By Paul Driessen
web posted April 9, 2018
It’s become a
recurring, frustrating pattern, as legislators
and regulators ignore the immutable laws of unintended consequences, to
drive
political agendas or aid favored constituencies, while harming others.
A good example is corporate average fuel
economy (CAFÉ)
standards on vehicles. Originally enacted in 1975 to offset the impacts
of the
OPEC oil embargo and US oil price controls, and slow the rapid
depletion of oil
reserves, the mileage standards grew increasingly stringent. During the
Obama
years, the earlier justifications were replaced with claims that a
vastly
tougher 54.5 mpg standard would somehow help prevent “dangerous manmade
climate
change.�?
However, EPA’s
own analysis showed that the new mileage standard would have
brought
emission reductions of a barely perceptible 3 billion tons of CO2 over
the
lifetime of vehicles covered by the new standards – out of an estimated
two
trillion tons of CO2 emitted worldwide during the same period.
That meaningless 0.15% savings was
fraudulent enough. But as
Competitive Enterprise Institute general counsel Sam
Kazman, other analysts and I have often pointed out, the real
impact of
these rules has always been on people. CAFÉ standards kill, maim
and
paralyze drivers and passengers – because they force auto makers to
downsize and plasticize cars and light trucks, making them less
crashworthy.
Insurance industry and other studies found
that the earlier
27.5 mpg standard resulted in 2,200 to 3,900 additional fatalities
every year,
and hundreds of thousands of additional serious injuries, in collisions
with
cars, trucks, buses, trees and other objects. Minority and other poor
families
suffer disproportionate
injuries and deaths, because they can least afford the higher
priced cars
and light trucks with advanced safety features. One can only imagine
the extra
tolls that would be associated with the 54.5 mpg rule.
Hopefully, EPA Administrator Scott Pruitt
will underscore
this lethal reality as he reexamines the Obama CAFÉ standards. (His
predecessors paid no attention to the likely death and injury tolls,
and
Democratic politicians, environmentalist groups and liberal media have excoriated
Pruitt’s proposal – raising serious questions about their
priorities and
concern about human lives and welfare.)
In contrast to this important and long
overdue regulatory
change – and in equally sharp contrast to his many other deregulation
and
reduced taxation actions – President Trump’s recent decision to impose
a 25%
tariff on imported steel products seems to have paid too little
attention to
unintended consequences.
Steelmakers and even the Commerce Department
claim “cheap�?
foreign substitutes “threaten national security.�? That’s a highly
suspect
claim. But even to the extent a threat can be demonstrated, the tariffs
themselves represent a serious threat to national security … to every
company,
project and job in other sectors of the US economy that depend on
affordable
steel … and to the president’s promise to Make America Great Again and
make
American energy a dominant player on the global stage.
Indeed, one can understand an
anti-fossil-fuel President
Obama imposing these tariffs. But Mr. Trump?
Just consider their impacts on oil and gas
drilling,
fracking, pipelines, refining, petrochemicals and LNG (liquefied
natural gas)
export terminals. These are steel-intensive operations. Add 25% to the
cost of
pipes and other specialized steels, and you raise exploration,
production,
construction, maintenance and repair costs by millions, tens of
millions or
even hundreds of millions of dollars.
Building drilling rigs and production
platforms that operate
in thousands of feet of corrosive sea water, send drilling and
production pipe
thousands of feet into high-pressure rock formations, and bring oil and
gas to
terminals and refineries miles away requires millions of tons of
high-quality
steels that most US companies don’t even make anymore. Horizontal
drilling and
hydraulic fracturing operations do, as well.
Steel pipes that go down these holes have to
be flexible
enough to bend without cracking or breaking. They must be durable
enough to
last decades without corroding or rupturing. This niche market
represents just 3%
of the total US steel market, the Association of Oil Pipe Lines
(AOPL)
notes, so most American steelmakers left the pipeline business to
overseas
competitors, who pay workers less, face fewer regulations, and can
survive on
lower profits. Subjecting this specialty pipe to tariffs makes no
sense.
In 2017, America’s oil and gas industry
spent $8.5 billion
just on the steel pipe used in 11,300 wells to frack shale and drill
conventional formations. That same steel would have cost $2 billion
more, if
these 25% tariffs had been in place, the AOPL explains. Similarly, a
“typical�?
280-mile pipeline would cost $75 million more, a “major�? (Keystone XL)
pipeline
some $300 million more, under these tariffs.
China has already slapped tariffs on US
soybeans, and
recently signaled that it can add to these oil patch woes by directly
targeting shale country products, such as petrochemicals and
liquefied
propane. The Chinese meanwhile use spies and hackers to steal US
corporate,
military and government information, and demand access to patents and
trade
secrets as a price for granting access to huge Chinese markets.
Ironically, two of the main beneficiaries of
these tariffs
and trade wars could be Russia and OPEC, who would see their own
exports and
revenues climb in response to declining US oil and gas production. The
primary
source of export
revenues for the Russian economy is oil and natural gas, and many
European
countries get 50-100% of their natural gas from Russia. That leaves
them
vulnerable to Putin threats of pipeline closures – and less willing to
challenge Putin in Syria, the Crimea, Ukraine and elsewhere.
That also resurrects the links between
anti-fossil-fuel US
environmental groups that have received funds laundered via the Sea
Change Foundation and other intermediaries, from Russian energy
oligarchs
with strong ties to Putin. Perhaps Special Prosecutor Robert Mueller
should
investigate that Russian collusion.
(Oil and gas companies can submit a tariff
exemption request
to the Commerce Department, if a product is not readily available from
American
manufacturers or is needed for national security reasons. But separate
requests
must be made for each product; they take months to process and are
valid for
only one year; and American aluminum and steel makers can object to the
request, dragging the process out.)
In essence, these tariffs might save a few
hundred steel and
aluminum manufacturing jobs. But they put thousands of US workers out
of work
in other industries that depend on affordable steel products as their
basic raw
materials. The protectionist tariffs also put dozens of projects on
hold or out
of reach.
In another irony, many of President Trump’s
much desired and
ballyhooed infrastructure construction and repair projects could become
the
victim of soaring steel prices, on top of 1931 Davis-Bacon Act rules
that local
prevailing union wages must be paid on public works projects. Still
more people
will then be injured and killed, due to dangerous road and bridge
conditions
that poorly thought out policies perpetuate.
Tariffs on foreign metals also persuade US
steel and
aluminum companies that they can raise prices, while still undercutting
foreign
competitors. That’s why American
Keg – the last US manufacturer of stainless steel beer kegs, and a
patriotic user of only domestic steel – had to lay off a third of its
workers.
Environmentalists oppose mining in the
United States. They
oppose coal and natural gas as fuels, and the rail and pipe lines to
get those
fuels to power plants, foundries and factories. They are OK with the
Trump
tariffs, since they help stymie fossil fuel projects. But radical
greens fail
to recognize that wind turbines also require massive amounts of
specialty steel
for rebar, turbine and transmission towers, generators and other
components –
making them and their high-cost electricity even less affordable and
justifiable.
The United States clearly cannot merely
present diplomatic
protests, while letting other countries engage in unfair trade
practices, and
worse. However, the politicians whose actions affect our lives in so
many ways
must do a far better job examining the nature and scope of the
unintended
consequences of their decisions. Mileage standards, trade wars and
tariffs tend
to get out of control, and innocent people suffer.
Meanwhile, the brinksmanship continues. Can the White House
and
Congress find better answers? 