Twenty years ago, Rob Bradley, then president and now CEO of the Institute for Energy Research (IER), published a two-volume, two-thousand-page history of hydrocarbon regulation, legislation, economics, and politics from the mid-1800s to the mid-1980s. Titled Oil, Gas & Government: The U.S. Experience, Bradley’s treatise puts many of today’s energy issues in historical context.
On April 1, 1996, I wrote about the book in the newsletter I founded and edited, Natural Gas Week. I started my column, dubbed Perspective, by quoting philosopher George Santayana: “Those who cannot remember the past are condemned to repeat it.”
Today, 20 years later, I would urge current legislators and regulators to consider the main takeaways of Bradley’s book before casting another vote or initialing another regulatory memo.
In his book, Bradley said that political motivations for government intervention are “narrow and self-interested, not necessarily in the common good and not necessarily representative of the citizenry.” He said the public sector “is not a place of scientific instruction and higher callings but is slave to the ideas, trends and passions of the moment.”
Rather than put government leaders on a pedestal, he quoted economist and Nobel laureate James Buchanan, who said that the complex government structure is “peopled by ordinary men and women.” Bradley added that these same government employees “value advancement, prestige and income” and are “fallible intellectually and morally” and are “capable of breaching personal ethics and the law itself.”
Strong words, but in the critical election year of 2016, they are words worth recalling.
While the past is not precise prologue, it nevertheless is compelling enough to warrant another chestnut, the observation by philosopher George Santayana that “Progress, far from consisting in change, depends on retentiveness. Those who cannot remember the past are condemned to repeat it.”
Thus, we come to a newly published two-volume book dubbed Oil, Gas & Government, and subtitled The U.S. Experience. The author is Robert L. Bradley Jr., of Houston, president of the Institute for Energy Research, which is a think tank so small we once labeled it a “think bucket.” That aside, Bradley’s intellect and skills cast a long shadow.
At various times he has teamed up with like-minded colleagues at George Mason University in Northern Virginia and the Cato Institute in Washington, D.C. In fact, Cato holds the copyright on Bradley’s latest book. While Bradley keeps his philosophical scribblings apart from his day job, it also must be noted that he is director of public policy analysis for Enron Corp., which gives him a pretty wide window on the energy world as well as access to a lot of bright, experienced people.
Oil, Gas & Government is a 2,000-page history of hydro-carbon regulation, legislation, economics and politics from the early 1800s to the mid-1980s. It started out as his doctoral dissertation in 1985 and blossomed from there. So it can be said that he’s worked on this book for a decade, although he took he took time out to write The Mirage of Oil Protection (1989), the forward to New Horizons in Natural Gas Deregulation (1996) and various essays.
In addition, he edited and wrote the introduction for Done in Oil, a history of the U.S. petroleum industry written by the late J. Howard Marshall, an oilman who, alas, is perhaps best known to the modern generation as the nonagenarian husband of blonde, flamboyant Guess? jeans model Anna Nicole Smith.
Politically and economically (after all, he’s a political economist), Bradley is an unreconstructed Libertarian. Unlike many zealots, however, he has a thoroughly delightful, engaging personality and he can talk about other subjects besides natural gas and oil . . . you know, like coal and futures trading.
He’s not shy about declaring what he likes and what he dislikes, such as The Prize, by Daniel Yergin, which Bradley thinks is a bit shallow in the area of being pro-free market. In the introduction to Oil, Gas & Government, Bradley says Yergin’s book “provides a highly readable account of the development of the international petroleum industry but understates important developments on the domestic U.S. regulatory front.”
Bradley states his own views in the first sentence of the introduction: “This book is intended to provide . . . a detailed history and analysis of government intervention in the U.S. oil and gas market.”
In the book, he emphasizes that much of this “intervention” was requested by executives in the gas and oil industries to gain benefits for themselves or to disadvantage their competitors, but he still assails government intervention.
He also says that two “distinguishing characteristics of the book should be acknowledged at the outset. One is the methodology of the social sciences and applied economics in particular; the other is the book’s negative spotlight on government intervention in the oil and gas market.”
As for the methodology, Bradley notes that “The applied economist is part historian and part economist. He or she must not only sift through the statistical information on a situation (the ‘outside’ of an event) but thoroughly understand the anecdotal or ‘inside’ of an event. The motivations of the economic actors are crucial.”
The book is in large part an “oil” book, not a “natural gas” book, although Bradley is careful to refer, as do we at Natural Gas Week, to the oil and gas industries, plural. In addition, there is a lot of crossover, so knowing a particular governmental treatment of oil helps to understand why natural gas is treated the way it is – or was, keeping in mind that Bradley’s history (unfortunately) only runs through 1985, although there are occasional references to more recent events.
For natural gas aficionados, Bradley’s book contains a 98-page chapter specifically on regulation of wellhead gas prices (1940–84) plus a 122-page chapter on regulation of natural gas pipelines.
His economic conclusion is that “The value of lost supply and the unnecessary cost of realized supply, added to government budgets for oil and gas intervention, industry compliance and the tax bill, would be in the hundreds of billions of dollars.”
But of 31 chapters, those two on gas regulation are hardly the only two that contain references to natural gas. In particular, the last two chapters – 95 pages on political conclusions and and policy implications plus 50 pages of appendices – add the particular resonance to this work that readers of Bradley’s books, essays and speeches have come to expect.
Bradley believes that political motivations “for government intervention are narrow and self-interested, not necessarily in the common good and not necessarily representative of the citizenry.” Given that he views the issue of motivation as critical, he concludes that “A political theory of economic interventionism must explain why in a democracy, particularly one founded on free-market principles, there can be intervention despite its harmful effects.”
He adds that “The pictures of the democratic political arena as a bastion of selfless, benevolent servants of the people, as long portrayed by political scientists and advocates of activist government, has lost its intellectual respectability.” He quotes James Buchanan, a Nobel laureate in economics, that the complex government structure is “peopled by ordinary men and women” who, in Bradley’s words, “value advancement, prestige and income,” are “fallible intellectually and morally” and are “capable of breaching personal ethics and the law itself.”
The public sector, he says, “is not a place of scientific instruction and higher callings but is slave to the ideas, trends and passions of the moment.” In short, in Buchannan’s words, they’re “very little different from the rest of us.”
Editor’s note: John H. Jennrich, first with the Oil & Gas Journal (where he was Washington editor) and then as founding editor of Natural Gas Week, ranks among the distinguished reporters/commentators in energy history. In 1988, he received the Award for Excellence in Written Journalism from the International Association for Energy Economics.
Natural Gas Week (1985) joined an industry publication list that began with the American Gas Light Journal/ Pipeline & Gas Journal (1859), and has continued with Oil & Gas Journal (1902), National Petroleum News (1909), Oil Weekly (1916), Platt’s Oilgram (1923), Oil Daily (1951), Gas Daily (1984), and Electricity Daily (1993).
Tomorrow, May 25, ExxonMobil shareholders will vote on a climate change proposition. And yes, the notions promoted by activists presume government intervention to raise the price of oil and gas products, reduce demands and threaten investors. Here is the issue and the background:
So alarmists that have supposedly divested Exxon Mobil stock are going to stay in the game and complain? I’m confused.