In recent months, the discussion of energy policy on the campaign trail has gotten more heated and less coherent. Both presidential candidates have obfuscated, contradicted themselves, and embraced economic fallacies. Here are some of their worst or most misleading ideas.

1. “Energy independence”

In a recent ad for Senator John McCain, the narrator intones direly: “Gas prices—$4, $5, no end in sight, because some in Washington are still saying no to drilling in America. No to independence from foreign oil.” Viewers are told that if McCain is elected president, he will increase domestic drilling and “rescue our family budgets.”

Both candidates have engaged in this type of rhetoric and insisted that “energy independence” is the solution to high oil prices and a host of other problems. Last month, Senator Barack Obama told an audience that he “couldn’t agree more” with his opponent regarding energy independence. “Without a doubt,” he said, “this addiction [to foreign oil] is one of the most dangerous and urgent threats this nation has ever faced.” According to Obama, it is responsible for “the gas prices that are wiping out your paychecks and straining businesses,” “the jobs that are disappearing from this state,” “the instability and terror bred in the Middle East,” and “the rising oceans and record drought and spreading famine that could engulf our planet.”

In fact, oil prices are determined on global markets, and the amount of additional oil that could be produced in the United States is only a small fraction of what is produced globally. Domestic drilling, therefore, won’t significantly affect how much Americans pay for gas. Proven oil reserves in the United States represent roughly one-fortieth of those in the entire world and account for no more than a year of global oil consumption. The Energy Information Administration has called the future impact of offshore drilling “insignificant.” A RAND study estimated that even massive exploitation of America’s oil shale would decrease oil prices by only 3 percent to 5 percent, would not reduce the trade deficit, and would not have a large impact on the balance of power between the United States and oil-exporting countries. For that matter, even one of McCain’s senior policy advisers told reporters that expanding offshore drilling would have no immediate effect on oil supplies or prices.

2. “Use it or lose it”

In a recent speech, Obama told supporters that he, too, supports increasing domestic drilling—but we should start by forcing energy companies to drill on the land they already lease. “We should start by telling the oil companies to drill on the 68 million acres they currently have access to but haven’t touched,” Obama said. “And if they don’t, we should require them to give up their leases to someone who will.”

Even one of McCain’s senior policy advisers told reporters that expanding offshore drilling would have no immediate effect on oil supplies or prices.

This concept originated among Democrats in the House of Representatives, who in June failed to pass a “use it or lose it” bill that would have forced oil and gas companies to prove they were developing their current land holdings before they could acquire new land, and to submit development plans for all the leases they held. If oil companies would just develop the land they already own, the thinking went, they could double U.S. oil production and cut oil imports by one-third; and if undeveloped land were given up, other oil companies would want to take over the leases and commence drilling.

Petroleum geologists say that when companies lease land, they do so without having a precise sense of how much oil it contains. After all, land takes time to explore, and it may not make economic sense to drill on much of it. Based on “today’s production rates on federal land,” a House Committee on Natural Resources report estimated that drilling on already-leased land would produce an additional five million barrels of oil and 45 billion cubic feet of natural gas a day. But those figures are highly dubious. Companies already have economic incentives to drill on their most productive land, so it’s unlikely that the undeveloped land would yield the same amount of oil and gas as the land that is being developed. Think of it this way: if we tried to extrapolate how much oil there is in suburban Illinois based on how much there is in Alaska, we’d get distorted estimates, because there’s a reason we drill in Alaska and not in Naperville.

3. Calling subsidies “market-based payments”

McCain has slammed energy subsidies, declaring that “when government jumps in and distorts the market, then [there are] unintended consequences as well as intended.” True enough. However, McCain himself supports certain energy subsidies—only he calls them “market-based payments.”

One can debate the merits of such subsidies—but we should call them what they are and talk realistically about how much they will cost. McCain wants to build 45 new nuclear power plants by 2030. Nuclear plants need significant government assistance to offset their massive start-up costs, and the costs associated with nuclear are notorious for being higher than originally estimated. It is not unreasonable to guess that constructing 45 new nuclear plants would require tens of billions of dollars in government funds.

There are many upsides to nuclear power, and increasing federal assistance to the industry may be worthwhile. But McCain should make the case for expanding nuclear power honestly: by talking about its costs and benefits, and by calling government support what it is—a subsidy.

4. “Green jobs”

During the Democratic primary campaign, Senator John Edwards touted a “green-collar jobs” program that would subsidize training and certification for workers (including low-skilled workers) in the new “green energy” sector. A version of this program is now part of Obama’s platform, which calls for spending $150 billion over the next ten years in order to create five million new green-collar jobs. There’s something in the Obama plan for everyone: it would provide American veterans with job training and placement in the energy sector, give grants to manufacturers to update their technology, and create a green job corps to teach “disconnected and disadvantaged youth” how to improve energy efficiency in their communities.

Obama’s ‘green jobs’ program isn’t so much an energy policy as a laundry list of new ways the government can give various constituents money.

In other words, Obama’s green-collar-jobs program isn’t so much an energy policy as a laundry list of new ways the government can give money to various constituents. It attempts to fix multiple problems at once, but would likely fix very little.

Both candidates trumpet the potential of government assistance to spur job creation in the energy industry. They seem not to understand the difference between “job creation” and “net job creation.” The Obama campaign, in particular, seems to look at environmental problems as opportunities to establish new and expensive government programs that would have only minimal effects on the environment. 

Not all of the candidates’ energy ideas are bad. McCain has stuck to his guns on opposing ethanol subsidies, even mentioning this to state fairgoers in Iowa. Obama would auction off 100 percent of greenhouse-gas permits as part of his cap-and-trade plan. Both candidates support long-overdue investments in the U.S. energy grid.

Still, McCain and Obama have made arguments and endorsed policies that are inconsistent with economic reality. Hopefully, each candidate will adopt a more realistic approach as Election Day draws closer.

Abigail Haddad is a research assistant at the American Enterprise Institute.

Image by The Bergman Group/Darren Wamboldt/Getty Images.