THE UNREFINED TRUTH

SYNOPSIS: Mindless rhetoric aside, Conservation is a sound strategy to end the energy crisis Gasoline prices are rising again, and the administration is rushing to turn this into another argument for its drill-and-burn energy strategy. But a look at the causes of the current gasoline shortage actually suggests a quite different moral: namely, that conservation ought to be a major element in our energy strategy, and that lack of conservation is a large part of what we've been doing wrong.

First things first: This year's gasoline price spike has nothing to do with a shortage of crude oil. Even if we had already punched the Alaskan tundra and the ocean floor off Florida full of holes, we'd still be in the same fix. The binding constraint right now is the nation's limited capacity to refine crude oil into gasoline.

Why is refining capacity inadequate? No new refineries have been built in this country for 20 years, a point emphasized with obvious relish by Dick Cheney. His implicit subtext, of course, is that it's the fault of environmentalist types who stood in the oil industry's way. That must be the story, right?

Wrong. It's true that environmental rules have somewhat crimped the production of our existing refineries. The problem is not so much the strictness of the regulations as their lack of consistency: each region has its own rules like the insistence of Midwestern states that gasoline include corn-derived ethanol fragmenting the nation's production. But the reason the oil industry didn't build any new refineries for two decades was that they weren't needed. In fact, right up until last year oil refining was a persistently depressed business, plagued by overcapacity.

Here's what happened: In the wake of the energy crisis in the 1970's, ordinary people in the United States began conserving energy not as a "sign of personal virtue," as Mr. Cheney sneeringly puts it, but because they wanted to save money. Cars, in particular, became much more fuel-efficient. Meanwhile the oil industry was subject to "refinery creep," the tendency of refining capacity to grow through incremental improvements even when no new refineries are built. The result was excess capacity and squeezed margins, right up to the late 1990's.

What finally brought us up against capacity constraints was a surge in demand that was partly due to the economic boom of the later Clinton years, but mainly due to the renewed enthusiasm of Americans for huge, gas-guzzling vehicles an enthusiasm, er, fueled by cheap gas. In 1998 gasoline was cheaper compared with overall consumer prices than ever before in U.S. history 60 percent cheaper than it was in 1981. The nation rushed out to buy ever-bigger S.U.V.'s and then suddenly discovered that we had run out of refining capacity. Refiners weren't frustrated by rules that prevented them from building new facilities; they were simply caught by surprise.

You have to bear this history in mind when parsing Mr. Cheney's recent speeches. To listen to him, you would imagine that we live in a country in which powerful political forces oppose energy production and preach a return to the dark ages. "To speak exclusively of conservation," Mr. Cheney declared in one speech, "is to duck the tough issues . . . it is not a sufficient basis all by itself for a sound, comprehensive energy policy." In another speech he ridiculed unspecified types for "saying to the American people that you have to live in the dark, turn out all of the lights." The story according to Mr. Cheney, in other words, is that we have an energy shortage because extreme conservationists prevented us from developing the supply capacity that serious people knew we needed.

Need I point out that this, like so much of what one hears from this administration, is a cynical misrepresentation? I defy Mr. Cheney to come up with examples of influential people who "speak exclusively of conservation," let alone anyone who says to the American people that they have to live in the dark. In fact, hardly any important politicians have spoken about conservation at all never mind exclusively this past decade.

We will need to build more refineries and more power plants, and pipelines, and so on. But it is ludicrous to suggest that our current energy woes are the result of too much emphasis on conservation. It would be closer to the truth to say that we are in trouble now because our politicians haven't dared even use the word.

Originally published in The New York Times, 3.9.01