Why this oil price collapse could be different
by Michael Webber
Unlike the 1980s, electricity prices should hold firm, but we should not be complacent about fixing our energy policy.
The recent oil price collapse seems like a replay of a bad 1980s movie that we’ve seen before. If we are not careful, we’ll be doomed to make the same mistakes we made last time, allowing our domestic oil and gas producers to wither, watching energy imports soar, prematurely stunting the growth of alternative fuel sources, and tossing conservation and efficiency by the wayside. If we are smart we’ll seize this opportunity to double-down on good energy policies and support all of our domestic energy producers so that we’re prepared for the next time oil prices spike.
After the energy crises of the 1970s, there was a brief resurgence of domestic energy production through the mid-1980s. Production grew, wages increased, profits soared, and the Rolls Royce dealership in Midland, Texas enjoyed a brisk business. But eventually, with OPEC in disarray, Saudi Arabia made the decision to keep its production high to reclaim lost market share, causing global oil prices to plummet in the span of just a few weeks. Sound familiar?
The scars from the 1970s and 1980s run deep. Competing in a vibrant global market, domestic U.S. oil companies were gutted by cheaper producers around the world. Our production shrank while consumption increased. Imported oil—much of it from countries whose foreign policy goals do not align with ours—filled in the gap. Our domestic oil and gas operators were in the doldrums for over a decade, with a shrinking, aging workforce and declining production.
Oil producers weren’t the only victims. Renewable energy technologies and a cultural mindset of conservation and efficiency got lost too. President Reagan famously removed the solar panels from the roof of the White House, speed limits were increased nationwide, fuel economy standards stagnated, road taxes froze, SUVs grew in popularity, and attitudes about saving energy went the way of bell bottoms. Experimental wind farms and solar panel development slowed down and national R&D funding for energy dropped from a high of $8 billion annually to less than $2 billion.