On Bush's Brand of Energy Diversity

The Bush administrations national energy policy is meant to stimulate a national debate. It is certainly doing that. Whatever you believe about its recommendations, the report is a surprisingly well-crafted overview of Americas energy situation. But are we in an energy crisis? Its a crisis to a low-income family that saw its heating bills double last winter — or to somebody who gets stuck in an elevator in California. What is evident is that we have moved into a more crisis-prone, constrained situation than weve seen for several years. Yet there is a big risk, amidst the furor, of losing sight of the common points across the debate.

Consider conservation. The notion that conservation has ceased to be important is simply not true. And the new policy does recognize that. The U. S. is, in fact, 42% more energy efficient than it was in 1973. And surely there is a lot more conservation to come. Some of it arises from the shift towards a service economy. A good deal comes from replacing older furnaces and machinery with more efficient ones. In other words, it is improved technology. Tighter regulations can help, too, such as raising the fuel efficiency of SUVs towards the level of cars. But a great deal of conservation is in response to the signals from the marketplace, otherwise known as "price." And dont forget "tax." Conservation can accelerate with higher prices — but that is a tough political choice.

We must understand, though, that conservation cant do the whole thing. A growing, increasingly energy-efficient economy will still need more energy. The reality is that a very complex supply system underpins our $9.3 trillion economy — and 93% of that system consistis of oil, natural gas, coal and nuclear power. The alternatives would have to be massive — and competitive — to have more than a small effect. Were not there yet. As it is, solar and wind supply just .001% of our energy. Continuing to spend on research and development is a wise investment.

Meantime, the requirements of our economy have to be met. For instance, additional natural gas supplies will be essential for the new, high-quality electric power that the information industry needs. Energy and environmental policies need to be better coordinated. Regulations that mandate "micro-brew" gasolines for different regions but dont take account of product flows increase the risk of price spikes, as seen in the Midwest. Overall, flexibility needs to be built into the energy system to enable it to adjust to changes in supply and demand and to avoid shocks. That means, among other things, modernizing the decades-old infrastructure. And we need to recognize that diversity is a pretty good policy. In a system so massive, there are not likely to be one or two all- purpose, perfect solutions.