Remember The Energy Crisis?

By Paul Greenberg

Tuesday, December 10, 2013

Who says the news is always bad? It's just that a discouraged editor on the night shift or a reader picking up her paper from the doorstep next morning may have to search for the good news between outbreaks of the other kind. Sometimes it helps to just pause and notice what's not there anymore, what's missing. Like any mention of what used to be a sad staple of the news, decade after decade: the Energy Crisis.

Energy Crises used to come as regularly as flu seasons, some years or whole eras worse than others. Let's see, there was the Energy Crisis of 1973 and of 1979 and of the years in between and after ... till the whole era, aka the Carter Years, might as well have been one long Energy Crisis. Why? Largely because each successive wave of shortages was only aggravated by government-supplied remedies that were going to cure them -- from price controls to tighter regulations on the oil industry and on a once free market.

Daniel Yergin is one of the more prescient students of the oil industry, and of the American economy in general. He's one expert whose analyses have proven so reliable over the years that they almost restore the once assuring connotations of the word Expertise, which has acquired a suspect sound over the years. And no wonder. One after another, the experts' "solutions" for the Energy Crisis did nothing but make it worse.

Looking back at all those failed panaceas, Mr. Yergin offered this summary and diagnosis of that whole, sad, failed era:

"A lasting lesson of the crisis years is the power of markets and their ability to adjust to disruptions, if government allows them to. The iconic images of the 1970s -- gas lines and angry motorists -- are trotted out whenever some new disruption happens. Yet those gas lines weren't the result of markets. They were the largely self-inflicted result of government interference in markets with price controls and supply allocation. Today, the oil market is much more transparent owing to the development of futures markets.

"The 1970s were also years of natural-gas shortages, which turned into a bitter political issue, particularly within the Democratic Party. Many at the time attributed these shortages to geology, but they, too, were the result of regulation and price controls. What solved the shortages wasn't more controls but their elimination, which resulted in an oversupply that became known as the 'gas bubble.' Today, abundant natural gas is the default fuel for new electricity generation. The lesson is that markets and price signals can work very efficiently, and surprisingly swiftly, even in crises, if they are allowed to."

Daniel Yergin's analyses of that debacle always stood apart, characterized by their recognition that market forces would work if given a chance to. And they did. Or else we wouldn't be wondering today what ever happened to the Energy Crisis. It's nowhere to be seen or painfully felt. The relief is palpable, if anybody would care to notice.

This happy ending hasn't been the result of price controls, rationing and all the rest of those counter-productive "fixes" that still attract statist theoreticians. It turns out the country wasn't so much addicted to oil all those errant years as to the quack cures government kept producing to cure our addiction.

As for the shortage of natural gas, it's vanishing, too, as the process nicknamed fracking (for Induced Hydraulic Fracturing) continues to revolutionize the nation's petroleum industry -- and, increasingly, the world's. There are other reasons for this revolution, like the expansion of drilling in Alaska, the North Sea and the Gulf of Mexico, but fracking may be the biggest explanation for the dramatic turnaround in petroleum production.

American oil output is up by more than half just since 2008. Oil imports, which accounted for 60 percent of the country's domestic consumption in 2005, is now down to 35 percent, or about where it was before these successive Energy Crises first struck in 1973.

The fading of the Energy Crisis from the news has been so happy if scarcely noticed a development that a president who's dragged his feet every step along the way, and who still finds ways to discourage drilling in the Gulf and continues to hold up construction of the XL pipeline to carry all that oil from Canada, now takes credit for this turnaround in American fortunes.

Did you notice that the country's trade deficit fell in October? The good news was attributed largely to oil exports, which have risen to an all-time high. Not because of this administration's policies but despite them.

If there's credit to be given, and there certainly is, the lion's share of it should go to a man who's scarcely mentioned by this president and his coterie of economic theorists: George P. Mitchell, the old wildcatter, dreamer, investor and inventor who died earlier this year at the age of 94. Born of immigrant Greek parents in Galveston, he was just about the most American character in this country's recent economic history -- always trying something new, always moving on to the next dream after the first one went bust. The man just would never give up.

George Mitchell never gave up on the offbeat idea of fracking despite years of disappointment and ridicule as he pursued black gold in the Barnett Shale out in the middle of Texas. He was always staking whatever he had left on one more roll of the dice. Till he hit the jackpot for us all.

And, please, Mr. President, don't tell us he "didn't build that." Some of us know better. And realize it on those rare occasions when we wonder what ever happened to the Energy Crisis. What did? It fell victim to an American entrepreneur named George Mitchell and all those others who followed in his footsteps through one now booming oilfield after another. Let's just say the Energy Crisis was done in by the free market -- once it was freed.