Sunday, May 9, 2010

America and Energy: A Failure of Vision

In the fall semester of my senior year, I attended American University as part of its Washington Semester Program. The 1980 presidential race in full swing, I became caught up in the issues of the day, issues which defined the times and, in many ways, remain with us today. As in most election years, the economy was on everyone’s mind, with talk of high inflation, stagnant job growth, double digit interest rates, and a mounting federal deficit (though at $50 billion, it was a surplus by 21st century standards). The Iranian Hostage Crisis was approaching its 365th day and represented a failure in presidential leadership that defined the Carter Presidency. And the Energy Crisis, as illustrated by rising oil costs, long gas lines, and America’s growing dependence on Middle Eastern oil supplies demonstrated how closely related all three issues actually were.

1980 was the only presidential election year in which I did not vote for the Democratic presidential candidate. President Carter was a disappointment to me and, following Ted Kennedy’s inspirational speech at the Democratic National Convention, I salvaged little enthusiasm for Carter. Though I dreaded the thought of a Reagan Presidency, my vote was to be cast in the District of Columbia, whose three electoral votes were safely in the hands of the Democrats. So I voted with my heart, rather than my head, and pulled the lever for John Anderson, a liberal Republican Congressman from Illinois who ran as an Independent that year. Anderson, I knew, could not win, but he was intelligent, articulate, and talked about the issues that most needed to be addressed.

One of Anderson’s primary concerns was America’s dependence on foreign oil, which he viewed as both an economic and a national security issue. Starting in August 1979, Anderson called for a 50-cent-per-gallon energy conservation tax to encourage reduced gasoline consumption and to spur more fuel efficient automobiles, steps he believed essential to reduce our dependence on oil supplies from the Middle East and other politically unstable regions. Anderson recognized the regressive nature of such a tax and its short-term economic burdens, so he proposed that the new gas tax revenues be used to cut in half employee Social Security taxes, to increase Social Security benefits, and to compensate those not on payrolls. He also proposed to exempt farmers and allow tax credits for businesses unfairly penalized. Although ridiculed at the time by the two major parties, had they or Congress paid attention, we would today be driving more fuel efficient cars, importing less oil, enjoying cleaner air and experiencing fewer oil spills. And we would be far more advanced in our energy conservation efforts and the development of alternative, renewable energy sources.

Anderson’s candidacy caught my attention that summer when I read Energy Future: Report of the Energy Project at the Harvard Business School (Random House, 1979), which surprisingly became a bestseller despite its 72 pages of footnotes. Edited by Harvard professors Robert Stobaugh and Daniel Yergin and written in plain English, Energy Future applied a business school perspective to the energy industry, assessing costs and risks, priority and potential, incentives, profits, and the marketplace. It explained that the oil shocks of the 1970’s were predictable, a reflection of the shifts in market power between energy users and energy producers (as countries like Saudi Arabia, Iran, and Iraq accumulated exorbitant power over the consuming nations). The report examined the external costs of energy use – the environmental, social, and geopolitical costs – which it contended had to be considered for there to be an accurate market analysis of each industry sector. And it advocated for an energy policy that combined subsidies and tax incentives, but which emphasized a free market approach, to achieve energy independence without sacrificing economic growth.

According to the B-School whiz kids, for different reasons, none of the four conventional sources of domestic energy – oil, coal, natural gas, or nuclear – could be relied upon to supply any more of our energy needs than these sources already did by the late 1970’s. Oil reserves in the United States were limited, and the potential for offshore drilling came with major environmental concerns and political barriers. Coal, while abundant in supply, brought with it serious labor-management disputes and a militant labor union, deadly health and safety risks, and huge environmental drawbacks. Building more nuclear reactors, while a potential source of relatively clean energy, was not politically viable in the United States due to the partial core meltdown that had occurred at Three Mile Island in March 1979, and given the growing public concerns with reactor safety (concerns heightened seven years later when a catastrophic accident occurred at the Chernobyl Nuclear Power Plant in Ukraine that dispersed large amounts of radioactive fallout into the atmosphere); and no reliable method had been developed to store the radioactive waste produced by nuclear power plants. Nor could we realistically rely on natural gas to provide much more than 25% of America’s energy needs (about what this source supplied in 1979). While natural gas provided a clean source of domestically produced energy and lacked the problems associated with nuclear and coal, it involved huge production and exploration costs in an industry mired in price fluctuations, an uncertain cost structure, regional disputes, and a complex interstate pricing and regulatory scheme. Although we could count on some growth in natural gas production, it alone could not lessen our reliance on foreign oil.

Energy Future also examined the negative externalities, or external costs (social, political, environmental), of each energy source. The study demonstrated that, if external costs were factored into the pricing structures of the traditional energy sources, then coal, oil, and nuclear were among the most expensive energy sources, while the true costs of natural gas production contained too many uncertainties to provide a reliable measurement. The report suggested not that we give up on the traditional sources, only that such sources would not and could not solve our energy problems and reduce our dependence on foreign oil.

What John Anderson and the Harvard Business School both realized was that the best hope for the United States, the solution that had the most chance of success and that made the most sense, economically and politically, was conservation (principally through increased energy efficiency) and development of solar energy. Anderson discussed policy measures similar to that set forth in Energy Future – tax credits and subsidies that provided market incentives promoting fuel efficiency, conservation, and the development of solar and other forms of renewable energy, which had high start-up costs but offered long-term solutions to America’s oil addiction and reliance on dirty and dangerous energy sources. It was essentially an attempt to place conservation and solar on an even footing with the traditional energy sources, all of which had benefitted for decades from subsidies and tax breaks. Although John Anderson tried to educate a reluctant populace, mainstream politicians and the two major political parties refused to listen.

Thirty years later, we find little has changed. America continues to suffer from a short-term perspective. When oil prices temporarily declined on global markets in the 1980’s, the Reagan administration backed expanded domestic oil production and Americans continued to drive large cars and SUVs, blast air conditioners, and play with motor boats and recreational vehicles. The United States, having lost its enthusiasm for a new approach to energy policy (President Reagan even ordered the removal of solar panels that President Carter had placed on the roof of the Department of Energy’s Forrestal Building), by the mid-1980’s once again returned to gas-guzzling cars and trucks. Today, our oil consumption has increased by over 40% and we remain as reliant as ever on foreign oil, as American dollars increase the wealth of Iran and Saudi Arabia, and our government spends over a trillion dollars on the War in Iraq.

Our oil addiction and reliance on conventional energy sources is further apparent when we look at the recent oil spill in the Gulf of Mexico, one of the worst environmental disasters in American history, yet reminiscent of 1969, when a major spill from an offshore platform off the coast of Santa Barbara, California, coated its pristine beaches in oil and led to the founding of Earth Day. Several major oil spills later, including the Exxon Valdez disaster in Prince William Sound in 1989, America continues to consume increasing amounts of energy. Despite some tinkering around the edges, little has been done to seriously address the environmental, health and safety, and national security risks of our stagnant energy policy. As Thomas Friedman of the New York Times wrote recently:
There is only one meaningful response to the horrific oil spill in the Gulf of Mexico and that is for America to stop messing around when it comes to designing its energy and environmental future. The only meaningful response to this man-made disaster is a man-made energy bill that would finally put in place an American clean-energy infrastructure that would set our country on a real, long-term path to ending our addiction to oil.

That is so obviously the right thing for our environment, the right thing for our national security, the right thing for our economic security and the right thing to promote innovation. But it means that we have to stop messing around with idiotic “drill, baby, drill” nostrums, feel-good Earth Day concerts and the paralyzing notion that the American people are not prepared to do anything serious to change our energy mix.
President Obama has the right instincts on energy policy, but it remains to be seen whether he has the political will and courage to truly lead our nation in the direction it needs to go. He has taken some positive steps:

• Accelerating the development of renewable energy – wind, solar, and geothermal power and battery-powered vehicles – through subsidies and tax incentives.

• Investing in high-speed rail, clean coal technology and smart grid investments as part of last year’s economic stimulus act.

• Defining greenhouse-gas emissions as a danger to human health and the environment and implementing a new “clean car” standard that, for the first time, allows the Environmental Protection Agency to regulate greenhouse-gas tailpipe emissions; and

• Adopting improved fuel efficiency standards for cars and trucks.

Of course, the President has also pushed for expanded offshore oil drilling (much to the chagrin of environmentalists, who can now honestly say, “I told you so”) and authorized financing for the construction of two new nuclear power reactors, the first such reactors since the 1970’s.

As the Harvard Business School concluded in Energy Future, there is no easy fix to America’s energy problems. We are all to blame – I am no exception, for I watch my color television sets, crank up the air conditioning on hot summer days, enjoy the freedom of travel, and regularly turn on the light switch – but until we finally see the big picture, until we can envision where our energy future is headed, until we realize the true costs – environmental, national security, and economic – of our dependence on oil and coal (and nuclear, until we find safe means to dispose of radioactive spent fuel), we will continue to be held hostage by Arab sheiks, Texas tycoons, and Wall Street commodities traders. The real problem with the oil spill in the Gulf and the coal mining tragedy in West Virginia (and the repeated history of such tragedies over the past two centuries), are not the tragedies themselves, for the risks are foreseeable and will continue to be so as long as we depend on these energy sources. The real problem is our reliance on oil and coal itself.

Until we as a nation – as consumers, as business owners, as policy makers – embrace conservation as a national priority, adopt serious fuel efficiency standards, and maximize our development and use of clean and renewable energy sources, we will continue to harm our most precious resource, the Earth, and be dependent on forces and nations outside of our control, at great risk to our economy, our environment, and our national security.


  1. Mark,

    Oil: Manna from Heaven, or at least Mother Earth; abundant source of energy that built a nation and led to other wonderful sources of energy, like nuclear and hydro power. Oil, simply put, is good and once you’ve accepted, either through enlightenment or intervention, that there is no such thing as man-made global warming, then there is very little reason to rush away from the black gold until a legitimate alternative is invented by a garage tinkering genius unencumbered by mindless government regulations and manipulations.

    One of the main reasons cited for freeing us from our “addiction” to oil (are we likewise addicted to sand for our glass? shouldn’t we be mandated to build houses with smaller windows?) is our dependence on foreign oil. But this, of course, rests on maddening circular logic: because we choose to impose burdensome regulations on energy producers; because we restrict exploration; and because we allow environmental extremists to use the courts to block the exploitation of our own natural resources, we therefore limit ourselves to purchasing oil from lunatics, who funnel the profits to psychopaths who kill Americans for sport and Allah. Since that is unwise, we must therefore free ourselves from foreign oil by . . . building bird killing and land wasting windmills and ineffective solar panels!

    Another reason for weaning ourselves from oil is that we will eventually run out of the stuff and be caught off guard and in the dark (should have stock piled the whale oil!). But if there is one golden rule in oil reserve predictions, it is that those who make such predictions are always wrong. In fact, science is pursuing the possibility that the earth produces oil (I won’t say the science is settled, but it’s a lot more convincing than Al Gore’s pet theory and would explain why once dry oil wells keep refilling), which poses a dilemma for Birkenstockers everywhere: if oil is a natural inorganic product of God’s green earth and if the sun is the main source of our globe’s changing temperature (the hell you say! that big orange ball-thing in the sky? solar flares my ass!), and it’s our own choice not to “drill, baby drill,” then what reasons do we still have to slander the world’s life blood that has elevated living standards for everyone?

    Truth be told, there should be oil rigs above every known oil deposit, and if that happens to be on my neighbor’s property, then I will gladly help him load up his truck for his move to Beverly. . . Hills that is.

    There should be tunnels into every known coal reserve, and if it happens to be under the house of my favorite liberal, I won’t call him a hypocrite for cashing in, but thank him for my lowering utility bill.


  2. Libs give lip service to freedom, but their actions consistently restrict American freedoms (this post alone advocates or hints at limiting: the freedom to drive a car of one’s choosing; the control to set the temperature of one’s home; the use of recreational toys; the ability to travel; the amount of electricity we use; the time we spend watching t.v.; American’s freedom in general by increasing the power of the government via the EPA and the addition of more regulations and taxes). One of the favorite targets of the left is the despicable SUV. Americans, because they are free, create prosperity that results in an abundance of choices. We have a dizzying array of cars to choose from, a fact that should be celebrated, but Democrats want to control and narrow and restrict that choice. They fail to understand that in a free society the reasons people have for buying an SUV or a big-ass truck are endless and every reason is as valid as the next: from “I look damn good in my Eddie Bauer limited edition Expedition, which should help with the chicks, huh?” to “If the car that transports my family is ever struck by another car I want it to be like a bug hitting the windshield” (my favorite), to “I’m decorating Al Gore’s new $9 million, nine bathroom, mansion and I need a big truck to deliver the new old-growth redwood dining room table.”

    It is not the government’s place to judge how people spend their money or use their energy. Nor is it the job of the government to decide what supplants oil in the future, because the people running the government are not as qualified as 300 million Americans. We did not need government control to choose oil as the preferred choice of energy back in the day when roughnecks were admired as men of action, who brought us the miracle liquid that greased the gears of a fast moving country. Think about it: what energy source does the government push in the 21st Century? Windmills for God’s sake! Why not just say that DVD and Blu-Ray are history and Beta will now be mandated! And returning to the topic of whale oil for a second, it was not government that mandated that crude oil replace whale oil, thereby saving whales from the brink of destruction, but choices made by individuals who recognized a better product when they saw it (likewise, turning to coal once prevented deforestation — and in doing so, starvation and frostbite — in Europe in the 1500s).

    If left to the government, energy choices will be made based on what will benefit the politician’s pocket book. It is no coincidence that Al Gore pushes carbon credits, considering that he buys carbon offsets from his own business that will make billions should cap-and-trade legislation be passed.


  3. So politicians will pick Beta for their own payday and then protect Beta from competition, either intentionally or because it’s in their nature, with endless red tape and incomprehensible laws. Silly you say? Take a look at the story of Krister Evertson, an almost perfect citizen, except for his membership in the homophobic Boy Scouts. Krister was a National Honor Society member (4.0 GPA, skipped 12th grade – hey, it’s not like a brainiac Eagle Scout was going to have a prom date anyway), donated two years of his life to teaching sign language to the deaf, and, of course, had no criminal record. But more importantly, he was an inventor with a passion for developing alternate sources of energy. He was awarded Citizen of the Day for his coconut-milk fuel-cell battery. So along comes the push for hydrogen power and Krister had an idea for “inventing a better process to produce a chemical called sodium borohydride to power hydrogen fuel cells.” Sodium borohydride is good because it is safe and produces no harmful emissions when used. It is, however, expensive, but Krister had an idea “to create a process to make it cheaper and speed the way to an environmentally-friendly hydrogen economy.” So he applied for a government grant. . . no wait, we already established that Krister was an American – he convinced his family to invest in his good idea and went to work in his garage. His American dream: to build a business and to “come up with the next big invention to help humanity.”

    You just know he’s gonna get his teeth kicked in, don’tcha?

    But then his money ran out and he was forced to apply for a government grant. . . damn, forgot – rugged individualist – so he did what he always did: closed up shop to go earn more money. Krister safely packed away his chemicals, supplies and equipment and paid to store it all at his friend’s business. He also sold – legally – some of the chemicals and shipped them, as required by law, using ground transportation. What he didn’t know was that UPS still ships some packages part of the way by air and because he had not put on the right label, the full weight of the federal government came down upon his head: two black SUVs ran his car off the road and men in black rushed him pointing guns. Krister was interrogated and jailed and, when he refused to plead guilty, put on trial. A jury eventually acquitted him, no doubt utilizing the legal theory of “Are You Effing Kidding Me?”

    But wasting two years of his life in which he could have been solving all our energy problems wasn’t enough. Because he was honest and told the feds that he had more chemicals, the EPA seized the chemicals worth $100,000, declared it toxic waste and destroyed it without telling him while he sat in a jail cell. Cost to the tax payers: $430,000.

    After his acquittal, the feds charged him again, for transporting his chemicals the half-mile to the storage space and improperly disposing of hazardous waste in violation of the Resource Conservation and Recovery Act (interesting statistics: Obamacare = 2,409 pages, RCRA = 163 pages, U.S. Constitution = 5 pages, Declaration of Independence = 1 page).

    Krister felt helpless: “An inventor—someone with a good idea that needs some time and hard work to grow—doesn’t stand a chance going up against the government.”

    Again this noble nerd refused to submit, only to have the judge tell him that the government didn’t have to prove that the chemicals were “hazardous waste,” and that the jury only needed to be told that the EPA classified them that way. This time he was convicted. “Think about that: All the government has to do is declare some chemicals—perhaps antifreeze or old paint in your garage—to be hazardous waste, and then there’s nothing you can do to defend yourself.”


  4. Krister went to jail and then a halfway house and now this honor student/Eagle Scout/volunteer worker/environmentalist/inventor/ex-bleeding heart (hopefully) is also a convicted felon, unable to vote or arm himself like some common crack dealer.
    “I was working on a hydrogen fuel cell invention, trying to improve the environment and the world. I was an American inventor. And for pursuing my dream, I wound up in prison. If I had chosen to watch TV on a couch instead, I would never have experienced this ordeal.” Plus, he would have qualified for food stamps!

    And this happened under a Republican administration!

    At a time when government should be reducing its role in our society, if for no other reason than to save the government itself, we are doubling down on government intrusion. We are on the same road Greece was on and approaching the same cliff they have already sailed over. Only now, while in freefall, does Greece understand the proper role of government, as it scrambles to give up control of several key areas of the economy in order to survive. The list is quite illustrious and understanding it is the key to our prosperity: healthcare, transportation and energy. They also propose raising taxes, which just goes to prove that there are limits to a liberal’s ability to face reality (for more on this see the New York Times article – yes, the New York Times– at

    As for Texas Tea, the only thing “idiotic” is not to maximize the output from our own backyard. It’s the height of disingenuousness to demonize Texans, soccer moms and millions of other Americans, who want their trucks and snowmobiles, as being responsible for our addiction to foreign oil when the government willingly restricts our choices to foreign oil and oil provided by foreigners. There is no shortage of oil (or coal, natural gas, water currents, nuclear reactions, wood, wind and algae, for that matter) or of enterprising Americans looking for the next energy source, but it must happen within the context of the free capitalist system. This means that oil should reign supreme while it is abundant and cheap, but when it becomes less so, Americans, not bureaucrats, should make the choice as to its successor.

    Rich R.

  5. Rich,

    I wish that you had as much love for the environment as you do for crude oil. The reason we need environmental regulations is because, simply put, left unfettered, the market ignores the environment -- treating it as a cost with no benefit to the bottom line. As for economic regulation, the price of domestic oil has been unregulated since 1980, yet few major new reserves of oil have been discovered in this country since then. Other than offshore drilling, we are exploiting virtually all major reserves in the United States.

    Putting aside any government mandates, if everyone, out of love of country, chose to trade in their SUVs and drive cars that averaged 40 miles per hour, we would cut our importation of oil by quite a bit and not need to risk environmental catastrophe with more offshore oil rigs. Your assumptions about unlimited oil is simply not true. Nor is your dismissal of global warming (but as is often the case, this is not something I discussed, and requires a broader and different discussion). The Deepwater Horizon disaster will take us years, if not decades, to recover from (if the damage to the ecosystem ever fully recovers). But massive oil slicks are only part of the problem with our continued addiction to oil. We send billions of petrodollars overseas to hostile countries and, with oil and coal production, continue to pollute our air with carbon monoxide and other noxious fumes. Your love of "freedom" is commendable, but your stated approach to energy policy is overly simplistic, unrealistic, and not very smart. The stakes are far too high to not take concerted action as a nation to reduce our dependence on fossil fuels.

  6. Mark, our mutual friend, John Steinbruck, often refers me to your site. Glad to see the reference to John Anderson. I was his congressional chief of staff when he ran for President in 1980.

    When JBA made his gas tax proposal, George Will excoriated him. Yet, after Reagan was elected, Will soon afterward wrote a column calling for a similar gas tax increase ... to fund the defense budget!

    One of the tragedies of our times is that there are too few people such as John Anderson (and John and Erna Steinbruck, for that matter) and too many such as George Will!

  7. Bruce,

    Thanks for the comment and thanks for reading! 1980 must have been a very interesting and exciting year for you. I recall George Will's criticism of the gas tax (there was little he and I agreed on back then), but I did not know (or forgot) that Will had subsequently proposed a similar gas tax (albeit for other reasons). Unfortunately, it seems today we are bearing the fruits of having not listened to your former boss thirty years ago.