The Split Level Energy Crisis

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Southern Exposure

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This article originally appeared in Southern Exposure Vol. 1 No. 2, "Special Report from Appalachia." Find more from that issue here.

The “energy crisis” is split level. Over the next 20 years or so it looks like a crisis of price. As fossil fuels become distant, more difficult to get at, they will cost more. But by the end of the century we will begin to run low on fuel supplies, and if the demand for them increase throughout the world, as it is expected to do, supplies will become scarce, perhaps by the middle of the next century. This sort of prediction is based on reports by geologists, many of them employed by major energy companies which have a stake in the game. The reports are admittedly sketchy and often not much more than educated guesses.

The “energy crisis” that has been so vigorously publicized by the petroleum and utility industries over the last few years was foreseen by the oil companies more than a decade ago .At that time, the major oil companies took steps to plan for it. 

In the mid-1950’s, after the Suez crisis, the Anglo-American petroleum firms which dominate the Middle Eastern oil fields and control two-thirds of the world’s oil, began to diversify their holdings. They saw that when the concessions ran out, the oil might be nationalized or, at the very least, the Arab countries would want more money and a share of the business. And in certain places there was a good chance the governments might take over the oil industries before the concessions ran out. 

The major oil companies began to diversify their operations. Throughout the 1960’s, they searched for oil in new parts of the world in the North Sea, in the shallow seas of southeast Asia from Indonesia to Australia, and throughout the Arctic, in Alaska and Canada. 

At the same time, some of these corporations turned their attention back to the North American continent, where they took a position in coal and uranium. Oil companies began to develop real estate and got involved in manufacturing nuclear power plants. 

As a result, by 1970 oil companies accounted for more than a quarter of the production in both the coal and uranium industries. Jersey Standard had acquired the largest coal reserves in the nation—some 6 million tons, and the oil industry as a whole was estimated to control 80% of all uranium reserves. In addition, oil companies had under lease vast quantities of water in the water-scarce mountain states. 

The government helped along this reorganization of the petroleum industry into an energy industry. The Internal Revenue Service issued private rulings that allowed oil companies to avoid taxes on profits used to buy other mining firms. Committees of Congress nominally involved in assuring competition and rational minerals policies ignored the industrial reorganization. 

By 1970 the major oil corporations had achieved a reorganization which gave them control over other fossil fuels, particularly coal, which might compete with oil and gas. Still the government could disrupt their energy policies because it had authority to set the price of natural gas at the well head. The oil companies, which produce most of the natural gas, had opposed government regulation of gas prices since the mid-1950’s. With the advent of the Nixon administration, they renewed the campaign to raise the price and to remove the Federal Power Commission’s authority to set prices. They insisted that there was not sufficient incentive to drill for gas at such low prices as then existed, and threatened a shortage if the prices were not increased. The Federal Power Commission adopted their arguments, raising gas prices in 1971, and again in the spring of 1973. At the same time, the commission argued along with the administration that gas prices should be deregulated. Whether or not the price of gas is freed from FPC regulation, prices have more than doubled in the last three years. As a practical matter the industry’s goal has been achieved. 

The major oil companies are thus in a position to develop energy supplies at their own pace, if need be, exhausting one fuel after another.


Changing Consumption Patterns

In Washington there seems to be a rather generally held view that the energy crisis is to be taken seriously, and public policy should be directed towards instituting certain broad gauge “conservation” measures which could sharply reduce consumption over the next 10 or 20 years. Meanwhile, the government should encourage through an expensive research program development of alternative, non-fossil fuel energy systems, such as wide-scale application of solar energy systems, development of tidal, geothermal, and fusion power. But, while this view is widely held, there is little motion, probably because the politics seem too radical and involve reorganization of the economy with a de-emphasis on the oil and auto industries. 

One fairly simply and convenient way to reduce both the consumption of energy and to begin the process of changing around the economy would be for the central government, or state and local governments, to implement schemes that are sketched in different government reports, including one by Nixon’s own Office of Emergency Preparedness. 

Transportation now accounts for 25% of total energy consumption and more than 50% of petroleum use. A first step might be to limit either the manufacture or use of automobiles powered by V-8 engines. Autos with V-8 engines now account for 84% of all car sales. These engines, averaging 292 horsepower per car, not only run the vehicle but also provide the power for automatic transmission (on 9 out of 10 cars), power steering, radio, and air conditioning (two out of every three cars). A reduction in engine size and associated gadgets would obviously sharply reduce the amounts of petroleum used by automobiles. Another step would be to eliminate automobiles from metropolitan areas, replacing them with mass transit schemes and with bikes. One study made by the Department of Transportation shows that the average automobile trip in a city is five miles at 12 miles an hour. That trip could be undertaken with considerable more efficiency, and no pollution, if it were by bike.

It is less expensive, and more efficient, to ship freight by train rather than truck. Also less energy is used. Expanding airline operations are consuming a larger and larger amount of fuel. Curbing the growth of the airline industry would be an important step in reducing energy consumption. That might be accomplished on a local level by preventing the expansion of airports, and by limiting the number of flights permitted to land each day. 

The Office of Emergency Preparedness, in its study on energy conservation, proposes new, stiffer building codes that require improved insulation. The OEP report, along with a special study by the National Science Foundation and NASA, suggest that solar home heating systems can be introduced fairly rapidly, especially in the southern and southwestern parts of the country. The conclusions of these reports agree with the general view that, along with energy conservation measures, the nation should rapidly develop solar power, both through research and development funds that will encourage planners and architects to make designs of solar houses and buildings, but also towards adoption of building codes that gradually will push builders and local governments towards solar energy.

Essentially, then, either on the federal or local level, government would take up an energy policy that would place fairly strict and growing limitations on industries that depend on fossil fuels and the motor vehicle, thereby forcing a gradual change in the economy. We would move away from oil and coal, cars and trucks, to a solar energy economy, where we would make much shrewder use of the sun, a source of energy that is available to everyone free, and towards other methods of transportation, the bike, mass transit, return to the water—canals, intercoastal waterways—for hauling freight. Travel would not be so common, nor so fast. And life probably would slow down. 


Administering Energy Resources

The major US energy resources which now are being developed, or shortly will be developed, are either owned by the state or federal governments. In the case of oil and natural gas the major new deposits lie under the sea on the outer continental shelf. Coal and uranium deposits are on public lands in the western mountain states, as is the case with oil shale. The water and water supply systems necessary to mine the coal, and to manufacture it into gas, are in the public domain. State and federal agencies have allowed the bureaus in charge of these properties to become instrumentalities of the industries themselves. Thus, the Interior Department has allowed production of oil in offshore waters, controlled by the federal government, to be dictated by state regulatory commissions which in the past have been industry-dominated bodies. There has been little effort to plan development of coal resources, except to ask the companies to come forward with one or another of their own schemes for exploitation.

Although the US Geological Survey is supposedly an agency of the US government, it answers largely to the petroleum companies which provide it with detailed analysis of the oil and gas reserves in the public domains. The Geological Survey keeps those reserve statistics private in order to protect the interests of the competing companies. The Federal Power Commission follows the lead of the Geological Survey and the industry, refusing to make its own independent estimates of gas reserves. Congressional committees with a purview over energy resources spend their time attempting to work out technical difficulties which permit the industries to get on with their work.

One immediate, basic step required before any further action can be taken on energy would be to establish independent agencies within the federal government to oversee and administer natural resources. The most important part of this process would be to conduct independent analyses of the nation’s energy resources. Even at this writing, in the late spring of 1973, with the energy crisis in full swing, there seems to be relatively little interest either within the government or within Congress towards making such an analysis. Yet, it is nearly impossible to undertake any sort of rational plan, whether on a national or regional basis, without a more thorough understanding of the extent of our natural resources. 

A second step would be to reorganize energy resources, replacing the private government of energy with truly public institutions. I believe that a move in this direction should be aimed at building the basis for regional political economies. A reorganization of energy resources might include the following possibilities. The Congress could create a federal energy board, which could supervise overall energy policy for the nation. The board would provide a sort of umbrella for regional plans, which in turn would carry forward different schemes. On an international level, the energy board could negotiate and make purchases of oil, gas and other fuels in world markets. It might on its own, or in conjunction with a consortia of regions, organize joint ventures with foreign countries.

Under the broad aegis of the government’s energy board, certain energy regions within the United States could be created. Within each region public elected agencies would establish economic plans, binding on the development of that region. These plans would necessarily determine how much of a region’s energy resources were required to execute the overall plan. Such a planning agency could determine energy surplus or deficiency, then arrange to purchase or sell supplies through the national board. 

The idea of a regional energy agency would be to develop binding economic plans for the area. For example, in the northeastern part of the country, such a regional agency could weigh the necessity for developing offshore oil and gas in terms of the fuels’ end use. If petroleum were to be refined into gasoline, then the analysis and decision might take into account air polluting effects of motor vehicles, alternate schemes for mass transit, limiting the size of auto engines, how freight is hauled, impact of airport expansion, and so forth. If the petroleum were to be used principally in the manufacture of electricity and the electricity were to go towards lighting, heating and air conditioning a large new office building complex in New York City (say the World Trade Towers), the regional plan would determine whether that building complex were indeed necessary and what useful purpose its construction and operation would serve. 

Obviously these regional energy agencies would need to become a part, if not the central point, of organizing and administering a rational, self-sufficient political economy.

As the resources were developed according to the regional plan, they could be fed through existing market installations of industry—investor-owned utilities, refineries, gas stations, pipeline systems, gasification plants, whatever—all of whose assets would be expropriated by the regional plan and managed by it for the general welfare. 

The resources would be administered under the theory that every citizen has equal rights to energy resources, for they are shared by all, and that it would be the responsibility of the plan to see that every home was provided with free electricity, gas, etc.

Energy resources would be developed and used in accordance with plans made by elected representatives to the agency. They would act in a democratic manner.

Although the schemes might well differ from region to region, it would be hoped that every citizen would spend some part of the year in helping to operate the energy economy. And that as a result, actual development of local plans would actually be made and carried forward by the townspeople or in neighborhoods. 

In this way the energy crisis might not only lead to the beginnings of a reorganization of the political economy on regional patterns, but also contribute to a reorganization of work, and a rebirth of politics on the local level.

Fundamental to this scheme would be the understanding that nobody owns natural resources. They ought properly to be shared by all in a relationship of trust.