On U.S. Energy Policy, Obama Should Trust the Market

COMMENTARY International Economies

On U.S. Energy Policy, Obama Should Trust the Market

Feb 18, 2016 2 min read

Senior Research Fellow, Margaret Thatcher Center for Freedom

Ted Bromund studied Anglo-American relations, U.S. relations with Europe and the EU, and the U.S.’s leadership role in the world.

On Wednesday, according to AAA, the average price for a gallon of gas in the United States was just under $1.72. Low energy prices are good for American consumers, for the U.S. economy, and for the United States in the world. Too bad President Barack Obama wants to raise them.

Obama’s final budget request calls for a $10 “fee” on every barrel of oil. While the administration denies this is a gasoline tax, oil companies will simply take the fee and pass it on to you. That looks like a tax, feels like a tax and costs you just the same as a tax.

While low-income families will get relief on heating oil costs, almost half of every barrel of oil is turned into gasoline. And because low-income families spend about 20 cents out of every household dollar on energy — and a lot of that goes to gas — the new tax would be disproportionately bad for the poor.

Of course, the president has a plan: Spend the money on subways, buses, electric cars and the like. In other words, the beneficiaries would be, first of all, the big companies and the big unions that make the subway trains and the buses. It’s not quite stealing from the poor to give to the rich, but it’s close.

If a city wants to build a subway, that’s fine. I use one almost every day. But there’s a simple way to pay for a subway: the city issues a bond, and then pays it back by charging the people who use the subway. The federal government doesn’t need to get involved. The federal government isn’t adding anything, except higher prices.

What’s remarkable is that the White House doesn’t seem to have any idea how lucky it’s been. Lower energy prices in 2015 saved every American family about $700, and Merrill Lynch estimates that, around the world, lower prices will leave consumers $3 trillion a year better off.

The U.S. recovery from the Great Recession was slow. But thanks to U.S. fracking, and Saudi efforts to stifle it by pumping more oil, we’re paying a lot less for energy. Without that boost to employment, spending and investment, our recovery from the Great Recession would have been even slower.

And low oil prices aren’t just good for the United States. They’re bad for a lot of places and entities that hate us. From Russia to Iran to Venezuela, and even the Islamic State, a lot of our adversaries are hurting because cheap oil makes life harder for them. Obama’s not had a lot of foreign policy successes, but cheap oil’s been good for us abroad.

It’s depressing to think how much better we could have done at home and abroad if Obama had made taking advantage of fracking a deliberate part of his strategy. Instead, he’s resisted it every step of the way, and he’s at it again now. The White House wants higher prices partly to “reduce our reliance on oil.”

The White House’s confidence that it can predict the future of transportation and energy technology is touching. But it’s also groundless. A decade ago, no one would have predicted driverless cars, drones or that the United States would cut carbon emissions with abundant domestic natural gas.

All three of those revolutions came from the free market. The federal government, meanwhile, demands drone registration, opposes fracking and talks about how subways, buses and light rail — all technologies more than a century old — can’t compete unless they get more of your money.

Sooner or later, we’ll stop using oil, just as we no longer rely on horses. I don’t know what will replace oil, but whatever does will have to be as convenient as oil, and no more expensive, or we won’t use it.

Obama can’t summon that future into existence through taxes and subsidies. He’s trying to plan the future. We’d all be better off if he’d just stop fighting it.

 - Ted Bromund is a senior research fellow in The Heritage Foundation’s Margaret Thatcher Center for Freedom.

 - This piece originally appeared on Newsday.

Originally appeared in Newsday