I often remind people that a U.S. president’s policies generally have limited impact on the energy markets in the short term. This topic often comes up when gasoline prices are rising or falling.
However, over the longer term a president’s policies can make a big impact. One of the examples I often use is President Nixon.
The Nixon Administration passed a number of policies that had a significant and long-lasting impact on the oil markets, but those impacts weren’t felt until he was out of office. For example, President Carter experienced a rise in oil production when he was in office, reversing a steady decline that had begun in 1970. But that was because the Alaska Pipeline was approved under President Nixon, and the oil began to flow while Carter was in office.
I recently reviewed presidential policies and how they have impacted the world’s energy markets, and I was struck by the ultimate significance of the policies of President George W. Bush. He may not be the first president that springs to mind when you are considering our greatest presidents, but I would argued that his energy legacy ranks near the top.
Like his father, George W. Bush had ties to the oil industry. Even Bush’s vice president, Dick Cheney, was an ex-oilman, having served as the CEO of oilfield services company Halliburton. Within two weeks of taking office, Bush named Cheney as the chairman of the National Energy Policy Development Group (NEPDG).
The group’s purpose was to “develop a national energy policy designed to help the private sector, and, as necessary and appropriate, state and local governments, promote dependable, affordable, and environmentally sound production and distribution of energy for the future.”
Quoting from my book Power Plays:
“The group’s work culminated in the release of the National Energy Policy (NEP) in May of 2001. The report warned that in the years ahead, America would face the most serious energy shortages since the 1973 oil embargo.
The report made specific recommendations designed to meet five goals:
- Modernize conservation
- Modernize U.S. energy infrastructure
- Increase energy supplies
- Accelerate the protection and improvement of the environment
- Increase U.S. energy security
The NEPDG came under criticism because its activities were not made public and critics charged that the oil industry heavily influenced the outcome. In fact, many of the report’s recommendations were focused on increasing domestic oil supplies and ensuring that the U.S. maintained access to supplies abroad.
However, continued access to oil was only one part of a comprehensive energy plan detailed in the report. One area in which the group made specific recommendations was in the use of renewable and alternative energy.
Among the recommendations were an expansion of a tax credit for landfill methane projects, acceleration of the permitting process for geothermal projects, expansion and extension of the tax credits for electricity produced from wind and biomass, a new tax credit for residential solar installations, a continuation of the ethanol tax exemption, an income tax credit for the purchase of hybrid or fuel-cell vehicles, and the development of hydrogen and fusion technologies.”
Treating an Addiction
In his 2006 State of the Union address, President Bush famously stated “Here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.” Many viewed his comments as disingenuous, but there is no question that Bush took actions that were ultimately successful in reducing U.S. dependence on foreign oil.
The Energy Policy Act of 2005 gave us the Renewable Fuel Standard (RFS), which mandated that an increasing amount of ethanol had to be blended into the fuel supply. In 2007 those mandates were expanded. This bill directly enabled the 17 billion gallon per year ethanol industry in the U.S. that still helps fuel our automobiles today.
President Bush pursued a hydrogen economy, but he was ahead of his time. A hydrogen economy failed to materialize at that time, but hydrogen is currently experiencing a renaissance as an attractive low-carbon transportation fuel.
But perhaps the most significant development to come out of the Bush Administration was the marriage of horizontal drilling and hydraulic fracturing (“fracking”), which ushered in the shale oil and gas boom.
The Bush Administration passed a number of laws aimed at accelerating the development of fracking. Many of those laws were staunchly criticized by environmental groups, but there is no doubt they helped spur an enormous increase in U.S. oil and gas production.
A Long-Term Impact
The irony is that President Obama presided over most of this production surge. But it was put in place by the Bush Administration, and the impacts are still felt today all over the world.
Bush’s policies resulted in a huge increase in U.S. ethanol production, record U.S. oil and natural gas production, dramatic drop in U.S. oil imports, and they ultimately broke OPEC’s iron grip on oil prices.
One could credibly argue that gasoline prices are as low as they are today because of the actions George Bush took as president. That is a truly substantial and long-lasting impact on the energy markets 20 years after he was first inaugurated.