Revisiting (Not Revising) History: The Reagan-Bush Energy Policy

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The new chair of the House Committee on Energy and Commerce waxes fondly about the Gipper. Oh boy.

February 6th would have been President Reagan's 100th birthday. Fred Upton (R-MI) used the occasion to reflect on the lessons we can learn from the energy policies of the president affectionately known as the Gipper. Legend has it that Reagan acquired that nickname for his 1940 portrayal of George "win just one for the Gipper" Gipp, the famed Notre Dame football player from the Upper Peninsula. Another bit of the Reagan legend -- a bit that the good representative from Michigan's sixth district and chair of the House Energy and Commerce Committee is touting -- is that the 40th president's energy policies were a huge success. Let's take a look.

Upton's Reagan Cup Is More Than Half Full

In Upton's view, many of our energy problems would be solved if we would just adopt the policies of the Reagan administration. The Michigan congressman wrote recently in the Detroit News:

"Reagan inherited all the energy policy mistakes of the 1970s -- a decade in which every energy challenge was met with ill-advised federal programs and mandates. ... Just one week after his inauguration in January 1981, Reagan issued an Executive Order sweeping away this market interference. Lamenting that 'restrictive price controls have held U.S. oil production below its potential,' Reagan said that eliminating them 'is a positive first step towards a balanced energy program.' Within a few years, domestic oil production went up -- and prices went down. Affordable energy helped usher in a quarter century of phenomenal economic growth."

Contrasting his praise of Reagan's energy vision with complaints about Obama's policies -- which the Michigan congressman describes as being "straight out of the 70's playbook" with its "digs at oil producers" -- Upton advises the administration to "remove the obstacles to domestic oil production and put an end to EPA's global warming regulatory overreach." In passing, Upton trashes the government's attempts to jump-start alternative and renewable energy sources, noting that "Reagan never assumed that central planning would replace the ... free marketplace."

Mr. Upton, in the Words of the Gipper...

Recalling Reagan's great rejoinder to the accusation during the presidential debates of getting something factually wrong, I say to you, Congressman Upton: "There you go again."

Let's look at the facts. The chart below illustrates the trends in U.S. oil consumption and production since the 1970s (the difference in the two is the amount of oil imported). It is true, as Upton claims, that U.S. production increased modestly during the first Reagan administration. This period saw a huge drop in consumption as well.


Source: U.S. Energy Information Administration (from data here and here).

Trends in U.S. oil consumption (red area) and production (blue) between 1970 and 2009. The difference in the two is the amount of oil imported. Note the slight upward trend in production and downward trend in consumption in the late '70s and early '80s. But by the beginning of Reagan's second term, those trends had reversed.

The problem is that these trends began well before Reagan took office. How can Mr. Upton look at these data and infer that Reagan administration policies caused the modest uptick in domestic oil production?

Could it be that he is really a closet physicist and is invoking a strange-particle-mediated quantum-entanglement time-warp wormhole to allow policies invoked in 1981 (when he took office) to affect oil production in the 1970s? Not.

The Likely Explanation: Skyrocketing Prices

If we reject the wormhole thing, what can possibly explain the uptick in production (and downward trend in consumption) that began in the 1970s? I think it's pretty obvious and I suspect most economists would agree with me. Both were almost certainly in response to the huge oil shock the country experienced. Skyrocketing prices stimulated more production and encouraged consumers to use less.

If you're not convinced, take a look at what happened in the mid-80s as prices declined. Right in the middle of the Reagan presidency (and its supposedly enlightened free-market policies), U.S .production began to decline, while consumption (and oil imports, by the way) climbed. This trend, which began in the Reagan years, has continued more or less unabated (until the recession of 2008/09).

The Sad Facts: There They Go Again

In 1973 President Nixon launched Project Independence with the goal of making the United States energy independent by 1980. Instead of meeting that goal, he and every president since (with the possible exception of Jimmy Carter*) has presided over an energy policy that has placed us ever more dependent on foreign oil and -- because oil is a fungible, global commodity -- ever more dependent on one of the most unstable and anti-American regions of the world. During the early years of the Reagan administration things were moving in the other direction, but the policies the administration adopted either failed to prevent them from reversing, at best, or caused them to reverse, at worst.

When it comes to energy, many would agree we're in a pickle -- and a pickle we would like to get out of. How to do this? We can and will, no doubt, have a healthy debate about that. And while some would have it otherwise, climate change must be part of that debate. But the one thing we don't want is to allow nostalgia for the Gipper to seduce us into following policies that help set in motion the forces that got us to where we now find ourselves.


* Jimmy Carter is the only president in this time period to leave office with growing domestic production as well as declining consumption. This is a fact, and there is no claim intended that Carter's policies did or did not cause these trends.