Tags: Cato | Calls | Bush | Energy | Plan | Placebo

Cato Calls Bush Energy Plan a Placebo

Friday, 18 May 2001 12:00 AM

"It won't do much good, but it won't do much harm either. And that's pretty good for government work," says Jerry Taylor, director of natural resource studies at Cato, a libertarian think tank.

"The administration is implicitly arguing that high prices and big profits are insufficient to induce investors to bring new power supplies to market," Taylor adds. Yet, he says, without the guidance of any official federal energy strategy, or a single dime of taxpayer handouts, investors are currently pouring billions into the energy sector.

"For instance, the nation is currently experiencing a power plant construction boom, with some 90,000 megawatts of new electricity capacity scheduled to come on line by 2002, and a staggering 150,000-200,000 megawatts by 2004," Taylor says. "This will not only burst the electricity price bubble, but will probably produce an electricity glut in the near future."

Taylor also says that "so many billions are flooding into the natural gas market today that futures contracts for the year 2003 are being made at half the price of today's wholesale spot price."

He points out that high gasoline profit margins are inducing European refineries to enter the U.S. market for the first time in decades, and are also spurring new investment in domestic refining capacity. Many analysts, he says, predict that prices will actually decline this summer, absent any unforeseen supply disruptions in the refining sector.

"The 'sugar' in the administration's policy pill is a smorgasbord of handouts and subsidies for virtually every energy lobby in Washington," Taylor says. "The administration seems to have forgotten the fundamental lesson of the 1970s: If technologies are competitive and economically promising, then no federal handouts are necessary. If they are not, then no amount of federal assistance will make them so."

Taylor predicts that the price bubble will burst of its own accord as investors race to secure profits, whether additional federal lands are opened to the industry or not.

"Those high prices will likewise induce more conservation than any possible set of government subsidies or efficiency orders," he says. "The administration is simply positioning itself to take credit for what the market is already busily accomplishing."

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Copyright 2001 by United Press International.

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It won't do much good, but it won't do much harm either. And that's pretty good for government work, says Jerry Taylor, director of natural resource studies at Cato, a libertarian think tank. The administration is implicitly arguing that high prices and big profits are...
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2001-00-18
Friday, 18 May 2001 12:00 AM
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