As gasoline prices rise above $4 per gallon, with the potential to go even higher, energy policy should be a major focus in the 2008 campaign. Seeking to capture the issue, John McCain went to Houston, America’s “oil capital,” to deliver the first in a series of speeches outlining his energy agenda. Calling for more domestic development and energy conservation, McCain sought to distance himself from both Barrack Obama and the Bush administration. In this he may have been successful, but he failed to outline a coherent and non-contradictory approach to energy.

The biggest headline from McCain’s remarks was his call for more oil and gas development at home, “because the price of oil is too high, and the supply of oil is too uncertain.” Where McCain has been lukewarm in his support for domestic development in the past, he came out foursquare in favor of more offshore drilling yesterday, so long as coastal states get a share of the proceeds and are wiling to go along. This could free up as much as 18 billion barrels of oil and 76 trillion cubic feet of natural gas, based on current estimates, but won’t do much to curb the high price of gas. McCain’s also not willing to drill everywhere. Still eager to burnish his conservationist credentials, McCain cannot (yet) bring himself to endorse drilling in Arctic National Wildlife Refuge, even though the environmental risks to oil development in Alaska are no greater than off the coast of Florida or California.

McCain’s call to end the moratorium on offshore drilling could be controversial in some coastal states, but other politicians may give him some cover. The White House is urging an end to the coastal moratorium so as to permit “environmentally friendly offshore oil drilling,” as is Florida Governor (and potential McCain running mate) Charlie Crist. Crist’s support is particularly important, as he once fought coastal oil and gas development and could help sell this position in Florida.

McCain stressed the need to upgrade and enhance America’s refining capacity and develop nuclear power. “There’s so much regulation” of the oil industry, McCain observed, “that the last American refinery was built when Jerry Ford was president.” Without more refining capacity, gasoline markets are particularly vulnerable to supply disruptions and price shocks. McCain also critiqued the excessive regulation of the nuclear industry. “Nuclear power is among the surest ways to gain a clean, abundant, and stable energy supply,” McCain noted, lamenting America’s failure to open a new nuclear facility in over 30 years. Europe already relies on substantial amounts of atomic energy and that China, Russia, and India have plans to build dozens of nuclear facilities, while America lags behind. If these countries “have the vision to set and carry out great goals in energy policy,” McCain asked, “then why don’t we?”

McCain attacked the old fashioned energy vision espoused by Barrack Obama, hitting the young senator’s support for a pork-laden energy bill and a windfall profits tax on oil companies. Such policies should remind voters of President Jimmy Carter and the disastrous energy policies of the 1970s, McCain suggested. “Now as then, all a windfall profits tax will accomplish is to increase our dependence on foreign oil, and hinder exactly the kind of domestic exploration and production we need,” McCain proclaimed, adding “I’m all for recycling — but it’s better applied to paper and plastic than to the failed policies of the 1970s.” His remarks suggest McCain is no longer open to a windfall profits tax himself, as he suggested in remarks last month, though when asked a campaign spokesperson refused to take a windfall profits tax off the table.

While attacking Obama’s assault on oil companies, McCain hit an ill-conceived populist note of his own, calling for more regulation to combat “speculation.” He attacked “reckless speculators” from “Wall Street” who “are counting their paper profits” as Americans suffer from higher gas prices. Such “reckless wagering” on energy markets must be stamped out, he declared. “Where we find such abuses, they need to be swiftly punished,” he said, calling for new “laws and regulations governing the oil futures market” to “assure transparency, prevent abuse, and protect the public interest.” In other words, McCain is endorsing Carter-esque restrictions on energy markets all his own. Adding another layer of bureaucratic oversight of energy markets will dampen the price signals upon which investors, producers and consumers all depend and, if anything, make energy markets less efficient and keep gas prices higher than they need to be.

McCain’s energy speech coincided with the release of a new ad highlighting his efforts control greenhouse gases. This juxtaposition encapsulates the Arizona maverick’s schizophrenic approach to energy policy. McCain’s platform embodies a fundamental contradiction: Calling for lower energy prices while endorsing a cap-and-trade regulatory scheme that will cause energy prices to rise. He wants to give Americans a gas tax holiday, yet wants to push the use of alternative energy prices that, at least for now, are significantly more expensive. He wants to allow markets to meet changing energy needs, yet also endorses greater bureaucratic oversight of those who seek to turn a profit in energy markets. These are circles that cannot be squared. Fortunately for McCain, Obama’s energy agenda is not much more coherent.

The McCain campaign’s effort to straddle the divide between environmentalists and energy production could be a shrewd political calculation. Many voters may want to believe they can conserve their energy and consume it too. But even if an inherently contradictory energy agenda can sell at the polls, it will not make for sound policy. – Jonathan H. Adler is professor of law and director of the Center for Business Law and Regulation at Case Western Reserve University School of Law.