship, high energy prices cut particularly deep. As the President himself said last spring:

One area of particular concern has been the cost and security of our energy. In an economy that relies on oil, rising prices at the pump affect everybody—workers and farmers; truck drivers and restaurant owners. Businesses see it hurt their bottom line. Families feel the pinch when they fill up their tank. For Americans already struggling to get by, it makes life that much harder.

Alas, the administration seems to have conflicting policy objectives, such as saving the planet. On the night of his victory in the 2008 Iowa Caucuses, Senator Obama predicted that the night would be remembered as “the moment that the rise of the oceans began to slow, and the planet began to heal.” It is a cause to which many of his supporters are deeply committed, and in the name of which they justify their calls for major sacrifices on the part of the whole society. And more practical considerations motivate the administration to seek higher energy prices, despite their impact on the poor. As Secretary of Energy Stephen Chu said, before one congressional committee, “Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe.” Why? In order to make alternative energy sources economically competitive.

This policy perspective examines the U.S. government’s energy policy in light of its impact on the cost, availability, and reliability of our energy resources, as well as in light of its broader impact on the U.S. economy. Absent severe economic dislocation, there is no alternative to expanding the safe production of traditional energy sources. Energy policy should be shaped by a rational economic policy that seeks to reduce the burdens and uncertainties of the current regulatory and tax climate.