What is fiction? The belief that we can reduce our dependence on foreign oil, shrink the amount of money we transfer to the Middle East, and lower the price of gas by driving our cars less. Nor does it help to raise fuel-efficiency standards as was grandly announced last week. When we use less gas, OPEC responds by tightening the faucet, reducing the supply, and causing the price to rise again.
What we need to do instead is lift the barriers that are preventing us from utilizing domestic, Canadian, and Third World energy resources, including not just Gulf of Mexico and Alaskan oil but also shale oil, shale gas, natural gas, and coal (all of which North America has in great abundance), and methanol (which can be made from coal, natural gas, urban garbage, and agricultural and forestry waste).
It would help if American automobile manufacturers would make all new vehicles capable of running on the widest possible variety of liquid fuels. The technology already exists. It costs about the same as a seatbelt. Having a critical mass of such vehicles on the road would open an enormous opportunity for entrepreneurs and investors to bring to market a variety of liquid fuels that can compete with gasoline.
That ought to be the goal: creating a diverse, abundant, and — most importantly — competitive market in transportation fuels. Let me stress: It is not for politicians to pick winners and losers. They should end subsidies for domestic ethanol. They also should abolish tariffs on imported ethanol. Purchasing energy from farmers in what we hopefully call the developing world is preferable — for many reasons — to purchasing energy from Iranian mullahs and Saudi sheikhs.
If Congress and the White House would establish and then maintain a truly free market, one in which consumers determine which transportation fuels and technologies offer the best values, that would put a leash on gas prices and reduce our need to spend in the Middle East and borrow from the Far East. Cheaper energy also would facilitate faster economic growth which increases tax revenues without increasing tax rates.
At the moment, however, U.S. policy continues to be what it has been: not just stealing from Peter to pay Paul, but also borrowing from Hu to pay Abdullah. It’s hard to imagine how we could do worse.