After the American Century
Romney and the
Republicans propose a return to the 1970s energy policy. He is the spokesman
for the old fossil fuel energy regime, intent on maintaining its technological momentum. He
would increase the supply of gas and oil, de-fund energy savings programs, leave
innovation choices to the private sector and let alternative energies fend for
themselves in the marketplace.
The Romney energy
plan, “Believe in America,” (2012) does not deny global warming, as George Bush
did for much of his presidency, but completely ignores it.
All the emphasis in the Romney plan
falls on increasing production, and Time
Magazine concluded that the plan could be summarized as “drill, baby
drill.” Like Gerald Ford and Ronald Reagan, Romney promises energy independence
through increased domestic production. While this idea proved a chimera for
Nixon, Ford, and Reagan, a reconceived “North American Energy Independence”
that includes Mexico and Canada (without actually asking them) seems more plausible in 2012. US oil imports
have been declining during the Obama years, from roughly 60 percent to 40% of
total consumption.Nevertheless, oil prices are still high. Most voters do not seem to understand that the price of oil does not fall if US imports of oil decline. The price of oil is a world-wide commodity price that is driven up by surging global demand. At the second debate on October 17 Romney suggested rpeatedly that Obama was somehow responsible for the high price of oil, but as a Harvard Business School graduate, one assumes that he knows this is sheer nonsense.
Romeny was attempting to make an issue out of oil drilling during the past four years. in fact, the Obama
Administration has opened more areas to on/shore and offshore drilling, and Romney would
expand this further. Domestic production has also increased due to new drilling
techniques that have revived old oil fields and opened up new ones, notably for
shale oil. During the past five years Pennsylvania and North Dakota have
enjoyed an economic boom that is decried by environmental groups because it
relies on hydraulic fracturing, a controversial technique that when used in
Texas, Appalachia, and the Great Plains suddenly cut natural gas prices in half
from 2008 to 2009. The Energy Information Administration has calculated that
the US may eliminate imports of natural gas by 2020. The same agency
estimates that increased domestic oil production could reduce imports to 38% of
the total, with much of the remaining imported oil coming from Canada and
Mexico. Romney’s plan is to further increase domestic oil extraction by opening
up more offshore areas and federal lands to achieve energy independence by 2020.
The Romney plan, which seems to have been written by the oil companies, is far less visionary than Richard Nixon's approach to the energy problem. Back in 1971, before the energy crisis had really become a national issue, and well before there were any lines at the gas pumps, Nixon sent this message to Congress:
“For most of our history, a plentiful supply of energy is
something the American people have taken very much for granted. In the past
twenty years alone, we have been able to double our consumption of energy
without exhausting the supply. But the assumption that sufficient energy will
always be readily available has been brought sharply into question within the
last year. The brownouts that have affected some areas of our country, the
possible shortages of fuel that were threatened last fall, the sharp increases
in certain fuel prices and our growing awareness of the environmental
consequences of energy production have all demonstrated that we cannot take our
energy supply for granted any longer.”
It is hard to imagine Romney sending this message, for he seems to think it is about 1965. He and the Republicans illustrate the economic
theory of path dependence, in which a corporation (or a nation) clings to a
technological system that is becoming uncompetitive. In the 1970s the
typewriter manufacturers did not make the transition to personal computers. In
the 1890s the old high wheel bicycle makers went bankrupt because they did not
make the transition to low slung safety bikes. Fundamental innovations almost
always seem to come from outside the established market leaders, who suffer
from “path dependency.” Established firms are too committed to a particular
conception of what their product is. This commitment is embedded in its
manufacturing process and endemic in the thinking of its managers. When a major
innovation appears, a leading firm often studies the technology but remains
committed to its product and production system. Indeed, established industries
typically redouble their commitment to the traditional product that has made
them the market leader. They make incremental improvements in manufacturing and
yet lose market share to the invader.
Likewise,
beginning in the middle 1970s, for more than fifteen years Detroit’s automakers
failed to understand and adopt Japanese lean production and lost their position
as the world’s leaders. Something similar has been occurring in the energy
field. While Europe (led by Germany) and China have invested heavily in
alternative energies, American utilities have moved more slowly to adopt solar
and wind power, or to develop decentralized smart grids. Obama and his
Department of Energy, led by Steven Chu, understand this. But Romney, like
Detroit’s CEOs in the 1980s, or the executives who ran the typewriter
manufacturers into the ground in the 1960s, remains wedded to a technological
system that is already being replaced. Romney has proclaimed himself to be the
most competent to steer the American economy into a prosperous future, but at
least in the energy field his eyes remained fixed on the past.
