What puzzles me about the ongoing energy “crisis” is that anyone should be surprised by it – or that there should be any doubt about how to resolve it. To begin, calling it a “crisis” is questionable, because there is no apparent shortage of energy: there are abundant sources of energy (oil, natural gas, coal, water, wind, and others); we have the means to produce fuel (drill for oil or gas, mine for coal) or power our grids (coal-fired or nuclear power); and we know how to increase the output of each of these. (As well, we know how to capture more hydropower, wind power, solar power, and geothermal power, but those opportunities are not much in debate at the present time, except as alternatives to other options.)

So, there is no energy-supply shortage, but there is a global energy-demand surge, and the problems that rise from that are what we call a crisis because we haven’t properly prepared ourselves to deal with the current consequences (higher energy prices, mainly.)

It doesn’t have to stay this way. It’s possible to increase energy supplies — but for any number of reasons, as a society we have chosen not to increase supplies in order meet to market demand. That could change, so long as we (as a society and a democracy) allow a free market to do so rather than hinder its effectiveness with penalties, restrictions, or over-regulation.

This should be understood, because there’s a similar dynamic being played out in the market of steel scrap … and it’s useful to keep the energy problems in mind as an example when pondering the scrap “crisis.”  As with energy, it's not clear that the shortage of scrap is a “crisis.” It may also be the case that the scrap shortage is the result of policies and regulations. And, the frustration that domestic steelmakers and foundries have over this shortage is similar to drivers who can't keep up with rising gas prices.

Steel-scrap exports boomed earlier this decade, when the domestic steel industry went into recession. Unfortunately, the trend did not revert when the domestic industry rebounded — as it has, along with steel industries worldwide. U.S. steel scrap exports continue at an all-time high rate. Two of the largest domestic electric steelmakers addressed their scrap problems by acquiring their major scrap suppliers, Nucor bought David J. Joseph and Steel Dynamics Inc. bought OmniSource. These moves have only made the domestic supply scene more acute for other steelmakers and foundries.

I got an earful of outrage from some steel foundry operators recently, and there’s no doubt they see it as a crisis. The American Foundry Society, Steel Manufacturers Assn., and National Precast Concret Assn., leading a coalition of over 1,500 companies, probably agree. They have re-formed the American Scrap Coalition, principally to address global market distortions they see as the result of export barriers in foreign markets. Meaning, because other nations restrict scrap exports, the open U.S. market is the only supplier able to serve most of the rest of the world.

The ASC wants the U.S. government to resolve this, and they have three priorities:

-- Identify and remove barriers to trade in steel scrap, which hinder U.S. companies and global competition;
-- Ensure that scrap exports are not permitted as an easy way around state, federal, and international environmental obligations; and
-- Consider actions by Congress, the Commerce Department and the Office of the U.S. Trade Representative to remove trade barriers.

The Institute of Scrap Recycling Industries is probably smirking its way through all this: why should they care who pays premium prices for the scrap they collect, sort, process, and distribute? But credit ISRI for the moderate tone of its response to the ASC: “Scrap and finished steel are globally traded commodities,” ISRI president Robin Weiner stated.  “Efforts to artificially restrict that trade can have negative repercussions that are felt around the world.” Based on the outrage I’ve heard, that bit of insight will be received just about as well as $4.00/gallon gasoline.

Who knows how sincere the ISRI response may be? But it doesn’t matter, as long as we avoid the disastrous effects of the U.S. government once again trying to “fix” global trade. The ASC may be correct about the causes of the scrap “crisis,” but their priorities seem to be going in a different direction.  “Remove barriers  …”? Great; go for it. “Ensure (etc.) …”? That sounds like a new invitation to more federal regulation. “Consider actions by Congress (etc.) …”? That sounds like it could be the start of the next “crisis.”