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Energy and the federal government, fossil fuel policies: 1900–1946
Book reviews
oil demand. Any doubt that this was the strategy can be dissipated by looking at IEA documents and policy reviews of the period, Of course this kind of background thought was absent from the decision of Norway to fund this ILO project, Norway, which before oil was rather poor (in Scandinavian terms) - a farming and fishing nation of low importance - had seen that oil promised great things and these great things should be offered to all the non-OPEC LDCs (NODCs), who could apparently conquer misery and catch up on their development thanks to oil. Now Norway has the highest GNP per capita in Europe and next to Belgium the highest per capita debt. Each day that oil prices stay low puts another twist on the Norwegian debt spiral and makes it ever more certain that freedom of decision making for the economy is lost. Reading the list of countries covered in this report including Brazil, Egypt, Ivory Coast, Peru and Mexico makes one think immediately of super-debt, national economic catastrophe, rising civil strife, even civil war. Oil might bring wealth but it can certainly bring problems. In the present context, petroleum development in NODC is a non-starter, a folly. Yet this report points out all the objective, reasoned elements of
Lack
of
economic
ENERGYAND THE FEDERAL GOVERNMENT, FOSSIL FUEL POLICIES: 1900-1946 by John G. Clark
University of lllinois Press, Urbana and Chicago, 1987, 511 pp, £35.95 Clark seeks to provide a comprehensive evaluative study of USA fossil fuel policies in the 1900-1946 period, The book is predominantly a review of efforts at market stabilization starting with World War I (and early postwar years), efforts to set ceilings, interwar efforts to boost prices, and the return to ceilings in World War II. His efforts
492
national d e v e l o p m e n t and industrialization policy b a s e d on oil and gas development. The contradiction could not be more perfect and highlights- if this is needed - the dangerously unstable, imbalanced macroeconomic context in which we live. The list of countries covered makes one think of present and future victims of the IMF - the same organization which, a few years ago, demanded energy reports from the World Bank concerning LDCs which requested IMF assistance. The World Bank as well as preaching rather ludicrous (and now mostly shelved) alternative energy projects, would always feature the high-cost, capital-intensive oil and gas sector as part of its recommendations. But heavy investment in petroleum has further weakened, even destabilized countries that often have no choice but to increase production (to be 'pricetakers'), as part of a race for economic growth made obligatory by population and debt growth. In the interesting b u t b r i e f sections on macroeconomic issues and links between petroleum and economic development, the report briefly notes these issues and at least evokes the questions of stretching resource lifetime and limiting oil sector growth through deliberate restraints on output. In the present context, and espe-
cially in view of the fact that all the NODC are small exporters (if not producers), the questions of pricing strategy and resource lifetime are now vastly more important than the majority of the other issues, such as local personnel training and infrastructure development, that are covered in greater depth by this report. The report's preface notes, perhaps bravely, that this study 'is not a guide to appropriate policies for a low oilprice world' and says that the ILO will be alert 'to needs and opportunities to follow up project findings'. In other words, because the future is on hold, if not cancelled, it is likely that no more reports from this project can be expeered for some while. This would indeed be a pity for it is totally incontrovertible that petroleum development, where resources make this possible, is a key to national infrastructure growth. That this is, presently, uneconomic or the road to faster debt is only one more proof of how so-called adjustment in the early1980s has created recession in the North and economic chaos in the South.
_rin c i p l e s
,ate fue, markets .e never e.p,a,ns
o
are deficient in almost every relevant aspect, The central flaw is an ill-advised failure to use any economic principles, He has chosen to concentrate on issues of price regulation. The failure to comprehend the elementary economics of price floors and ceilings leads to totally unsatisfactory discussions, He is perennially surprised that price fixing causes problems and distressed that non-price rationing works so badly. The book has selected for primary attention precisely the issues the author is least able to treat, Clark goes on to synthesize these poorly devised analyses into an illstated proposition of a need to regu-
AndrewMacKillop SPACECOSA Lyon, France
why this intervention is justified and scatters his views about the form the intervention should take. However, it seems that, basically, he wants a policy of substituting coal for oil and gas. This is a pet policy of many observers of energy. Clark fails both to mention the long history of the argument and to provide any rationale. Had he used a bit of economics, he could have placed himself on the side of those who consider government agencies better able than private markets to judge future prospects. Had he adequately examined the energy economics literature (see below), he might have recognized that he was actually advocating a socially inefficlent policy of preventing a shift of resources. He begins with an effort to describe
ENERGY POLICY October 1987
Book reviews~Letter to the editor the pre-World War I fuel market in 24 pages. The next chapter deals with a potpourri misleadingly called emergent g o v e r n m e n t fuel policies. The chapter begins with further discussions of market trends; develops a statement of the view of the public interest that guides him; discusses, superficially, issues such as regulation of energy and its transportation; the mineral (or as the typesetter garbled it, G e n e r a l ) leasing act; the antitrust case against Standard Oil and assorted g o v e r n m e n t investigations of the coal industry. In the discussion, he argues: The supreme test of policy is the dcgrcc to which it achieves equity (sharing). justice (fairness a la Rawls), and liberty all in the spirit of the principles enunciated in the Declaration of Independence (p 34). That sentence all too well epitomizes the wrong-headedness and ignorance Clark brings to the study. We have r e d u n d a n c y , failure to understand Rawls or his critics, and disregard of the undesirability of attaining equity by regulating specific markets, Then a pair of chapters report on World War I fuel policies. The first
These are only the primary deficiencies. His handling of sources is unsatisfactory. H e uses the most awkward referencing system extant - extensive endnotes with neither a bibliography nor references in the index to allow ready determination of what has been considered. While I may have missed a citation or two, it remains clear that he neglects much that is important. For example, the most recent work cited on state regulation of oil production is Erich W. Z i m m e r m a n n ' s 1956 study; later, more careful work is neglected. Inexcusable hiatuses also arise with the literature on natural gas and international oil. A clear gaff arises with his citation of The Politics o f Mistrust: Estimating Anwrican Oil and Gas Resources by Wildavesky and T e n e n b a u m . He fails to cite the junior author and misleadingly calls the book simply 'a c o n t e m p o r a r y analysis of this problem' (the alleged inadequacy of oil and gas reserve data). He fails to point out that the Wildavesky and T e n e n b a u m conclusion opposes his. They argue that the attack on statistics was a
smoke screen for other concerns and that the practical effect in the oil and gas reserve case was to produce worse data at higher cost. He tends to provide incomplete or confusing explanations of policies of secondary concern. For example, on p 154 there is a totally incomprehensible discussion of depletion allowances. The description of the Mineral Leasing Act, noted above, is another such case. In short, Clark has added to the deplorably long list of bad discussions of energy that have appeared. No richness of information offsets, as it does in other cases, the biases and e c o n o m i c incompetence. Particularly deplorable is that the book is an offshoot of work Clark did for the Historian of the US D e p a r t m e n t of Energy. That the book escaped examination by the many able economists in D O E reinforces the Department's dubious reputation.
Richard L. Gordon
The Pennsylvania State University University Park, PA
deals with coal; the second with oil and gas. Then coal 'shortages' of the 1920s are reviewed. The next chapter
is largelydevotedtotheproblemof the law of capture in oil and gas (the
Letter to the editor
right of each owner of the land of any part of an oil or gas field to drain as much oil and gas as possible from the entire field). He next discusses the deteriorating market position for coal
Obje c t i o n s
to
tone
and allegations on monopolization of oil pipelines and coal railroads. He then returns to oil production problems ending up with New Deal policies in the realm. This is followed by a discussion of New Deal coal policies, T h e n a chapter is devoted to endorsing proposals made in the 1930s for coordinated energy planning. Three chapters are devoted to fuel policy in World War II. The concluding chapter d e n o u n c e s the failure to regulate vigorously enough, As this should suggest, many chapters are highly disorganized. Even the best (the reviews of wartime policies) tend to be choppy, inadequate in their discussion of substance and excessively c o n c e r n e d with political posturings by the participants and Clark.
ENERGY POLICY October 1987
We are taken aback at the review of our book I by David Wilson which was published recently in Energy Polity (February 1987). A good reviewer usually finds some problems, errors and omissions by the authors, and such is the case here: a map that mistakenly labels many intermediate nodes as refineries, shows several oil pipelines where there are none, etc. With this, we have no problem. But we do strenuously object to the condescending tone of the review and some of its unnecessary inflammatory language. These we believe have no place in a normal scholarly review, We also object strongly to some of the assertions made in that review, For example, one of Wilson's main
and
language
points is that there are amply awtilable data for running onr transportation model for a year later than 198(), but he forgets that books have very hmg lead times for publication. The basic research for our book was done in 1983-1984, and although it is difficult to remain current, every effort was made to do so. While we agree that the data on the production of energy are available for years since 1980, and we have made use of some of these data, consumption data are not, at least not at the level of spatial disaggregation required. Estimates for refinery throughput are not available after 1980 as yet, data on gas consumption for 1984 were only just published 2 and almost no data exist on
493
oil demand. Any doubt that this was the strategy can be dissipated by looking at IEA documents and policy reviews of the period, Of course this kind of background thought was absent from the decision of Norway to fund this ILO project, Norway, which before oil was rather poor (in Scandinavian terms) - a farming and fishing nation of low importance - had seen that oil promised great things and these great things should be offered to all the non-OPEC LDCs (NODCs), who could apparently conquer misery and catch up on their development thanks to oil. Now Norway has the highest GNP per capita in Europe and next to Belgium the highest per capita debt. Each day that oil prices stay low puts another twist on the Norwegian debt spiral and makes it ever more certain that freedom of decision making for the economy is lost. Reading the list of countries covered in this report including Brazil, Egypt, Ivory Coast, Peru and Mexico makes one think immediately of super-debt, national economic catastrophe, rising civil strife, even civil war. Oil might bring wealth but it can certainly bring problems. In the present context, petroleum development in NODC is a non-starter, a folly. Yet this report points out all the objective, reasoned elements of
Lack
of
economic
ENERGYAND THE FEDERAL GOVERNMENT, FOSSIL FUEL POLICIES: 1900-1946 by John G. Clark
University of lllinois Press, Urbana and Chicago, 1987, 511 pp, £35.95 Clark seeks to provide a comprehensive evaluative study of USA fossil fuel policies in the 1900-1946 period, The book is predominantly a review of efforts at market stabilization starting with World War I (and early postwar years), efforts to set ceilings, interwar efforts to boost prices, and the return to ceilings in World War II. His efforts
492
national d e v e l o p m e n t and industrialization policy b a s e d on oil and gas development. The contradiction could not be more perfect and highlights- if this is needed - the dangerously unstable, imbalanced macroeconomic context in which we live. The list of countries covered makes one think of present and future victims of the IMF - the same organization which, a few years ago, demanded energy reports from the World Bank concerning LDCs which requested IMF assistance. The World Bank as well as preaching rather ludicrous (and now mostly shelved) alternative energy projects, would always feature the high-cost, capital-intensive oil and gas sector as part of its recommendations. But heavy investment in petroleum has further weakened, even destabilized countries that often have no choice but to increase production (to be 'pricetakers'), as part of a race for economic growth made obligatory by population and debt growth. In the interesting b u t b r i e f sections on macroeconomic issues and links between petroleum and economic development, the report briefly notes these issues and at least evokes the questions of stretching resource lifetime and limiting oil sector growth through deliberate restraints on output. In the present context, and espe-
cially in view of the fact that all the NODC are small exporters (if not producers), the questions of pricing strategy and resource lifetime are now vastly more important than the majority of the other issues, such as local personnel training and infrastructure development, that are covered in greater depth by this report. The report's preface notes, perhaps bravely, that this study 'is not a guide to appropriate policies for a low oilprice world' and says that the ILO will be alert 'to needs and opportunities to follow up project findings'. In other words, because the future is on hold, if not cancelled, it is likely that no more reports from this project can be expeered for some while. This would indeed be a pity for it is totally incontrovertible that petroleum development, where resources make this possible, is a key to national infrastructure growth. That this is, presently, uneconomic or the road to faster debt is only one more proof of how so-called adjustment in the early1980s has created recession in the North and economic chaos in the South.
_rin c i p l e s
,ate fue, markets .e never e.p,a,ns
o
are deficient in almost every relevant aspect, The central flaw is an ill-advised failure to use any economic principles, He has chosen to concentrate on issues of price regulation. The failure to comprehend the elementary economics of price floors and ceilings leads to totally unsatisfactory discussions, He is perennially surprised that price fixing causes problems and distressed that non-price rationing works so badly. The book has selected for primary attention precisely the issues the author is least able to treat, Clark goes on to synthesize these poorly devised analyses into an illstated proposition of a need to regu-
AndrewMacKillop SPACECOSA Lyon, France
why this intervention is justified and scatters his views about the form the intervention should take. However, it seems that, basically, he wants a policy of substituting coal for oil and gas. This is a pet policy of many observers of energy. Clark fails both to mention the long history of the argument and to provide any rationale. Had he used a bit of economics, he could have placed himself on the side of those who consider government agencies better able than private markets to judge future prospects. Had he adequately examined the energy economics literature (see below), he might have recognized that he was actually advocating a socially inefficlent policy of preventing a shift of resources. He begins with an effort to describe
ENERGY POLICY October 1987
Book reviews~Letter to the editor the pre-World War I fuel market in 24 pages. The next chapter deals with a potpourri misleadingly called emergent g o v e r n m e n t fuel policies. The chapter begins with further discussions of market trends; develops a statement of the view of the public interest that guides him; discusses, superficially, issues such as regulation of energy and its transportation; the mineral (or as the typesetter garbled it, G e n e r a l ) leasing act; the antitrust case against Standard Oil and assorted g o v e r n m e n t investigations of the coal industry. In the discussion, he argues: The supreme test of policy is the dcgrcc to which it achieves equity (sharing). justice (fairness a la Rawls), and liberty all in the spirit of the principles enunciated in the Declaration of Independence (p 34). That sentence all too well epitomizes the wrong-headedness and ignorance Clark brings to the study. We have r e d u n d a n c y , failure to understand Rawls or his critics, and disregard of the undesirability of attaining equity by regulating specific markets, Then a pair of chapters report on World War I fuel policies. The first
These are only the primary deficiencies. His handling of sources is unsatisfactory. H e uses the most awkward referencing system extant - extensive endnotes with neither a bibliography nor references in the index to allow ready determination of what has been considered. While I may have missed a citation or two, it remains clear that he neglects much that is important. For example, the most recent work cited on state regulation of oil production is Erich W. Z i m m e r m a n n ' s 1956 study; later, more careful work is neglected. Inexcusable hiatuses also arise with the literature on natural gas and international oil. A clear gaff arises with his citation of The Politics o f Mistrust: Estimating Anwrican Oil and Gas Resources by Wildavesky and T e n e n b a u m . He fails to cite the junior author and misleadingly calls the book simply 'a c o n t e m p o r a r y analysis of this problem' (the alleged inadequacy of oil and gas reserve data). He fails to point out that the Wildavesky and T e n e n b a u m conclusion opposes his. They argue that the attack on statistics was a
smoke screen for other concerns and that the practical effect in the oil and gas reserve case was to produce worse data at higher cost. He tends to provide incomplete or confusing explanations of policies of secondary concern. For example, on p 154 there is a totally incomprehensible discussion of depletion allowances. The description of the Mineral Leasing Act, noted above, is another such case. In short, Clark has added to the deplorably long list of bad discussions of energy that have appeared. No richness of information offsets, as it does in other cases, the biases and e c o n o m i c incompetence. Particularly deplorable is that the book is an offshoot of work Clark did for the Historian of the US D e p a r t m e n t of Energy. That the book escaped examination by the many able economists in D O E reinforces the Department's dubious reputation.
Richard L. Gordon
The Pennsylvania State University University Park, PA
deals with coal; the second with oil and gas. Then coal 'shortages' of the 1920s are reviewed. The next chapter
is largelydevotedtotheproblemof the law of capture in oil and gas (the
Letter to the editor
right of each owner of the land of any part of an oil or gas field to drain as much oil and gas as possible from the entire field). He next discusses the deteriorating market position for coal
Obje c t i o n s
to
tone
and allegations on monopolization of oil pipelines and coal railroads. He then returns to oil production problems ending up with New Deal policies in the realm. This is followed by a discussion of New Deal coal policies, T h e n a chapter is devoted to endorsing proposals made in the 1930s for coordinated energy planning. Three chapters are devoted to fuel policy in World War II. The concluding chapter d e n o u n c e s the failure to regulate vigorously enough, As this should suggest, many chapters are highly disorganized. Even the best (the reviews of wartime policies) tend to be choppy, inadequate in their discussion of substance and excessively c o n c e r n e d with political posturings by the participants and Clark.
ENERGY POLICY October 1987
We are taken aback at the review of our book I by David Wilson which was published recently in Energy Polity (February 1987). A good reviewer usually finds some problems, errors and omissions by the authors, and such is the case here: a map that mistakenly labels many intermediate nodes as refineries, shows several oil pipelines where there are none, etc. With this, we have no problem. But we do strenuously object to the condescending tone of the review and some of its unnecessary inflammatory language. These we believe have no place in a normal scholarly review, We also object strongly to some of the assertions made in that review, For example, one of Wilson's main
and
language
points is that there are amply awtilable data for running onr transportation model for a year later than 198(), but he forgets that books have very hmg lead times for publication. The basic research for our book was done in 1983-1984, and although it is difficult to remain current, every effort was made to do so. While we agree that the data on the production of energy are available for years since 1980, and we have made use of some of these data, consumption data are not, at least not at the level of spatial disaggregation required. Estimates for refinery throughput are not available after 1980 as yet, data on gas consumption for 1984 were only just published 2 and almost no data exist on
493