April 29, 2005

Growing Economy Needs More Not Less Energy

In his primetime news conference President Bush said energy prices could go down by helping "growing energy-consumers overseas, like China and India, apply new technologies to use energy more efficiently and reduce global demand of fossil fuels." Efficency only goes so far, but it should certainly help developing economies like China and India. What will encourage efficency even more are rising energy costs. Rising prices tells energy users that they need to economize. The process won't be quick, and it may be painful. Feel the pain of someone who bought a gaz-guzzling SUV just before gas prices shot up.

But the UPI headline is misleading. Bush never called for reducing global energy demand. Saying something like that would be foolish. Man has insatiable desires. Economies organize resources to satisfy those desires. Economies grow when more and more desires are met. Energy is one resource that is needed for growing economies. Effectively using wasted energy is useful, but there comes a point (whether one runs into the laws of physics or diminishing marginal returns) where energy conservation isn't useful and more energy has to be produced. In a free market rising energy prices are a signal that there is a profit opportunity for new energy producers.

Why aren't more energy producers getting into the act? Well, stringent environmental zealots, Not In My Back Yard (NIMBY) protesters, and untold numbers of twisted governmental subsidies, regulations, and disincentives block entrepreneurs' attempts to build more nuclear plants, coal-burning plants, and even alternative energy producers.

It's sad to say, but I think it will take $5/gallon gas and/or multiple regional blackouts like the one that hit the eastern part of the U.S. a few years ago before some people really get serious about increasing U.S. energy production.

"Bush Wants Lowered Global Energy Demand"