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No magic in this marketplace: energy "happy talk." (Ronald Reagan's energy policy)

No Magic in This Marketplace

President Reagan's resilient optimism appears to have become official government policy, infecting the usually indifferent Washington bureaucracy like a tropical contagion. Take Secretary of Energy Donald Hodel. "We are better off today than we were in 1980,' Hodel told the National Press Club this summer. "Consumers are reaping the benefits of oil decontrol.' In a late August interview with the trade newsletter "Inside Energy,' he was even less guarded: "Things have, you know, improved vastly under the Reagan Administration, for which we will duly take credit. We have no alternative but to admit that we're responsible for the successes in energy.'

Actually the energy picture is not quite as rosy as Hodel depicts it, and what good news there is cannot be attributed to the Reagan team. Domestic oil production is essentially flat, and coal and gas production declined sharply from 1980 to 1983. To be sure, oil imports, the gauge of American energy disarray in the 1970s, dropped from 6.8 million barrels a day when Reagan took office to 5.5 million a day in the first half of 1984, and prices have fallen as well. But most economists say that the drop is a symptom of the 1980-83 recession and not the result of any particular action on the part of the Administration. Hodel is fond of claiming that Reagan's order to decontrol oil eight days after he took office was the momentous event that increased production and lowered prices. In fact, oil was 80 percent decontrolled by that time, so the effect of the move was minimal. What is more, prices appear to be firming up, despite enormous excess capacity in the oil-producing countries, and import levels are expected to rise 14 percent this year.

Hodel's other major claim--that the goal of U.S. energy policy is "to maintain a balanced, across-the-board approach to developing our energy resources'--is as disingenuous as the cries of victory, and probably more harmful. The Administration simply refuses to undertake crucial energy tasks that await Federal action. And old biases still drive the decision-making at the Department of Energy.

First, there is the department's stubborn allegiance to nuclear power, evidenced by the $1.4 billion requested for that purpose in the 1985 budget. This includes $623 million in the "energy supply' category, $238 million for nuclear waste disposal and $468 million for regulation. The nuclear fusion budget is an additional $483 million. The President's support for the Clinch River breeder reactor, his hope to revive spent-fuel reprocessing technology and his pledge to facilitate exports have cheered the industry without accomplishing much. Nunzio J. Palladino, chair of the Nuclear Regulatory Commission, has pushed for the licensing of more nuclear plants, although the technology is dying. During Reagan's term thirty-nine plants under construction were canceled, and no new projects have been started. The economics of nuclear power, as almost everyone but the Administration acknowledges, are simply no good.

Meanwhile, the assault on alternatives begun under Reagan's first Energy Secretary, James Edwards, a dentist from South Carolina, continues, though Hodel seems more bullish on conservation and renewable sources of energy than Edwards was. "Hodel recognizes that conservation in the United States stabilizes the world oil market,' says Debbie Bleviss, president of the Energy Conservation Coalition in Washington. "And he sees the problems of Third World countries being dependent on imported oil for economic growth. Is there a new commitment to conservation? It depends on your base line. Compared with Edwards, yes. Compared with the Carter Administration, no.' Scott Sklar, the Congressional coordinator of the Solar Energy Industry Association, adds: "Hodel is much more savvy. He knows not to articulate the very negative policy Edwards did.'

Budget requests are the best index of Hodel's priorities. The Carter conservation budget in 1980 was $1 billion; this year the D.O.E. is requesting $390 million, mostly because when it asked for less in the past, Congress insisted on maintaining appropriations at that level. The 1985 request for development of solar, wind, biomass and other such technologies is $200 million, down from $790 million in 1981.

In addition to protesting the evisceration of the budget, Hodel's critics accuse him of letting the most effective measures languish. Weatherization funds for low-income households were cut time and again in Reagan budgets, only to be restored partially by Congress. The Residential Conservation Service and a conservation scheme for schools and hospitals have also been under attack. And though Hodel and his conservation chief, William Patrick Collins, have said all the right things about fuel-saving and are pressing the Office of Management and Budget for more funds, the programs in place are deteriorating from neglect.

"The programs need constant review, evaluation and adjustments,' Bleviss explains, "but the prevailing mentality is that the free market can do everything, that there's no role for government. So these programs are resisted, rather than well run, within D.O.E.'

Some D.O.E.-watchers portray Hodel as a pragmatist who, in a second term, will be subject to heavier pressure from the free-market ideologues in the Energy Department and the O.M.B. The pragmatism-versus-ideology tussle can have a profound effect on energy costs, especially in areas where the simple market approach is doomed--for example, electric power. Demand for electricity is up sharply this year (it rose 6 percent from September 1983 to September 1984), and the utilities are sounding alarms about a catastrophic power shortage in the 1990s. The industry proposes, not surprisingly, to build huge power plants at the rate of two a month. The cost of such a building spree would be more than $700 billion by the year 2000. This is the Administration's preferred policy as well.

A far more prudent course would be to dampen demand. The government could do that by setting appliance efficiency standards. The savings that could be achieved by adopting even modest guidelines for manufacturers would be impressive and would remove the need for building dozens of proposed power plants. (Today, twenty-four large plants are required just to keep the nation's refrigerators running.) Recognizing this compelling logic, the Carter Administration had appliance standards ready for 1981. Reagan's D.O.E. not only blocked their release but issued a "no standard' standard meant to override state measures, some of which, like California's, are quite progressive and working well. A lawsuit filed by conservation activists is challenging the department's regulation this year, but the D.O.E. has yet to act. If the "no standard' standard is rescinded, states will once again be free to enact their own measures--which, unfortunately, could create chaos for manufacturers.

What is most ironic about the Administration's energy policy is that it belies the President's happy talk about high technology being America's economic savior. The White House bias against renewable energy sources and its efforts to promote nuclear exports serve to discourage the development of a U.S. energy-technology industry. According to Sklar: "The worldwide technological lead we've had in renewables is narrowing, in photovoltaics and passive solar particularly. The Japanese, the Swedes and others are about to overtake us.'

The Reagan Administration reaped the anti-inflationary benefits of the oil price cataclysm of 1978-79, which drove the Western economies into a recession that lowered energy consumption and prices. It is unlikely that anything comparable will occur in the coming four years to jolt the freemarketeers from their dream world. Yet the signs of trouble in the next decade--growing imports, surging power demand, bigger cars--are there for all to see.
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Author:Tirman, John
Publication:The Nation
Date:Oct 20, 1984
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