By John Carey
SPECIAL REPORT$100 OIL
Supercostly Crude: Winners and Losers
Pricey Oil's Path to Your Pocket
Oil: A Bubble, Not a Spike?
And You Thought Oil Was a Worry
Bush Is Blowing Smoke on Energy
The Pain of Fuel Surcharge Shock
Oil: Small Biz Takes a Big Hit
On Apr. 27, President Bush made an impassioned plea for an energy plan that would wean the U.S. from imported fuels. "Our dependence on foreign energy is like a foreign tax on the American people," he declared in a speech to a gathering of small-business owners and entrepreneurs in Washington.
What the country needs is "a national strategy," Bush said. "And the most important component of our strategy is to recognize the transformational power of technology. By harnessing the power of technology, we're going to be able to grow our economy, protect our environment, and achieve greater energy independence."
Powerful sentiments, indeed. But the words are largely hollow. Sadly, the plan Bush proposed would do little to increase existing supplies of oil, gas, or electricity, or decrease domestic demand for energy -- the two steps that would really make a difference. Charges Frank O'Donnell, head of Clean Air Watch, a Washington-based environmental group: "The new Presidential energy plan seems mainly to be a public-relations stunt aimed at trying to reverse some of the latest polls, which show a growing public discontent with high gas prices -- and the President."
LOW PRIORITY. Of course, environmentalists such as O'Donnell can usually be counted on to bash GOP policies. But in this case the criticism is deserved. Plenty of evidence indicates that the White House's sudden interest in energy policy is driven far more by politics than substantive policymaking.
To understand why, recall the last Presidential election. Democratic candidate John Kerry struck a nerve when he called for reducing American dependence on Middle Eastern oil, saying that "we should rely in American ingenuity and not the Saudi Royal family."
Yet, Kerry failed to turn energy into a significant policy issue in the race. And the White House learned a lesson: You can score political points by talking about energy policy -- without ever needing to follow through. It has been widely reported that Vice-President Dick Cheney privately told top Washington energy-policy wonks after the 2004 election that the Administration would put the issue low on its priority list for 2005.
"RETAKE THIS ISSUE." That was before oil prices soared, however, and the Republicans started taking a beating, as higher gasoline and home-heating costs made Americans angry and anxious. President Bush's approval ratings dropped, and GOP strategists cited rising fuel costs as the primary rub.
In a strongly worded report to his party in late winter, Republican pollster Frank Luntz warned: "Right now, the Democrats are exhibiting perfect pitch when it come to their energy message.... You need to retake this issue now before the next spike at the pump and before the next surge in our home-heating bills."
Luntz recommended that Republicans hammer hard on four themes: energy independence, national security, the power of innovation and new technology, and the importance of balancing new supplies with conservation. "The energy debate is ripe for partisan picking," he wrote. "Americans loathe the idea of being reliant on the Middle East for our energy needs -- and they were waiting for someone to tell them so."
LAUNDRY LIST. Kerry's remark about not relying on the Saudis was his "single best line at the convention, and it continues to resonate even today," Luntz observed. And in a recent interview with BusinessWeek, Luntz added that if the Administration "stays silent [on energy], it loses."
Luntz's memo is a powerful political document, and the White House took his advice to heart. On Mar. 9, Bush gave a speech hitting all of Luntz's themes. The President called for new technology to reduce America's dependence on imported oil and to increase conservation, and, along the way, to boost national security. Then in his Apr. 27 speech, he repeated the grand ideals -- and offered concrete initiatives. "For the sake of this country, for the sake of a growing economy, and for the sake of national security, we've got to do what it takes to expand our independence," the President said.
Here's what Bush offered as policies needed to meet this ambitious goal:
Provide federal risk insurance for nuclear plant builders, so that they don't bear the costs of delays in licensing new plants.
Encourage building of new refineries on closed military bases and ease regulatory "burdens" to speed construction.
Drill for more oil and gas at home, including in the Arctic National Wildlife Refuge (ANWR).
Spend $1.7 billion over five years to develop hydrogen-powered cars.
Expand the tax credits for hybrid cars to clean-diesel vehicles as well.
Give the feds more power to site new liquefied natural gas terminals (LNG).
Promote clean coal and nuclear power around the world.
Nothing is wrong with any of these ideas, although there's widespread -- and legitimate -- opposition to drilling in the ANWR. Even many environmental groups now reluctantly agree that clean-coal plants and advanced nuclear reactors are part of the solution to tomorrow's energy problems. Additional refining capacity would prevent the spot shortages that, in the past, have sent gasoline prices soaring in parts of the country.
REALITY AVOIDANCE. More LNG ports would bring additional natural gas to the nation. Clean-diesel cars would increase the average mileage of America's cars. And if anyone ever figures out how to actually produce enough hydrogen, fuel-cell cars do offer advantages.
But while the speech's rhetoric was lofty and inspiring, the President's proposals don't match up with the problems they purport to solve. They carefully avoid the politically difficult steps that actually would take America farther down the path of energy independence.
Take nuclear power. Safer new designs promise a reliable, relatively inexpensive source of electricity that doesn't contribute to global warming. But potential licensing delays aren't the big hurdle. In fact, the industry is already preparing applications seeking approval for new designs, so that when a good business case for new plants exists, utilities will be ready to go.
MORE MILEAGE NEEDED. A much bigger problem: not having a place to put the radioactive waste. "We won't have a new generation of nuclear plants unless the government keeps its 50-year old promise of waste disposal," said John W. Rowe, chairman and CEO of Exelon (EXC), a major nuclear utility, in a recent speech. But the waste issue is a political hot potato, so Bush steered clear of it. The truth is, what he did propose will do little to spur the development of new nuclear plants.
Similarly, Bush avoided the politically difficult -- but crucial -- steps on all the other issues, too. For example, energy experts agree the single-most effective way to cut oil dependency is to make cars and trucks -- which account for more than 60% of America's oil consumption -- more fuel-efficient. "You have to start with higher miles per gallon," says Robert E. Ebel, chairman of the energy program at the Center for Strategic & International Studies, a Washington (D.C.) think tank. That means mandating higher fuel economy standards or taking similar politically courageous steps.
Extending tax credits for diesel cars is mere tinkering around the edges. And hydrogen-powered fuel-cell cars are largely a pipedream for now.
FOLLOWING A SCRIPT? Want to take a real step to prevent gasoline shortages and keep a lid on energy prices? Easing regulations on refineries may sound good. But the Administration could make things truly easier for refineries by requiring that the nation use just one blend of fuel, instead of the current dozens that various states require. Of course, that wouldn't be a hit in many of the red states, which currently don't use the cleanest-burning fuels. It would be a bold step that would make a real difference, however.
Want to increase supplies of oil and gas? Instead of drilling in the ANWR or adding a few LNG ports, Bush could open up areas like the Gulf coast of Florida or the Rocky Mountains, which has a 60-year supply of natural gas, to exploration and drilling. But that wouldn't be popular in Florida, where his brother Jeb is governor, or in some of the Western states that are strong Bush country.
The President's failure to propose any meaningful solutions, while claiming to "do the right thing for America" makes it hard not to conclude that the Administration's main goal is not energy independence, but rather improving its standing the polls. Indeed, what's most striking about Bush's Apr. 27 speech is how closely it follows the script written by Luntz earlier this year. A few examples:
The pollster recommended emphasizing that the nation's energy problem "has been years in the making, and it will take years to solve." On Apr. 27, Bush said: "This problem did not develop overnight, and it's not going to be fixed overnight."
Luntz wrote that in advocating drilling in the ANWR, the Administration should say that "using modern techniques, only a very small area will actually be impacted by the development." In his speech, Bush echoed that, saying: "Because of the advances in technology, we can reach the oil deposits with almost no impact on land or local wildlife."
The pollster stressed that Republicans should have a positive message, appealing "to American ideals of invention and innovation" and tapping "into feelings of American exceptionalism and ingenuity to seal the deal with the swing voters." Any surprise, then, that Bush emphasized in his address that "technology has radically changed the way we live and work"? He added: "Our country is on the doorstep of incredible technological advances that will make energy more abundant and more affordable for our citizens."
Stirring words. Americans can only hope the President is right. But the goals of energy efficiency and independence won't be spurred by anything this Administration is currently proposing. Carey is a senior correspondent in BusinessWeek's Washington bureau