Obama’s Energy Record: Markets Beat Government

Washington, D.C. — As the Obama administration enters its final year in Washington, it is worth looking at what has changed in the U.S. energy arena since the administration began in 2009. A lot is different, and mostly positive. How much credit or blame belongs to White House initiatives and government policy is arguable. I argue that government policy was irrelevant.

First, most important, the days of the “energy crisis” are thankfully over. After 40 years of hand-wringing, political posturing, bloviating, hubris, and hunkering down, the energy landscape in the U.S. looks entirely benign, even bullish. The U.S. is once again an oil colossus and the Malthusians of M. King Hubbert and the “peak oil” hysteria vanquished.

That’s amazing given the apocalyptic rhetoric that dominated the past four decades. Crude oil was selling for over $100/bbl not long ago. Today, under $40/bbl. There are lots of reasons, but the most important is directional drilling and hydraulic fracturing technologies. Washington’s fingerprint on those developments is faint indeed.

Federal research funding contributed to the fracking revolution. But Washington, and particularly the Obama administration, whose time in power has largely coincided with the rise of fracking, had nothing to do with the development end of the R&D. Indeed, the administration has seemed conflicted about fracking, the best thing in U.S. energy since Spindletop.

In addition to revolutionizing U.S. oil production, fracking produced a natural gas revolution, as methane became the top generating fuel for electric power. Again, Washington had little to do with this. It was driven by the oil-and-gas industry and by private electric utilities seeking the lowest cost fuels (carbon dioxide emissions reductions came free).

The Obama administration proclaimed an “all of the above” energy strategy when it came to generating electricity and responding to carbon dioxide emissions. That was political rhetoric, a response to Republican complaints about an administration “war against coal.” Only the most credulous observers of the administration’s actions could believe it was a firm policy statement.

There is an administration war against coal, whether Obama recognized it or not. But the war, waged primarily outside the White House, turns out to be irrelevant given market forces that fracking released against coal-fired electricity. The lesson is that government is less able to manipulate market forces than either its supporters or it opponents believe. Coal will continue to have a large, but diminishing, role in electric generation in the years ahead. Gas will grow. Government will be on the sidelines.

Obama acolytes will claim his “Clean Power Plan” as a lasting legacy. Not so fast. It’s a bold executive move that challenges the limits of the 1990 Clean Air Act Amendments, as well as the muscle of executive-only authority. Will it withstand judicial review? Uncertain. Will it be implementable if the courts approve it? Equally uncertain.

Renewables, the magical formula of many environmental activists, grew enormously last year, but from a tiny base, meaning that the impact has been miniscule. That’s except for California and Hawaii, where the “duck curve” continues to confound. Absent economical, large-scale electric storage — it’s not here yet, despite recent hyperbole – wind and solar will remain niche generation. Ironically, large-scale storage could also benefit nukes, which do not follow load.

During the Obama administration, the Department of Energy continued to spend large amounts of our taxes on feckless endeavors. That’s not a slap at the administration. DOE has been a champion of worthless spending on failed technologies and dead ends since its creation in 1977. Congress has been complicit.

While the Solyndra photovoltaic fiasco was probably the poster child for Obama’s DOE dysfunction, there are plenty earlier examples from Republicans administrations. Do you remember the Clinch River Breeder Reactor? Solvent Refined Coal 1? Solvent Refined Coal 2?

Then there is the Obama administration’s record on nuclear power. It’s right up there with George W. Bush’s nuclear record. As in, lots of talk. Little action. The nuclear industry, hitching the same ride on air pollution issues that it tried in the 1980s and 1990s, failed to persuade the administration – or a Congress bound up in ideological straitjackets – of its case. Is there a message here for nuclear lobbyists?

Will the final year of the Obama administration address any significant energy issues? Unlikely, but that’s a good thing. The U.S. energy situation is far better today than it was when Barack Obama took office in January 2009. It had very little to do with him. Or Congress. Or anyone else in Washington. Whatever else it did that was bad, political gridlock has been very, very good for energy, letting markets work.