Pursuing Energy Failure, Again and Again

by Robert Bryce
Policy makers can never resist the urge to “just do something.” And it never works.

Energy policies are faddish. From the energy-independence moonshine of the corn-ethanol scam to the latest 645-page slate of regulations the EPA wants to inflict on the domestic electricity-generation sector, the supposed threats have varied.

Back in the 1970s, the claim was that we were too dependent on Arab oil (a claim that we continue to hear today). These days, in addition to the never-ending blather about “energy independence,” we have the spurious claim from the Obama administration that yet another layer of EPA rules on U.S. industry will make a dramatic difference when it comes to global climate change.

There’s an enduring theme in all the energy-policy fads we’ve endured since 1973: that just a little more governmental intervention will cure the ills of the energy marketplace. In fact, policymakers invariably believe that the energy sector needs more governmental intervention because there has been some type of market failure.

In the 1970s we were told that domestic producers weren’t producing enough energy and therefore government needed to intervene to encourage oil production. Congress also decreed that we must decrease natural-gas consumption. Today we’re told that the global energy market is producing too much energy — or at least, too much energy of the wrong kind (e.g., too much from coal) — and therefore we need governmental intervention to protect us from the consumption of too much energy, which is producing too much carbon dioxide, which may lead to catastrophic climate change, which may cause economic losses in the future. Oh, and by the way, those proposed new EPA rules are effectively requiring increased natural-gas consumption.

Over the decades, many journalists and academics have chronicled the myriad misadventures of U.S. energy policy, but few have done it as thoroughly or as well as Butler University economist Peter Grossman does in his essential book, US Energy Policy and the Pursuit of Failure. Before going further, I should point out that this is a tardy review of Grossman’s book, which came out in May 2013. But throughout my reading of it, I found myself routinely nodding in agreement with Grossman’s analysis and conclusions.

Grossman begins with an overview of the 1973 Arab oil embargo and Richard Nixon’s “Project Independence,” which aimed to make the U.S. entirely self-sufficient in energy by 1980. He goes on to point out that in the year after the 1973 embargo, Congress “considered about 2,000 bills that incorporated at least some provisions related to energy.” Grossman makes clear that the events of 1973 still haunt American energy policy today, even though it was excessive governmental intervention that fueled the gasoline shortages that followed the embargo. Grossman writes that the price controls implemented by the Nixon administration “made the disruption of the oil market in 1973–74 much worse than it would have been otherwise. In fact, it was U.S. policy that turned the embargo into a major national emergency.”

Claims about an “energy crisis” have, he writes, “been ubiquitous for 40 years” in American politics. And yet despite occasional energy shocks, Grossman points out that real U.S. GDP has tripled during that time period.

Legislators are always wanting to “do something” when it comes to energy. A prime example of that mentality occurred 41 years ago: In December 1973, Congress voted to require year-round use of daylight-savings time. Nixon quickly signed the bill even though there was scant proof that the time-shifting would save any energy at all.

That desire to “do something” emerged again with the release of the National Energy Strategy in 1991, shortly after the first Iraq war. At that time, President George H. W. Bush was near the peak of his popularity, with an 86 percent approval rating. But lest Bush appear to be not “doing something,” the White House proposed the National Energy Strategy, a 214-page document that called for drilling in the Arctic National Wildlife Refuge as well as spending $3.5 billion on research for batteries to be used in electric vehicles. (Sound familiar?)

Under Bill Clinton, the “do something” mentality continued with the Partnership for a New Generation of Vehicles, a program that aimed to produce a “super car” that would have the same size, styling, and price as a typical family automobile, but would get 80 miles per gallon. (Sound familiar?)

Under George W. Bush, the push for some type of energy strategy continued with the National Energy Policy Development Group, which was led by Bush’s vice president, Dick Cheney. That group predicted rapidly rising oil and gas consumption and an “ever-increasing gap” between domestic energy supplies and domestic demand. After years of quarreling with Congress, Bush signed into law the Energy Policy Act of 2005, a 1,700-page bill that, Grossman explains, included “subsidies for just about every form of energy production.” Among its most lavish subsidies were those given to corn-ethanol producers.

I could provide many more examples from Grossman’s book to prove his points about legislators’ inability to resist “doing something” about energy. Frankly, I wish I had written this book. By giving us chapter and verse on how our politicians have continued to deceive themselves (and, in turn, the public) about energy, Grossman has performed a valuable public service. He has exposed the underlying fallacy of policymakers when it comes to energy: that they are smarter than the marketplace. And having fully researched America’s energy-policy foolishness (his book is packed with footnotes), Grossman forecasts more of the same in the future, writing that it is “especially doubtful” that legislators will be able to resist intervening in the world’s biggest industry.

In the last section of his book, Grossman neatly summarizes recent U.S. energy-policy efforts on climate change, including the infamous Waxman-Markey bill of 2009 (also known as the American Clean Energy and Security Act), calling it “the kind of panicky grandiose solve-all” legislative effort that has “marked energy policy for four decades.”

I fully agree with Grossman, too, when it comes to how the U.S. should position itself on the issue of carbon dioxide emissions. He writes that the goal of “international policy should be to help poor nations develop and leave the climate issues aside for the time being.” Furthermore, he’s exactly right when it comes to broader climate goals. Since carbon dioxide emissions have been rising rapidly (up an average of about 500 million tons per year since 1985) and that rise will almost certainly continue unabated, the U.S. and the rest of the world will need to focus on preparedness.

It’s a bit clichéd to suggest that a certain book should be required reading for policymakers. Please forgive me for doing exactly that with this book. With US Energy Policy and the Pursuit of Failure, Peter Grossman has revealed himself to be the preeminent historian of American energy policy. If policymakers are going to insist on inflicting themselves on the energy market, they should at least know how their predecessors have failed doing the very same thing.

— Robert Bryce is a senior fellow at the Manhattan Institute. His fifth book, Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong, was published in May by PublicAffairs.