US energy policy and the pursuit of failure…again

We’ve been here before.  

The development of the Biden administration’s energy and climate policies is following a path set by the energy policies of the 1970s. That is not a good model to follow. Failure followed failure. Essentially U.S. energy policy has been created by a four-step process: 

First, an energy crisis is declared. Presidents and legislators feel the pressure to “do something.” 

Second, policy proposals that supposedly will provide a solution are announced. 

Third, assuming the sense of crisis lingers, extreme measures are passed in Congress or initiated by executive action, or both. 

Fourth, the measures prove ineffective and, although billions are spent, the measures are either repealed or just forgotten. In the meantime, market forces end the “crisis.” 

Presidents Nixon and Ford went through steps one and two. The Arab oil embargo and the subsequent gasoline shortages made it necessary for officials to offer radical ideas. But the end of the lines at gas stations and the fall in oil prices meant the end of the sense of crisis. That made officials reluctant to pursue the radical measures that had been proposed.  

It took the energy crisis of 1979-80 to follow the path to its conclusion. The return of gasoline shortages and sky-high energy prices induced President Carter to devise a comprehensive energy plan.  

Carter and his energy secretary believed that the U.S. and most of rest of the world were rapidly running out of oil and natural gas. All remaining oil and the wealth it entailed would go to the oil exporters (especially the hated Organization of Petroleum Exporting Countries, OPEC), while we shivered in the dark.  

So drastic measures were needed. Carter’s policies, if enacted, were supposed to make the U.S. energy independent, but would have other virtues including protecting the American way of life. 

The major component of this plan was to replace two million barrels a day of oil imports with a substitute derived from processing American coal. These “synfuels” would cost $88 billion (inflation-adjusted $320 billion), a number then-Secretary of Energy James Schlesinger later admitted “came from nowhere.” Moreover, five different agencies of the government said that the synfuels goal wasn’t feasible.   

As distress at the pump (especially rising prices) continued, Congress passed most of Carter’s plan, including the creation of the Synfuels Corporation.  

But the forecasts were ridiculously wrong. The world was not running out of oil and natural gas, and within a couple years of the passage of Carter’s energy program, there was a glut of oil and prices collapsed. By the mid-1980s, it was OPEC that appeared on the verge of penury. Parts of Carter’s program were repealed; other parts, ignored.  

In fact, the main reason for the gas lines was not venal oil producers but mistaken U.S. policies, enacted by the Eisenhower and Nixon administrations. Domestic supplies of oil and natural gas were not nearing exhaustion but prices for both were set by the government, and consequently production was falling because it was unprofitable for companies to drill for it. Price controls were lifted in the 1980s, and the gas lines ended. 

That wasn’t the end of the energy fears, of course, but the need to “do something” drastic about energy didn’t reassert itself until the mid-2000s. Soaring prices of oil and natural gas fed forecasts that these two essential fuels would soon be exhausted and the prices would be going up essentially forever. Another energy crisis was declared 

In 2005, Congress and President George W. Bush put together legislation that created, among other things, the Renewable Fuels Standard (RFS), which required 7.5 billion gallons of corn-derived ethanol to replace about 5 percent of gasoline by 2012.  

The RFS was increased to 36 billion in 2007 (by 2022) as the energy crisis worsened. Much of the ethanol now was to be distilled not from corn but from cellulosic plants like switchgrass. But despite billions being spent, cellulosic ethanol is still not commercially viable. As with synfuels, a glut of oil and natural gas – much of it extracted in the U.S. through hydraulic fracturing – falsified end of oil and gas forecasts and made expensive ethanol unnecessary.    

And so we come to the present: President Biden and many congressional Democrats have declared that we face an “existential” crisis from climate change. To avoid life-killing heat and extreme weather, we are said to require energy programs costing several trillion dollars. Initially, the goal would be to replace the colossal American electric system with its fossil-fuel and nuclear generators mainly with wind turbines, solar panels and gigantic batteries. This effort, like Carter’s, will also have greater virtues, creating millions of jobs and producing environmental justice. 

There are good reasons, however, to wonder if a real crisis even exists, much less whether the trillions of dollars will solve it. While acknowledging that a warming world may create problems in the future, many experts discount apocalyptic forecasts. There is nothing in reports of the Intergovernmental Panel on Climate Change (IPCC) that supports, nor does the evidence show, we are on a path to extinction.   

In the meantime, it isn’t clear that all that effort would accomplish much of anything. It won’t lower world temperatures significantly, and will likely cost far more than what the administration projects. The undertaking would also so greatly increase the demand for minerals and land that it is widely thought infeasible. Even to attempt it threatens grave environmental harm, and the result, if attained, would leave us with an energy system much more prone to failure and extraordinarily expensive to maintain. 

Biden has managed to slip some of his energy and climate objectives into executive orders and legislation intended primarily for other purposes. But if his energy and climate wishlist is enacted (a big if), we will surely see much of it eventually scaled back, ignored or abandoned.   

Biden’s energy and climate policies seem, like the policies of the past, like the pursuit of failure. 

Peter Z. Grossman has written several books on energy, including “U.S. Energy Policy and the Pursuit of Failure” (Cambridge, 2013).