Few of the many encomiums to the late Jimmy Carter mentioned the domestic issue he regarded most crucial. As he put it a couple years after his presidential term ended: “[T]here was never a moment when I did not consider the creation of a national energy policy equal in importance to any other goal.”
He was determined especially to prevent another energy crisis like the one that had battered the country in 1973 and 1974.
Carter’s efforts on energy, however, produced more irony than achievement. By 1980, he created what his press office called a “virtually complete framework for a national energy policy.” But practically everything he did was undone within a decade, and the actions that proved most enduring produced effects opposite from what he intended.
Carter was a neo-Malthusian, who believed incorrectly that America’s energy crisis arose because our supplies of oil and natural gas (supplies in most of the world, in fact) were rapidly running out. A catastrophe loomed; our machines would grind to a halt and our debt to Middle Eastern oil sheiks (who would have the remaining oil) would balloon.
On the surface, that seemed to be the lesson of the energy crisis. But in reality, the crisis stemmed mainly from US government policy, which controlled oil and natural gas prices, keeping them too low, discouraging production and encouraging over-consumption. The federal government also allotted oil supplies, creating market chaos.
Although the energy crisis had hit most Americans, Carter believed people were not taking the problem seriously enough. They needed to be ready to make sacrifices, he claimed, guided by the visible hand of government.
His program was vast and complicated but had three primary goals: in the short term, switch from scarce natural gas and oil to America’s abundant coal for electric power generation and industrial process heating; embark on a program of massive conservation; and develop and employ alternative energy technologies.
Most of his proposals became law. In 1978, for example, Congress passed the Powerplant and Industrial Fuel Use Act which prohibited any new powerplant or industrial boiler from using natural gas or oil. Coal or renewables (and possibly nuclear) were the fuels permitted.
Carter’s most important conservation decisions were to decontrol partly the price of natural gas and decontrol completely the price of oil—the latter a step he had resisted at first. But finally, in 1979 he was convinced that decontrol would raise the cost of oil and oil products (such as gasoline) dramatically, leading consumers to conserve.
For renewables, he set a goal that by the year 2000, twenty percent of America’s annual energy consumption would be solar. He was especially taken with the idea that solar was ready to replace oil and natural gas in home water heating. To that end, his first major energy bill provided tax credits for consumers who installed solar hot water systems in their homes. In the process, he hoped to stimulate a solar hot water industry.
Undoubtedly his most ambitious alternative energy program, however, was to turn enormous quantities of American coal into a synthetic substitute for oil and gas, replacing the equivalent of two million barrels of oil per day. The Synthetic Fuels Corporation (SFC) bill, passed in 1980, would have appropriated $88 billion (over $336 billion in 2024 inflation adjusted dollars) if it was ever completed.
What happened to this vast energy program?
Most of it was dismantled just a few years after its inception.
The Powerplant Act was scrapped in the mid-1980s when it became clear after the partial decontrol of natural gas prices that there was a great deal more of it than Carter ever imagined.
Carter’s solar policies, rather than launching solar, devastated the nascent solar industry.
Twice.
After he announced his plans in early 1977 to provide incentives to consumers for solar hot water heating, an industry geared up to meet consumer demand. But as Congress dithered over the legislation, the incentives did not come into effect until the fall of 1978. In the meantime, many solar start-ups went bankrupt.
The second time was in the mid-1980s. Natural gas was abundant and cheap, so solar became uncompetitive commercially. The solar incentives were phasing out by design, but it seemed pointless to the Reagan administration to renew them. By the mid 1980s, more solar hot water systems were being removed from homes than installed in them.
The SFC was created in 1980, but in April 1986, it was shuttered. With oil and gas supplies abundant in the wake of price decontrol, the rationale for spending billions on synfuels disappeared—and so did the synfuels agenda.
The decontrol of oil prices started by Carter and finished by Ronald Reagan was the most consequential step Carter took. But it did not lead to higher prices for oil and oil products, particularly gasoline. In fact, in the 1980s the price of oil had collapsed; in inflation- adjusted terms, the price of gasoline was lower than it had been in early 1970s, before the energy crisis.
It would go lower still. In the 1990s, the price hit rock bottom at an inflation-adjusted price that was lower than at any time post-World War II. In other words, the decontrol of prices encouraged increases in supply that Carter didn’t believe existed, rather than the decrease in demand Carter had counted on.
Perhaps the greatest irony of Carter’s energy policy was that he presided over an energy crisis in 1979-1980 that was in many ways worse than the one in 1973. His policies had done nothing to forestall it.
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