Oil Rigging Elections

When the New York Mercantile Exchange closed the day before Thanksgiving, a barrel of crude oil cost over $97, roughly matching the inflation-adjusted record high set in 1980.

As the baleful effects of soaring oil prices ripple through the economy, the quest for an oil substitute becomes political, especially when presidential candidates stumping in Iowa before the caucuses have to pledge to preserve or expand subsidies to the corn-based U.S. ethanol industry.

It is a time-honored campaign strategy: if energy prices are scaring the electorate, promise to develop alternative fuels. In the summer of 1979, President Jimmy Carter promised that with his energy plan, the United States would “never use more foreign oil than we did in 1977.” A year later, he signed the Biomass Energy and Alcohol Fuels Act into law, allocating $600 million to the production of fuels from agricultural crops, agricultural wastes and residues, wood and wood wastes and residues, animal wastes, municipal wastes, and aquatic plants. Much of the money was devoted to research on cellulosic ethanol, currently the most promising biofuel in development (see “The Price of Biofuels,”).

In any case, Carter lost the election to Ronald Reagan in a landslide, the price of oil declined to levels tolerable to the electorate, and just as he pledged, President Reagan slashed the budget. By August 1981, funding for Carter’s Biomass Act had been reduced to $460 million. The money soon dried up.

In the August/September 1979 issue of Technology Review, Philip Shabecoff, then a writer for the New York Times, argued in “The Current Politics of ‘Synfuels’ ” that politics should not diminish the importance of developing synthetic fuels, which include clean-burning coal and crude oil made from oil shale. Shabecoff wrote:

President Carter’s call for a “fast track” development of synthetic fuels was, in large measure, a response to a political problem–his own waning prospects for re-election in 1980. Politics, therefore, is likely to determine just how far the “synfuels” program goes.

The ninety-sixth Congress has been notably timid and unproductive, given to darting off in a new direction with every shift of political current like a school of nervous fish. When the gasoline lines started forming early in the summer, Congress feverishly embraced synthetic fuels as an answer to take home to angry constituents. But when the lines disappeared in most of the country, the Congressional will to deal boldly with the energy crisis began to dissolve into the irresolute bickering that has characterized the legislative branch over the past couple of years.

If the synthetic fuels program is to move forward at the pace outlined by the President, it must be launched with the momentum of full national consensus. The technology to carry such a program to fruition exists, the policy makers believe. And there is little argument with the national security rationale for relieving dependence on foreign sources of energy. …

Economic issues are likely to form a particularly difficult political barrier to Mr. Carter’s program. For one thing, the cost of developing the synthetics program is going to be high. According to an analysis by the Rand Corporation, the crash program envisioned by the President could easily cost twice the $88 billion price tag he put on it. The capital absorbed by the program will drain funds that would otherwise be invested in different sectors of the economy. …

It will be some time before the intrinsic merits of competing energy strategies can be fully weighed. But a political decision will be made soon. The future of synthetic fuel development will probably be determined by how the issue is treated by the candidates for office in 1980–and how the voters respond.