U.S. Energy Policy and the Pursuit of Failure.
For forty years U.S. energy policy has been viewed through a framework first constructed in the early 1970s. Indeed, before the 1970s scarcely any thought had been given to the idea of a singular and cohesive national energy policy. We may have been better off without the idea. In the name of a national energy policy, as Peter Grossman details in his book, we have been subjected to four decades of political hubris on energy topics, often followed by wasted spending and ineffectual regulation.
The common view of the energy crisis of 1973, promoted by politicians in the 1970s and enshrined now in high school history books, positions the United States as victim of an injurious oil embargo enforced by the Organization of Arab Petroleum Exporting Countries. Grossman gets the history right. The embargo may have required some shifts in import sources, but the decades-old trend of increasing oil imports continued with the merest of pauses. The crisis was created by U.S. policies, not by an international oil cartel.
The sharply higher international price of oil in the early 1970s did require adjustments, but the crisis arose because useful adjustments were frustrated by Nixon's oil and gas price controls and limits on interstate movements of oil due to the Mandatory Oil Import Quota program. What would likely have been a costly but relatively brief period of adjustment was instead a period of shortages, gasoline lines, and desperate searches for political solutions. This search for political solutions yielded President Nixon's "Project Independence," announced a few weeks after the OA-PEC embargo began, which made energy independence the centerpiece of U.S. national energy policy. As is often noted, every President since Nixon has paid homage to the idea of energy independence.
Grossman's first chapter, "Crisis," describes the political floundering in response to energy issues. But Grossman only reluctantly employs the phrase "energy crisis," claiming the term lacks sufficient substance to be analytically useful. A section termed "Energy Crisis Economics" interjects a discussion of basic supply and demand analysis and connects the discussion to the policy narrative. It is in this mixing of policy narrative with basic economic analysis that sets Grossman's book apart from similar energy policy books.
Grossman continues with a chapter presenting a foundation for energy policy analysis, including both the familiar market failure approach and a complementary examination of government failure. Beginning with the Carter administration's Executive Order 12866, each president administration has declared regulatory efforts should clearly identify the market failure or other specific problem intended to be addressed. The principle may have had modest effects on regulatory practice, but it has not constrained political ambitions for managing energy production and consumption.
Subsequent chapters continue the policy narrative accompanied by short explications of the economic principles applied or ignored by policymakers. Grossman is particularly sharp in his examinations of the vast gaps between ambitious political claims and everyday economic realities. Grossman repeatedly observes, as a Carter aide once said, when the public perceives an energy crisis, the government must do something, anything, even if it is wrong. Political logic drives politicians into action, whether or not they understand the problem. Therefore politicians speak of gaps emerging between supply and demand, as if prices play no role. Seemingly every time energy prices jump, a politician will invoke the Apollo program or the Manhattan Project in defense of grand energy projects. Grossman distinguishes clearly between well-delineated government projects in pursuit of grand goals, in which cost is a minor concern, and the creation of a commercial energy resource or product intended to be taken up by consumers, where price is critical. Over the past forty years the politicians have changed and the issues shifted a bit, but the policy failures have remained strikingly unchanged.
The lessons Grossman derives from his chronicle of failure are summed up in his final chapter, "Modesty." Fortunately, in his view, the ineffectiveness of most energy policy efforts have left energy industries mostly in the hands of the market. Nonetheless, policy failures have reduced economic efficiency and cost American taxpayers billions. The final chapter explains Grossman's program for a more modest energy policy.
Grossman's book is a bit of a hybrid. For the most part he presents a thorough analytical narrative of the past forty years of national energy policy. Intermingled in the narrative are explanations of basic economic and political analytical tools useful in understanding his critiques. But despite recourse to standard tools of analysis, Grossman's book is not entirely a dispassionate review. His clear enthusiasm for, or perhaps particular point of view on, energy policy is displayed repeatedly, as when terming one politician's bill "especially inane," another bill "implausible on every conceivable margin," and editorializing that Nixon's desire for energy independence was simply absurd. The shifting tone from calm analytical narrative to opinion-charged commentary was a bit off-putting. More substantively, not every target of Grossman's commentary will feel the condemnations justified within the text.
The book would have benefited from a stronger editorial hand. The readers gets too much detail on the coming and going of people and policy proposals, especially in the chapters covering the Nixon, Ford, and Carter administrations. Nothing in the grand narrative arc of U.S. energy policy depends upon the name of the head of a short-lived energy policy agency in the mid-1970s. Perhaps all of the bureaucratic shuffling well illustrates the floundering of the Nixon, Ford, and Carter organizations as they struggled to do something about energy. Still, the swings from high level analysis to bureaucratic minutia makes for less than compelling reading. The unevenness of tone could have been smoothed out without losing Grossman's obvious enthusiasm for the topic. The final chapter could have been a clarion call for a more modest energy policy, but it lacks the organization and polish needed to shine.
Nonetheless, the book presents a well-founded critique of U.S. energy policy over the last four decades, provides a grounding in the tools of analysis needed to assess policymaker action, and sets out a thoughtful program for reform. According to Grossman the first step in reforming energy policy is to change the narrative away from energy dependence, and the second is to make energy policy about identified energy market failures. Even these two straightforward changes would yield big improvements in energy policy making. Despite its flaws, the book is a valuable assessment of U.S. energy policy and ought to be read by policymakers, students of energy policy, and policy analysts.
Texas Tech University
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|Publication:||The Energy Journal|
|Date:||Apr 1, 2015|
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