Bad surge.(energy economics)

THE surge in oil prices in recent months to $50 a barrel is arguably the leading factor behind the recent slowdown of the economy and the sagging stock market this year. There is no point in sugarcoating the reality of our current predicament: We are in the midst of a mini-energy crisis, not nearly as severe as what happened during the Arab oil embargo of the 1970s-when prices skyrocketed from $6 to $30 a barrel in a ten-year period-but economically disruptive nonetheless. Higher oil and energy prices have the impact of a tax on the American economy. Given that we import 3.7 billion barrels of oil a year, the rise in prices from $30 to $50 a barrel will cost the U.S. economy about $75 billion this year alone.

The most imminent danger we face from this mini-crisis does not come from the Arabs but from U.S. policymakers and, alas, many conservative Republicans, who seem hell-bent on resurrecting all of the failed Jimmy Carter policies of the 1970s. Recently, a group of well-meaning national-defense experts with sterling conservative credentials, including Frank Gaffney, James Woolsey, and Boyden Gray, concluded that because our reliance on foreign oil is a security and economic threat, we need to have more Carter-era energy programs to reduce our reliance on Middle East oil. They could not be more economically or fiscally misguided. As energy expert Jerry Taylor of the Cato Institute warns: "If conservatives follow their lead, the U.S. government will waste tens of billions of dollars on corporate-welfare boondoggle energy programs destined to fail again."

Jimmy Carter had a perfect record on energy policy: Every reform he enacted, from the creation of the Energy Department to price controls on oil and gas, exacerbated the crisis of surging prices and drops in domestic supply. One of his most miserable failures was a program called the synthetic fuels corporation (SFC), a federally subsidized alternative-energy program that cost American taxpayers about $2 billion and never produced a single kilowatt of electricity. One of Reagan's first official acts as president was to lift all energy price controls. In 1985 he pulled the plug on the SFC.

No one understood the geopolitical importance of oil more than the Reaganites at the height of the Cold War. What Reagan knew instinctively was that America did not ...