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The Wall Street Journal

Presidential Energy

Higher oil prices, not federal programs, will spur energy innovation

Ronald Bailey
February 2, 2006

"America is addicted to oil," President Bush warned during his State of the Union address, vowing "to replace more than 75% of our oil imports from the Middle East by 2025." And since our 230 million cars and trucks burn two-thirds of the 20 million barrels of oil we consume daily, Mr. Bush solemnly declared, "We must also change how we power our automobiles." The cure for our addiction? Why, a government program, of course: the Advanced Energy Initiative. This new scheme would throw more tax dollars at research aimed at creating clean power plants and also cars powered by hydrogen, electricity and ethanol. Unfortunately, the past 35 years of failed presidential energy initiatives doesn't bode well for these proposals.

For example, during the 1973 Arab oil embargo -- which tripled the price of oil overnight -- Richard Nixon launched Project Independence, asserting, "In the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving." Like Mr. Bush, Nixon also promised federal dollars to produce "an unconventionally powered, virtually pollution-free automobile within five years."

Gerald Ford moved the date for achieving American energy independence up to 1985. In 1975, Mr. Ford signed the Energy Policy and Conservation Act, which set federal standards for energy efficiency in new cars for the first time.

In 1977 Jimmy Carter notoriously declared energy independence an issue of such vital national interest that it was the "moral equivalent of war." In August of that year, Mr. Carter signed the law creating the U.S. Department of Energy, intended to manage America's ongoing energy crisis. In a nationally televised speech in July 1979, after the Iranian oil crisis doubled oil prices, Mr. Carter swore, "Beginning this moment, this nation will never use more foreign oil than we did in 1977 — never." He proposed a sweeping $142 billion energy plan which would achieve energy independence by 1990, moving the date forward yet again. Mr. Carter also urged Americans to park their cars one day a week and take public transportation.

In 1991, in the prelude to the first Gulf War, George H.W. Bush announced a national energy strategy aimed at "reducing our dependence on foreign oil." He also funded the U.S. Advanced Battery Consortium — a $260 million research project to develop lightweight battery systems for electric vehicles.

In 1992, Bill Clinton proposed a tax of 59.9 cents per million BTU on crude oil to discourage dependence on foreign oil. Next year he launched the $1 billion Partnership for New Generation Vehicles with the Big Three automakers, aiming, by 2004, to produce a prototype car that was three times more fuel-efficient than conventional vehicles.

Now we return to the current administration. In May 2001, after California experienced a series of rolling blackouts, Dick Cheney's national energy task force starkly declared: "America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s." In his 2003 State of the Union message, President Bush pledged "to promote energy independence for our country." He also announced his $1.2 billion FreedomCAR proposal, to develop hydrogen-fueled vehicles.

But despite these bold proclamations, the only way we've ever cut back on imported oil is in response to higher prices. World oil prices peaked in real terms in 1980 at about $90 per barrel. In 1977, U.S. imports were 6.6 million barrels per day. By 1985, imports had been cut in half to 3.2 million barrels. Why? Simple economics: Higher prices boosted domestic production and reduced consumption. And despite more than 30 years of government-sponsored initiatives only about a half-million alternative fuel vehicles roam America's highways, and none are wholly electric or hydrogen powered. Today's higher prices will do far more to free us from dependence on foreign oil imports and spur energy technology innovation than any federal program ever will -- even a so-called Advanced Energy Initiative.

Ronald Bailey is Reason magazine's science correspondent.

[Correction: In 1992, Bill Clinton proposed a crude-oil tax of 59.9 cents per million BTU. The original version of this article said the tax was 59.9 cents per BTU.]

Ronald Bailey is Science Correspondent

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