Is it any coincidence that energy prices have gone up since the government further increased its involvement in the sector with last August's passage of an energy bill? Why do we need a national energy policy? Some people argue it's because energy is such an important sector that the government must take a role. Well in that case why don't we have a national food policy, or a national housing policy? I can't even imagine how much that would screw things up if we had either of those.
Here's an idea: why don't we just let markets work? Remove all subsidies, efficiency requirements, etc. and let the market work its magic (the only exception should be taxes added on to compensate for the cost of externalities -- i.e. coal should be taxed more heavily than wind power as it pollutes the air). If oil prices go up, oil-based alternatives will be more attractive and the market will promote them. Remember, prices convey information. They tell us what things are worthwhile and what things aren't. If an alternative energy source costs $5 to produce $3 worth of energy, it isn't worthwhile. If oil costs $100/gallon it means we should seek to be more efficient in its use and find additional supplies, in addition to alternatives.
The government keeps trying to outsmart the market and they keep on failing.
Further comments from Business Week on ethanol (via instapundit) and Brendan Miniter.
P.S. It is also notable that it isn't just the U.S. that takes a heavy-handed government approach to energy -- it's actually more the rule than the exception. Indeed, most oil firms in OPEC countries are state-owned.
This trend continued yesterday with Bolivia's seizure of its natural gas industry.
Update: Popular Mechanics looks at alternative fuels.
Here's an idea: why don't we just let markets work? Remove all subsidies, efficiency requirements, etc. and let the market work its magic (the only exception should be taxes added on to compensate for the cost of externalities -- i.e. coal should be taxed more heavily than wind power as it pollutes the air). If oil prices go up, oil-based alternatives will be more attractive and the market will promote them. Remember, prices convey information. They tell us what things are worthwhile and what things aren't. If an alternative energy source costs $5 to produce $3 worth of energy, it isn't worthwhile. If oil costs $100/gallon it means we should seek to be more efficient in its use and find additional supplies, in addition to alternatives.
The government keeps trying to outsmart the market and they keep on failing.
Further comments from Business Week on ethanol (via instapundit) and Brendan Miniter.
P.S. It is also notable that it isn't just the U.S. that takes a heavy-handed government approach to energy -- it's actually more the rule than the exception. Indeed, most oil firms in OPEC countries are state-owned.
This trend continued yesterday with Bolivia's seizure of its natural gas industry.
Update: Popular Mechanics looks at alternative fuels.
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