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Pursuing Energy Failure, Again and Again
Policy makers can never resist the urge to “just do something.” And it never works.


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Robert Bryce

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.

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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?)



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