Pratt on Hakes, 'A Declaration of Energy Independence: How Freedom from Foreign Oil Can Improve National Security, Our Economy, and the Environment'

Jay E. Hakes. A Declaration of Energy Independence: How Freedom from Foreign Oil Can Improve National Security, Our Economy, and the Environment. New York: J. Wiley, 2008. iv + 252 pp. $27.95 (cloth), ISBN 978-0-470-26763-9.

Reviewed by Joe Pratt
Published on H-Energy (May, 2010)
Commissioned by Joseph A. Stromberg

The Politics of U.S. Energy Policy

The cycle of boom and bust in oil prices that began in the early 1970s continues to shape the global energy economy, and there are valuable insights to be gained from a look back at the policy responses to the energy crises of the years from 1970 to the mid-1980s. Jay Hakes’s new book is written to help a broad audience understand the historical context for the ongoing debate over long-term energy policies in the United States. Hakes’s background gives him useful insights into energy politics and policies; he was head of the Energy Information Administration in the Department of Energy (DOE) in the 1990s and currently is head of the Jimmy Carter Presidential Library and Museum. Although specialists might come away from his book wishing for more detail on various topics, Hakes provides food for thought for anyone concerned about our nation’s energy past and future.

Making good use of documents from presidential libraries, Hakes marches through events from the late 1960s through the recent past in search of explanations for our nation’s failure to move toward the elusive goal of greater energy independence. After briefly discussing how the nation became so dependent on imported oil after World War II, he provides a more detailed analysis of the energy policy responses to the disruptions caused by the energy crises of the 1970s. Much of his book examines the giant gap in this era between the presidential proposals for achieving greater energy independence and the legislation passed. Although Hakes acknowledges that political compromises often undermined the passage of a coherent, long-term energy policy, he argues that some of the policies that emerged did move the Unites States toward less dependence on imported oil. He concludes with a long section on the problems of politics before discussing seven “economically and politically viable paths to energy independence” (p. 143).

The title of the book, A Declaration of Energy Independence, is misleading. Hakes is concerned primarily not with energy independence, but with policies that stopped the growth of oil imports and then reduced them to levels that allowed policymakers to manage their impact on the nation’s economic, environmental, and national security. At the heart of his book is the concept of “politically viable” energy solutions. Hakes takes an optimistic view of energy politics, which he depicts as delivering useful compromises in energy policies in 1975 (the omnibus energy bill signed by President Ford), 1978-80 (incentives for renewable energy, restrictions on fossil fuel use by utilities, President Carter’s synfuels package), and 2007 (the passage of legislation extending and raising the corporate average fuel economy program, or CAFE, standards and new incentives for alternatives to oil). He compares the legislative process to the production of sausage, noting that it is often difficult to appreciate the final product if you have watched it being produced. But he nonetheless remains optimistic about the American political system’s capacity to muddle through crises, relying on often unwieldy political compromises to find acceptable solutions.

The reader should ask a simple question: on the complex issues encompassed by energy/environment/transportation/economic policies, does Hakes's data support his optimism? Whereas Hakes sees the glass of effective energy policies as half full, most others have seen it as more than half empty. Some would argue that the glass itself has been shattered by political partisanship and the lack of a long-term perspective in a decision-making system marked by divided authority and a crisis-oriented approach to long-term problems needing more than ad hoc, piecemeal, short-term “solutions.”

Hakes stands his ground in an interesting discussion of what he calls the “forgotten victory” of the period from about 1975 to the early 1980s. During the Ford and Carter administrations, he sees important steps toward energy independence in the form of the original CAFE standards, the creation and gradual construction of the Strategic Petroleum Reserve, a variety of tax incentives for solar energy and other renewables, restrictions on the use of oil and natural gas in the generation of electricity, and even the creation of the short-lived synthetic fuels program in the early 1980s. He argues that several of these initiatives ultimately created a policy framework within which the nation made substantial progress in the most obvious measure of enhanced energy independence, the decline in imported oil as a percentage of U.S. energy consumption. He has no qualms about locating the reversal of this victory in the Reagan administration’s commitment to substituting a faith in the deregulated, freer markets for the energy policies passed from 1975 through 1980.     

Hakes shows that energy policies generally reflected a mass of competing interests and programs, and emerged through a short-sighted political process that often reached compromises by arguing for years and then giving something to everyone in order to cobble together a majority vote. Sausage-making indeed. His depiction of the “politically viable” policies ultimately passed reveals no pattern of continuity in the content of policy. Indeed, the presidents from Richard Nixon to Ronald Reagan all had markedly different ideas of the best path toward energy independence, so even the presidential visions that set the agenda of debate changed every four years.

This need not mean that the policy results were doomed to failure. As the founding fathers desired, compromise solutions have been the hallmark of American politics and public policy. But it is a long step from the early success of the CAFE standards to the subsequent exploitation of the loopholes for SUVs; it is a long step from President Carter’s initial emphasis on conservation in 1977 to the passage of the legislation creating the Synthetic Fuels Corporation in 1980. The burden of proof is on the author to show that these were the best available compromises, and that they laid the groundwork for a victory in the battle for effective energy policies.

Hakes needs more data, for example, to support his analysis of a critical issue underlying his entire argument, the interaction of energy policies and oil prices. Since the 1980s, much of the debate on this vital issue has been dominated by conservative economists who assume that government policies will distort free markets, postponing the natural corrections of markets unfettered by regulation. One the issue of oil price regulations in the 1970s, Hakes agrees that the impulse to fight inflation by holding domestic oil prices low did have perverse effects on the adjustment to a much higher price regime in the international oil economy. But he breaks ranks with the “free market” economists on the impact of the CAFE standards, which he sees as playing an important role in reducing gasoline consumption. In so doing, he raises questions in need of answers: What are the limits of public policy in the Unites States in encouraging conservation? How can conservation policies be made “market conforming” so that they reinforce price signals? Hakes revives another critical discussion when he extols the virtues of the Strategic Petroleum Reserve in protecting the nation against future disruptions of oil supplies. Here he enters a relatively unexplored analytic territory that could be called “market redefining regulations.” How does government policy redefine the boundaries of traditional markets in response to pressing new societal concerns such as the possible economic disruptions from future embargoes of oil to the United States? Similar questions face Hakes at every turn when he grapples with the appropriate responses to climate change. How can a government regulation shape market forces to absorb the cost of new demands with highly uncertain long-term costs and benefits?        

Readers who approach this book with an open mind will reread passages in the chapter on the “forgotten victory” looking for data to support Hakes’s overall argument. It is there in a series of short discussions about the impact of numerous policies on the incremental demand for oil and on the public’s attitude about energy consumption. I began reading this section as a skeptic, but I came away willing to grant Hakes the benefit of the doubt on the big question of the impact of the energy policies of the late 1970s on energy use. Obviously, policy and price both shape energy consumption, but Hakes reminds us that public policies can encourage the conservation of oil and encourage the growth of alternatives to foreign oil, at least if such policies reinforce market signals and are left in place long enough to alter patterns of consumer behavior.

This did not happen in the 1980s, and a closer look at why it did not happen provides important reminders of the limits of energy independence in the United States and the global economy. The very high oil prices sparked by the Iranian revolution in the late 1970s rippled through the global economy in ways not easily managed by government policies in the major oil-consuming nations. One important and generally neglected impact of this price surge was high inflation, which increased construction costs and quickly undermined the building of the giant, expensive energy projects called for in the name of energy independence. When world demand for oil weakened and oil prices grew softer, these projects bit the dust. Even more important for Hakes’s argument was the impact of higher prices within OPEC. As global oil demand weakened, Saudi Arabia grew tired of trying to defend OPEC prices through production cuts, and it reasserted authority over oil production and prices by opening its valves and flooding a weak global market for oil with millions of barrels of relatively inexpensive oil. Most observers would agree that this episode, more than a reversion to “free market” policies under Reagan, signaled the end of the forgotten victory of declining oil imports in the United States.

A fuller analysis of this pivotal series of events would have forced Hakes to examine more thoroughly the intersection of domestic policies and global pricing. The increase in U.S. oil imports after the mid-1980s was not just a case of free market ideology trumping public policy within the United States. It also was a case of the long-term Saudi policy of moderating oil prices to undermine the growth of alternatives to oil overwhelming the energy policies designed to reduce oil imports in the United States. This speaks more to the long-term vulnerability of the United States to global political/economic forces beyond its control than to the weaknesses of U.S. energy policy. Indeed, one lesson of the oil depression of mid-1980s is that more effective long-term energy policies aimed at limiting the nation’s dependence on foreign oil are essential in allowing the nation to gain greater control of its own destiny in the closely related areas of energy and national security.

Hakes presents an extended and interesting conclusion that lays out a seven-point plan of action to build such a set of energy, economic, and environmental policies. He calls for a much larger Strategic Petroleum Reserve, cars that do not rely so heavily on gasoline for fuel, tax incentives for bringing alternative fuels to market, greater use of electricity, energy taxes designed to persuade consumers to change their energy consumption habits, and strong ongoing measures to “make energy conservation a patriotic duty” (p. 203). He also puts forward the need to throw some “Hail Mary’s” in pushing through creative approaches with the potential for changing the debate on energy. Most of this program should sound somewhat familiar to those of us old enough to remember President Carter’s original energy proposals and his call to make energy independence the “moral equivalent of war” in 1977.

Why should we agree with Hakes that Carter-like, conservation-focused energy policies, which never made it through Congress in the 1970s, are somehow appropriate for the present? Hakes suggests two answers: Congress, not Carter, was misguided in the earlier period, and the growing world demand for oil along with the growing decline of U.S. oil fields makes conservation even more important today than it was thirty years ago.

Even if Hakes is correct, the problems of politics that so plagued all the presidents from Nixon to Reagan in their efforts to fashion effective energy policies remain. Hakes offers lessons for American citizens and perhaps for President Obama on ways to pass public policies that can lessen our dependence on imported oil while also encouraging economic growth and greater environmental quality. He calls for stronger leadership and an appeal to patriotism. Many voters in November of 2008 seemed to make the leap of faith that Barack Obama embodies a new approach to politics and a new capacity to bring the nation together around a consensus that government must do better than in the past. The current debate on health policy does not bode well for the emergence of an effective political compromise on energy/environmental issues. We shall see.  

Hakes offers insights into our energy problems that should be useful to leaders and concerned citizens alike. He leaves the reader with a possible antidote to political cynicism--the sense that through trial and error our political system can deliver a variety of policies that together have the capacity to ease the impact of our dependence on imported oil as we seek long-term solutions. The inelegant art of “muddling through” toward energy “manageability,” not energy independence, is the path presented by this book. Muddling through is a well-worn path in American politics. It ultimately relies on the industrial, financial, and technological strengths of our economy and our people to find a way over, around, or through the most serious of problems. As we stumble along this path in search of sustainable energy policies, Hakes’s book provides much-needed historical context, including useful examples of what has and has not worked in the past. 

Printable Version: http://www.h-net.org/reviews/showpdf.php?id=23594

Citation: Joe Pratt. Review of Hakes, Jay E., A Declaration of Energy Independence: How Freedom from Foreign Oil Can Improve National Security, Our Economy, and the Environment. H-Energy, H-Net Reviews. May, 2010.
URL: http://www.h-net.org/reviews/showrev.php?id=23594