Supply and demand realities

Posted: Feb 18, 2001 12:00 AM
WASHINGTON--In spring of 1996, gasoline prices shot up, topping $2 per gallon in California. It being an election year, President Clinton boldly stepped in and ordered an investigation by the Energy and Justice Departments. They found nothing. They found what any child could have told them before they wasted their millions. Supply was down (a particularly long winter delaying gasoline refining, a refinery explosion cutting capacity in California) and demand was up (people driving more and faster in ridiculously outfitted, combat-ready, all-but-armored SUVs). Surprise. Prices went up. Well, the silly season has returned. California is now experiencing a general power crisis, and almost 60 percent of Californians think that the rolling blackouts are a conspiracy by the power companies to raise rates. Politicians are thundering, fingers are wagging, and complicated theories are being hatched to explain the shortages. Here's my guess: Demand is up and supply is down. Demand is up because in the most absurdly misnamed deregulation plan ever created, California capped the consumer price of electricity, thus preventing price signals from restraining demand. And demand shot up because the California economy has expanded by 34 percent in the last 10 years. The supply side of this equation is even more obvious. Californians love the environment. Power plants are dirty, intrusive and ugly. So California hasn't built one in 10 years--even as its demand for electricity has grown by almost 25 percent in just the last five. To put California's obdurate ecosensitivity in perspective, in the last five years Texas has built 22 new power plants; within a year that number will rise to 37. Californians refuse to acknowledge that in the real world their desire for one good (an unsullied environment) might actually conflict with another (their desire for hot water in their Jacuzzis). The conflict between hyper-environmentalism and energy shortages applies to more than just electricity. Oil prices spiked last year. And in the last 12 months, natural gas prices have tripled. Yet for decades environmentalists have successfully restricted offshore drilling, exploration on federal lands, and, of course, tapping the Arctic National Wildlife Refuge for its potentially huge oil and natural gas reserves. ANWR is the poster child of cake-and-eat-it-too eco-petulance. It's a place so remote and so desolate that not one American in a million will ever see it. Exploration would affect no more than 8 percent of the refuge. Rather than disturb the mating grounds of caribou, however, our exquisite environmentalists have prevented exploration of what could be our next Prudhoe Bay. And for reasons of nothing less than hysteria, they have also blocked the one supply side solution to the environment vs. energy conundrum: nuclear power. Nuclear is the one mode of electricity generation that avoids nearly all traditional environmental damage--the noxious gases, the particulates, and best of all, carbon dioxide, the primary greenhouse gas. Nuclear waste is not a trivial problem, but it has the distinct advantage of being concentrated and not dispersed in the atmosphere. Yet the allergy to nuclear is so extreme and irrational that even in the midst of this crisis, no one dares mention it as a long-term alternative. After decades of such willful energy abnegation, blackouts begin and Californians can't figure out why. The only comparable example of mass myopia is airline congestion. It is blamed on the FAA, on the airlines, on air traffic control, on little green men. The answer is simpler: Two decades of deregulation have democratized air travel by making it so much cheaper. Yet while air traffic has soared--by almost 50 percent in the last nine years--no one wants to build new places for the planes to land. Since 1974, only one major new airport has been built (Denver International). Even the conversion of obsolete Cold War military airports to civilian use, such as El Toro in Southern California, has been held up for years by red tape. Since 1991, a total of just five new (BEG ITAL)runways have been built in the country's 29 largest airports. Environmental regulation and community protests make the process so difficult that building a new runway takes 10 years. Yes, fancy air traffic control--running planes closer together both in time and space without crashing--can make up for some of the overload. But it can hardly make up for the hard fact that when millions more people are flying to an almost fixed number of runways and airports, they get backed up. You can't blame people for not wanting an airport or a power plant in their backyard. But you can wonder at their perplexity when the lights go out and the planes don't fly on time.