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Oil and the State: How Journalists Get it Wrong / Artikel mises.org

verfasst von - Elli -, 28.07.2003, 16:03

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Oil and the State: How Journalists Get it Wrong
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By William L. Anderson

[Posted July 28, 2003]

[img][/img] In
a recent article on"energy" problems in the United States, Time
Magazine has managed to do what U.S. journalists have been doing for the
last three decades when writing about matters of natural resources: displaying
a wealth of factual knowledge while simultaneously demonstrating a profusion
of economic ignorance.

The magazine's latest foray into the issues of oil, natural
gas, and other fuels,"Why
U.S. Is Running Out of Gas," shows that the
country's"top" journalists in the energy field are as
economically ignorant as their forbears were in the 1970s and 1980s when this
country was gripped by a real live fuel crisis. If we can conclude anything,
it is that economic illiteracy is a requirement of"elite"
journalists in this country who cover the energy beat—and that government
programs to"do something" about these crises only create more
crises.

The article notes that some critical fuels shortages,
especially in natural gas, already are here and that the prospects for the
next few years could be grim, indeed:

<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">

            …Americans
are heading into their first big energy squeeze since the 1970s: a shortage
of natural gas, the invisible resource used to heat homes, fuel kitchen
appliances, generate electricity and manufacture many of the chemicals we
use. The shortage has triggered a sharp rise in prices that is likely to
exact a heavy toll on low- and middle-income Americans, especially those
living on fixed incomes. Home heating bills last winter more than doubled in
some areas, and they are expected to go up at least another 20% this winter.
Electric bills also will spike because generating plants are increasingly
gas-fueled. And in places like Louisiana, where the petrochemical industry
makes up a big part of the local economy, the shortage is causing a loss of
jobs, with at least 2,000 layoffs so far. The entire industry may be forced
to move offshore over the next few years if there is no relief.

[/i]

The reason for this situation, according to Time,
however, is one that demonstrates that journalists on the energy beat still
have not learned some basic lessons in economics:

<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">

For consumers, the second part of this one-two punch is
exaggerated oil prices. While the world is swimming in crude oil, it already
trades at an inflated price of $30 a bbl., a level essentially dictated by
Saudi Arabia with the approval of the U.S. government. This translates into
swollen prices for gasoline, home heating oil and other petroleum products.
What's worse is that because of Congress's three decades of fumbled energy
legislation, Americans have become more vulnerable than ever to an
interruption in foreign supply that would truly send prices into orbit and
cripple the U.S. economy. More than 53% of America's daily consumption of
oil and petroleum products comes from foreign sources, compared with 35% in
1973.

[/i]

To put it another way, the authors blame the current
situation on (1) the fact that this country imports a large amount of
petroleum and oil products, and (2) that Congress has lacked the political
will to"solve" the problem by pursuing government-funded"energy
alternatives."  I first look at proposition (1), then tackle
(2).

While Time's journalists might be good at
demonstrating their skill with numbers, their ability to size up a situation
is tainted by their incessant statism—and their simple failure to recognize
that the myriad of"energy crises" that have hit this country in the
past 30 years owe their origins to government intervention in the pricing,
distribution, and extraction of fuels. In other words, the journalists decry
Congress for not"solving" the problems that Congress, the courts,
and the executive branch caused in the first place.

This is hardly the first time anyone has spoken about the
"crisis" of importing oil. As one who was in college during the 1973
Arab oil embargo, I remember the gas lines, the accusations of near treason
against"Big Oil," and the politicians clambering for"energy
independence."  Indeed, President Richard Nixon in 1974 called
for a"Project Independence" that was supposed to create energy
alternatives that would enable Americans to stop importing oil by 1990. This
country, according to the pundits, was"addicted to foreign oil,"
and with our lives to be dominated seemingly forever by an"energy crisis,"
it was time to get serious and start conserving and looking elsewhere,
including the development of vehicles fueled by hydrogen gas.

The issue of"foreign oil dependency" is one that
is long on rhetoric and short on substance, as I pointed out in an earlier
article on this subject. For example, no one speaks
about"foreign caviar dependency" or"French wine dependency,"
or"Mercedes-Benz dependency" or"DVD dependency," despite
the fact that we import those items in large numbers, too.

It is true that current U.S. demand for petroleum-related
products cannot be met by the amount of oil pumped from sources within this
country's borders. Also, much oil that is imported comes from countries where
political life is volatile and much of the populace openly demonstrates hatred
for the USA. (That people in those countries are willing to sell oil to U.S.
firms despite their political proclivities demonstrates the power of trade as
an instrument of peaceful coexistence between the peoples of the earth.

(However, since most politicians speak of trade in terms of
violence like"trade war,""dumping," and"need for
protection," it often is difficult to be able to effectively broadcast
the message to the public that our buying oil from countries like Saudi Arabia
might be a good thing, at least in part.)

The"solution" to such"dependency,"
according to policymakers and echoed in the statist mainstream press, is that
government must engage in programs both of coerced conservation and coerced
production of alternative fuels, since members of both of these groups contend
that a free market not only cannot deal with the problems, but actually is the
source of crisis. Thus, one reads editorials in the New York Times and Washington
Post on a regular basis stating that Congress must increase"fuel
efficiency" standards in automobiles, an idea that has been thoroughly
debunked on
these pages.

The thinking goes as such: (1) conservation will result in
less fuel being consumed; (2) less fuel consumed means less"dependency"
on foreign sources; therefore, (3) coerced conservation will lower U.S. oil
imports. While such"reasoning" may make perfect sense to Times
editorial writers, it ignores that little problem economists call opportunity
cost.

Forcing conservation creates its own set of costs that often
play out in the markets and always result in the overall loss of wealth and
employment. (In forcing automobile manufacturers to downsize and make vehicles
lighter in order to meet fuel economy standards, government has made many
cars
more dangerous and has caused the deaths of
thousands of people, not to mention doing damage
to the automobile industry.)

For all of the hue and cry about imports, the past 30 years
have been some of the most volatile times in Middle East history since the
Roman Empire, yet during that same time, crude oil prices have fallen
precipitously in real terms. In other words, the wolf that supposedly lurks at
the door has not attacked, despite every opportunity to do so.

The second focus of the Time article deals with the
various federal"energy independence" programs that have been
started by Congress but always seem to bog down. According to the authors, the
problem is not necessarily with the ideas behind the programs—or even the
programs themselves—but rather with the lack of political will in Congress.
In other words, the authors claim that Congress refuses to take the necessary
power to create an energy utopia—as though the 535 men and women making up
that legislative body really had that ability in the first place.

Take the"SynFuels" program created in 1980 by
President Jimmy Carter, for example. In decrying OPEC oil imports, Carter
declared that there was an abundance of alternative fuels and energy sources
within the U.S. borders and began a government program to extract those energy
sources. From oil shale to ethanol to solar energy, the government doled out
hundreds of millions of dollars in subsidies and tax credits only to see
market realities play out in a destructive way.

According to Carter and his supporters, by offering
subsidies and tax credits, the government would be able to create and expand
an energy industry that would produce homegrown fuels, albeit at prices
substantially higher than even the highest prices OPEC was able to receive for
its own fuels. In other words, American taxpayers and consumers would be
forced to pay extra for fuels that they could purchase more cheaply otherwise.

Ethanol production is an excellent case in point. A
corn-based fuel, ethanol cannot be transported by pipeline, actually lowers
fuel economy, and provides no measurable clean-air benefits. Furthermore, the
program survives only because the government heavily subsidizes the whole
thing.

To put it another way, taxpayers and consumers must pay at
the pump and on their 1040s for a fuel program that given their own choices
would not exist in the first place. (Once again, we see those pesky
opportunity costs that government planners are unable to legislate out of
existence. Not surprisingly, those mega-firms that receive these government
doles also have close political relationships with Washington politicians and
Archer-Daniels-Midland, one of the worse offenders, advertises heavily on
shows such as ABC's"This Week" and NBC's"Meet the
Press.")

For all the talk of"economic objectivity" in
government programs, we are constantly reminded that, yes, government is a political
entity. That means government largess will always be doled out
according to the political benefits that accrue to those who give them. To
imply otherwise is to say that legislators and bureaucrats have the psychic
ability to engage in correct and accurate economic calculation even though
they do not have any of the basic tools that economic calculation requires,
according to Ludwig von Mises and Murray N. Rothbard. The Socialist
Calculation Problem applies as much to government energy programs as it does
to the central planners in GOSPLAN of the former Soviet Union.

The authors of the Time article are correct in that
coming energy crises are brewing. However, they are wrong when they assume
that such problems occur because of the ineptitude of capitalists and the lack
of political will by members of Congress. Whether it be gasoline or the making
of bread, the production of goods is best left to economic, not political
entrepreneurship.


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William Anderson, an adjunct scholar of the Mises Institute, teaches
economics at Frostburg State University. Send him  MAIL.
See his Mises.org  Articles
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Oil and the State: How Journalists Get it Wrong / Artikel mises.org - - Elli -, 28.07.2003, 16:03