Drolet: Folly of government energy policy

Leon Drolet

The damaging effects of federal energy regulations are on full display this week at Detroit’s North American International Auto Show. Electric vehicles are dramatically unveiled to potential buyers who increasingly ignore the electrics already in showrooms. Thanks to energy mandates, politicians, not customers, effectively drive the auto industry with results costly to us all.

Government electric car subsidies dangled before auto shoppers are an obvious expense, but are increasingly ignored by buyers opting for more practical SUVs, crossovers and pickup trucks. Far more costly are regulations forcing automakers to redirect hundreds of millions of research dollars away from improving technologies embraced by consumers. We can never know what improvements in safety, energy, technology and design are delayed or never developed due to forced redirection of research investments.

Evidence of government energy policy failure is everywhere. This month, a deal to sell U.S. crude oil was signed between an American oil producer and China’s state oil refinery. The sale is the first since Congress’ December decision to end a 40-year-old ban on exporting American oil. American producers can finally sell to international customers — boosting U.S. jobs.

The oil export ban was enacted in the 1970s in response to experts predicting the world was running out of oil. The feds also enacted the infamous 55 mph speed limit and fuel efficiency mandates. Today, the world is awash with cheap oil as new technologies allow producers to extract previously inaccessible petroleum. The export ban only hurt U.S. companies, benefiting foreign producers.

Regulators often fail to anticipate technological advances. In 2007, Congress effectively banned incandescent light bulbs, forcing Americans to purchase fluorescents despite higher costs and mercury risks. Last week, researchers at the Massachusetts Institute of Technology announced they developed incandescent bulbs 300 percent more efficient than previous incandescents. But companies seeking to sell these bulbs may have to clear stifling regulations or change the law that crushed the incandescent industry.

The full cost of government energy policies is impossible to calculate. For example, government subsidies resulted in millions of acres of farmland being dedicated to producing corn for inefficient, expensive ethanol which raised food prices in a world where many go hungry.

Few still argue the world is running out of oil. Today, the concern is global warming. Yet, given the pace of technological change, it’s impossible to predict what energy sources will be most efficient years from now. Imposing policies based on current guesses result in missteps lasting decades — like the 1970s oil export ban. Worse, such policies may delay development of efficiencies that regulators cannot conceive of — like highly efficient incandescent lights.

Economist Friedrich Hayek called it “the fatal conceit” — the belief that a few experts have superior decision-making ability than the overall marketplace of consumers. Hayek explained how knowledge is very widely dispersed and no group of politicians can ever have as much knowledge as millions of consumers expressing their knowledge in individual ways: what cars they buy, how much they turn up their furnace, who they buy electricity from, etc. The net results of all those individual consumer actions almost always outperform central planning results.

Visit the auto show and you’ll likely marvel at the ingenuity it takes to develop those new electric cars. I do. Maybe mandates drive advancements? Yes, but what if all that intellect and creativity were freed to improve cars people actually buy? The show we see is substantially the result of top-down government mandates. The world we don’t get to see would likely be a far more awesome show.

Leon Drolet is a former Michigan state representative and director of the Michigan Taxpayers Alliance.