After Forty Years, Politicians Still Understand Little About Energy
It was forty years ago this month that America’s first national energy crisis began, and it therefore seems like a good time to consider what policymakers have learned about energy over the past four decades.
The answer is discouraging:
After Arab oil producing nations imposed an embargo on oil exports to countries that aided Israel—the United States and the Netherlands—the America faced oil shortages and were, most notably, sitting in gas lines, sometimes for hours. Government officials believed there were two lessons: First, America and maybe the whole world (except for Arab exporters) were running out of oil and natural gas, and second, the U.S. had become “dangerously” dependent on world energy markets.
But, we were told, the good news was that both problems had solutions, in fact the same solution. We could use the wondrous technological skills of America that had put a man on the moon and have a similarly ambitious government goal of creating wondrous new domestic energy resources. This new technology would make us energy independent. President Richard Nixon said it would happen by 1980.
The embargo ended in March of 1974 without new legislation but there was soon a new cabinet department devoted to energy, numerous congressional committees working on aspects of energy legislation, more energy crises, some legislation, then more legislation, and continual, calls for alternative energy technologies to bring us energy independence.
Yet the first energy crisis was completely misunderstood. The gas lines were caused by U.S. price and allocation controls, not the embargo. Those same controls had reduced incentives to people to look for additional resources, which were nowhere near exhaustion. It was true that we had become dependent on the international oil market but this entailed little danger. The U.S. has weathered supply disruptions from countries around the world from wars, coups and labor strife. Prices rise but the gas lines disappeared with the end of government central planning.
Meanwhile, the embargo accomplished nothing for the exporting countries—except to contribute to a worldwide recession, which led to falling demand and lower export profits. Though experts imagined oil exporters using embargoes as a policy weapon, they have not done so. It turned out that oil exporters were much more dependent on selling us oil than we were on buying it from them. When oil prices collapsed in the 1980s so did the economies of most of the exporting nations.
Nevertheless both policy rhetoric and policy ideas have had a remarkable continuity for the last 40 years. Pronouncements by President Obama have reflected the two “lessons” of 1973. So did those of most of his predecessors. Congress has imagined it’s 1973 for the last 40 years. The same clichés, the same “solutions,” the same ideas.
Still, it’s only when energy crises have persisted that we have gotten major energy legislation. That’s when we get the promise of some marvelous technologies—for example, synfuels, ethanol, solar—that can be achieved by grandiose programs that will remake our technology, our society and even our souls. They have, however, invariably failed.
A central problem with energy policy is that the underlying goal is so confused that it’s no wonder we get something like an irrational ethanol mandate. What is meant by energy independence? I’ve counted a dozen different definitions; by some of these definitions (for example, a diversity of oil suppliers) we’ve been independent for the last couple decades.
Actually, it seems that politicians don’t mean anything specific when they say, “energy independence.” It’s a slogan not a goal or a policy, and to the extent it is meaningful, it is a hope for a world in which no voters have reason to complain about the price of gasoline.
After 40 years, the on-off focus on energy policy has left us with is a large energy bureaucracy, some grand ideas about an amorphous goal, and along the way, the waste of some billions of dollars. But, most of the time, even as politicians bloviate, the government does nothing.
Then good things can happen because we are letting markets decide.
Photo Credit: Embargoes, Politicians, and Energy/shutterstock
Peter Z. Grossman is the Clarence Efroymson Professor of Economics at Butler University. He is the author of U.S. Energy Policy and the Pursuit of Failure, which is now available from Cambridge University Press. Links to more of his work can be found at: http://peterzgrossman.wordpress.com/.
Other Posts by Peter Z. Grossman
The Energy Collective
- Rod Adams
- Scott Edward Anderson
- Charles Barton
- Barry Brook
- Dick DeBlasio
- Simon Donner
- Big Gav
- Michael Giberson
- James Greenberger
- Lou Grinzo
- Tyler Hamilton
- Christine Hertzog
- David Hone
- Gary Hunt
- Jesse Jenkins
- Sonita Lontoh
- Jesse Parent
- Jim Pierobon
- Vicky Portwain
- Tom Raftery
- Joseph Romm
- Robert Stavins
- Robert Stowe
- Geoffrey Styles
- Alex Trembath
- Gernot Wagner
- Dan Yurman