Watching Government A new look at oil history

With Patrick Crow from Washington, D.C. A few years back, Daniel Yergin's history of the oil industry, "The Prize," became a best seller. Now another history of the industry has been published that is unlikely to achieve as much success but probably offers more insight into the industry. Robert Bradley Jr.'s two volume, 2,000 page "Oil, Gas and Government" tells how legislation, regulation, and politics have affected the economics of oil and gas production. The volumes detail government

April 8, 1996

3 min read

A few years back, Daniel Yergin's history of the oil industry, "The Prize," became a best seller.

Now another history of the industry has been published that is unlikely to achieve as much success but probably offers more insight into the industry.

Robert Bradley Jr.'s two volume, 2,000 page "Oil, Gas and Government" tells how legislation, regulation, and politics have affected the economics of oil and gas production.

The volumes detail government interventions in exploration and production, transportation and allocation, refining, and marketing.

An Enron Corp. economist, Bradley has his own consulting firm, the Institute for Energy Research, in Houston. His book was published by the Cato Institute, Washington, D.C., and reflects its free market philosophy.

Bradley discussed his work last week at the annual meeting of the National Ocean Industries Association in Washington.

Government failures

The theme of Bradley's book is that virtually all government interventions in the industry have been failures.

He said, "Given the unsatisfactory outcomes of federal energy regulation in the 1970s, a free market outlook should be anything but controversial. In fact, the burden of proof has been thrust on the shoulders of those who espouse government intervention in energy markets.

"What will be controversial to some is the book's consistently negative descriptions of government intervention regardless of decade, industry phase, or geographical settings."

For instance, Bradley said initial regulation of natural gas utilities led to a century of regulation that has fed on itself and unnecessarily raised prices.

Bradley disputes the conventional historical perspective that the Standard Oil trust engaged in predatory pricing that required government action.

He argues that government interventions in markets in times of war or energy emergencies is unnecessary. "You can have a free market solution to emergencies. You need to let the competition continue."

Bradley said much government regulation has resulted not from pressure by dissatisfied consumers but from business interests trying to get a leg up on competition.

And in some cases governments might have intervened in the market to bring needed order, such as promoting pooling earlier this century, but they did not.

A comparison

Because it is an economic history, Bradley's book is considerably drier than Yergin's colorful history of the international oil industry. And despite its interesting stories, "The Prize" was one of those books that more people seemed to start than finish.

Asked about Yergin's book, Bradley said, "In many ways it is great. But in many ways it gives the wrong impression of the industry."

He explained that Yergin should have been more critical in his examination of the industry's history, rather than reporting the conventional viewpoints.