One of the more surreal sessions at this year’s World Economic Forum in Davos had oil industry experts explaining how the melting of the polar ice cap – which is occurring faster than anyone anticipated – represents not only a problem, but also an opportunity: vast amounts of oil may now be accessible.
Similarly, these experts concede that the fact that the United States has not signed the Law of the Sea, the international convention determining who has access to offshore oil and other maritime mineral rights, presents a risk of international conflict. But they also point to the upside: the oil industry, in its never-ending search for more reserves, need not beg Congress for the right to despoil Alaska.
President George W. Bush has an uncanny ability not to see the big message. For years, it has become increasingly clear that much is amiss with his energy policy. Scripted by the oil industry, even members of his own party referred to an earlier energy bill as one that “left no lobbyist behind.” While praising the virtues of the free market, Bush has been only too willing to give huge handouts to the energy industry, even as the country faces soaring deficits.
There is a market failure when it comes to energy, but government intervention should run in precisely the opposite direction from what the Bush administration has proposed. The fact that Americans do not pay the full price for the pollution – especially enormous contributions to greenhouse gases – that results from their profligate energy use means that energy is under-priced, in turn sustaining excessive consumption.