Rivals’ Energy Plans Would Have No Immediate Effect, Experts Say

Gasoline prices rocket. Home heating fuel dwindles. Electricity bills seem out of control. All the makings for Energy Crisis 2000--and an irresistible presidential campaign issue.

Indeed, Al Gore and George W. Bush have already claimed that they would avoid a reprise of the 1970s, largely with their parties’ familiar tools: conservation for the Democrats and more drilling for the Republicans. On Friday, they ratcheted up the rhetoric in hopes of capitalizing on voters’ worries.

But behind the scenes, policymakers, analysts and industry executives largely agree that the candidates’ plans would have no immediate effect on the price gyrations that are of uppermost concern to most Americans. They are skeptical of the candidates’ grand plans, unconvinced that government can do much good quickly and unsure whether there is even an immediate problem to be solved.

“I don’t see a whole lot in either of their plans, but then I’m not sure there’s a whole lot they should be doing,” said Severin Borenstein, an economist and director of the Energy Institute at UC Berkeley. “With the exception of what it could do to the poor, this isn’t a crisis; it’s more of an inconvenience.”

That is not what San Diego and south Orange County electricity ratepayers think; they just got their first taste of electricity deregulation in the form of monthly utility bills that are double their previous ones, and many are convinced that catastrophe is at hand.

“For some households, this has been a real burden,” said Frank A. Wolak, a Stanford University economist and chairman of the Market Surveillance Committee, a federally mandated monitoring group for California’s electricity market.

Still, the experts say, some big changes in U.S. energy use over the last quarter-century make the return of gasoline lines and cardigans unlikely any time soon.

The most important, they say, is that the nation’s economy can turn out substantially more goods and services for every unit of fuel it uses. That enables it to withstand price hikes much better than in the 1970s.

“Before the recent price hikes, the U.S. energy bill as a fraction of the economy was less than half of what it was 20 years ago,” said Ralph Cavanagh, energy policy director for the Natural Resources Defense Council, a national environmental organization. “That means, while the increases may hurt, they’re are not all that damaging.”

Many voters might think that government-mandated conservation deserves the credit. But, in fact, the country has been backsliding. For example, the fuel efficiency of new passenger vehicles, which improved through the late 1980s, has since declined.

Instead, say experts, the most important cause has been a development that no one ordered and few even foresaw: the shift from heavy industry to high-tech, from the old economy to the new. The lesson that many draw is that governmental energy policies are weak reeds compared to broad economic trends.

“Organizing a national policy that can make much of a difference is so difficult I don’t think it’s possible,” said Harvard University economist William W. Hogan.

A second change protecting against a 1970s-style crisis is the substantial deregulation of the oil and natural gas markets. One of the few surviving legacies of the nation’s last energy debate, it ensures that when supplies are short, there is a swift response in the form of price hikes rather than gasoline lines, fistfights and rationing.

That’s an improvement, at least for those who can pay, but as Southern California’s experience shows, it’s not painless. And more than anything else, pain is what the presidential candidates promise they can alleviate.

Gore claims he can do so almost entirely with conservation and alternative energy sources. His plan would give families tax breaks for insulating their homes, installing solar panels and buying fuel-efficient cars. Businesses would get breaks for embracing everything from wind power to methane.

What pain the plan would inflict would not fall directly on the public. For example, Gore would ban new oil and gas drilling off California and Florida, and any drilling in the Arctic National Wildlife Refuge in Alaska. Both actions might anger the energy industry but certainly not voters.

Bush’s incentives would be for energy suppliers, not consumers. Although he acknowledges the importance of conservation and alternative energy sources, much as Ronald Reagan did in 1980, Bush proposes to spend only modestly more on them. Instead, he would open portions of the Alaska wildlife refuge and other federal lands to oil and gas exploration, encourage “clean coal” development and pave the way for some additional use of nuclear plants.

At the same time, the experts argue, both candidates’ plans would make the nation only modestly less dependent on foreign supplies, and then only years from now.

“It’s depressing how little difference the candidates’ plans would make and how little institutional memory there is,” said Henry Lee, a Harvard energy policy specialist.

The loss of memory seems to run particularly deep at several key points in the campaign debate.

* Reducing reliance on imports: Both candidates claim they would shrink imports’ 56% share of America’s daily oil intake, thus stabilizing prices and inoculating the country against a supply cutoff. In fact, both have strongly suggested that America might once again be energy independent, a particularly popular notion as the once-toothless Organization of Petroleum Exporting Countries has suddenly seemed to regain some of its former power.

But almost nothing of the sort is likely to happen in the next decade or more, say the experts.

* Blaming the energy industry: Gore has repeatedly suggested that energy providers are engaged in “corrupt pricing” and “unfair practices.”

But analysts say that the current ability of providers, especially OPEC, to raise prices is almost entirely due to worldwide demand outstripping supply. Most argue that the problem will correct itself as higher prices attract new supply and reduce demand.

* Blaming regulation: Bush has argued that excess regulation and a mismatch of state and federal rules have stalled the building of oil refineries and power plants. He has scored the Clinton administration and Gore for failing to act.

But many analysts say that, with some exceptions, energy markets are vastly less regulated than they used to be and that the big problem has been elsewhere.

“The price of oil and natural gas has been too low to attract the necessary investment,” said Harvard’s Lee. “Environmental restriction may have exacerbated the problem, but it’s 80% prices.”