(Aug. 1, 2005) — Congress finally is ready to deliver an energy bill to President Bush, and apparently it's in the nick of time. Passing any sort of legislation that helps chemical companies will be more difficult in the next few months.
First, as publicly traded companies begin to report their quarterly results, it will become tougher to argue that chemical companies need government help. Already, it looks like most companies are reporting very healthy profit numbers for the past few months.
Any delay could have meant that the legislation would have slipped until next year, when Congress will be distracted by midterm elections. That would have made it a partisan issue, and probably too hot to handle.
The bill is good news for North American plastics processors. First of all, Uncle Sam needed to encourage power companies to use other fuels to generate electricity. Also, the government had to make it easier to drill for new domestic sources of natural gas. Otherwise, North American chemical companies, which mostly use natural gas as a feedstock (unlike counterparts around the world that use oil), would be at a long-term competitive disadvantage.
Experience tells us that things won't work exactly as advertised. Any time the government gets involved in trying to steer the economy, through tax breaks or subsidies, the result is usually something unexpected — maybe even bad. Remember, for example, the tax break for businesses that bought SUVs for company use? It originally was meant to encourage companies to invest in new equipment. Consider that Exhibit A on the list of examples of how Congress has managed to screw up U.S. energy policy to date.
Still, a little direction is required, because left on their own, consumers (who really make the economy run, after all) can do some pretty stupid things.
Over the long term, policymakers need to keep in mind that energy pricing depends on two things: supply and demand. Boosting supply won't bring down pricing if global demand continues to skyrocket. Whether the future is in nuclear power, fuel cells, hybrid cars or something else, North America needs to tame its dependence on oil and natural gas, especially the imported variety.
That's not anti-business or anti-growth. It's common sense: Existing energy-use patterns cannot be sustained indefinitely, and changing them doesn't mean rolling back the clock, it means progress.