Adam Smith to the rescue.

BUT THE free-market approach had one inherent defect: it led inexorably back to the cheapest and most ada table fuel-foreign oil, most of it from the Gulf." The sentiments expressed in The Economist are heard frequently these days. Self-flagellation is on the upswing among advocates of a free-market energy policy.

That "defect" in the free market pushed energy prices down dramatically after price controls were lifted in 1981, setting the stage for the longest economic expansion in peacetime history. It was this enormous growth in our economy, not profligate energy use, that brought about a 49.9 per cent reliance on foreign oil. Those who contend that oil's freemarket price was too low because it didn't reflect the cost of protecting foreign supply lines might ask themselves whether a higher price, and a smaller economy, would have made us less vulnerable to Saddam Hussein's blackmail today. OPEC's stranglehold on the world oil market wasn't broken until new sources began coming on stream-the North Sea, Mexico, Alaska's North Slope. (The cartel's exports to the U.S. dropped from 74.7 per cent to 41 per cent of American oil imports between 1973 and 1986.) But in recent years, energy policy has become a weak sister to environmental policy. The Point Arguello field off the California coast, where Chevron has invested $2.5 billion, has been ready to produce for years. If recalcitrant local officials give the go-ahead, up to one hundred thousand barrels a day could be added to domestic production. Alaska's Aretic National Wildlife Refuge, with oil prospects rivaling those of the adjacent North Slope, remains off limits. Grossly exaggerated green worries about nuclear safety have shut down the nuclear industry for years.

Oil conservation will inevitably increase as oil prices do. Federal intervention to promote consumer efficiency is not only unnecessary, it can be eccentric in its consequences-witness the auto deaths attributable to fuel-efficient, lighter vehicles. But as long as the economy grows our reliance on foreign oil will continue to grow until domestic production is expanded. Provided that dictators are kept in their place, we will benefit thereby.