Virtually every claim made by T. Boone Pickens to justify the lavish subsidies he is seeking for his wind energy investments is flat wrong.
First, oil imports are not the cause of high gasoline prices. On the contrary, oil imports serve to keep gasoline prices down. After all, we import oil for a reason – it’s cheaper than the domestic alternative. If we were to restrict our energy diet to energy produced in the United States, it would make domestic energy producers (like Mr. Pickens) far richer and energy consumers (the rest of us) far poorer, and GDP would be reduced as well. While one can understand why Mr. Pickens is attracted to the idea of “energy independence,” for the rest of us, keeping the country open to imported goods is pro-consumer, whether we’re talking about oil, steel, textiles or athletic shoes.
Second, we are no more forced to rely on the “goodwill” of foreign oil producers when we shop for petroleum than we are forced to rely on the “goodwill” of supermarkets when we shop for eggs and milk. Oil producers export crude oil because it’s a great way to make money – and for many, the only way to make money. And once that oil is in the global marketplace, market actors, not oil producers, dictate where it goes. Hence, we are betting on producer greed – which is a pretty safe bet.
Third, if wind energy were a sensible economic investment, it would not need the lavish federal and state subsidies already in place or the additional largesse sought after by Mr. Pickens. Likewise, if compressed natural gas (CNG) vehicles are an economically sensible alternative to conventional gasoline-powered vehicles, then no government “master plan” is necessary to deliver them to market. Price signals will induce investors to invest and consumers to buy, without government having to lift a finger. The same goes for all the other energy-related R&D Mr. Pickens would like the taxpayer to dole out. If that R&D is promising, it will be pursued, whether government subsidizes it or not.
Fourth, if reducing our carbon footprint is the goal, then the most direct and efficient means of reducing that footprint is to impose a tax on carbon emissions and then leave it to the market to sort out how to most efficiently order affairs under those new prices. Maybe it will mean windmills and CNG, but maybe not. Perhaps it will mean more nuclear power, new hydrogen-powered fuel cells, “clean” coal, the emergence of cellulosic ethanol, battery-powered cars or hybrids – or a continuation of the existing energy base but less consumption as a consequence.
Of course, if the market were to go into any of those directions, Mr. Pickens would be out a lot of money, which is probably why he wants to hard-wire the market to consume the things he’s investing in and have the government lavish him with subsidies in the course of doing so. I wish Mr. Pickens well in his wind energy business, but I see no reason why taxpayers, ratepayers or consumers ought to be forced to sacrifice in order to fatten his already ample bank account.
Jerry Taylor, Financial Post
Jerry Taylor is a senior fellow at the Cato Institute.
24 July 2008
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