Energy Nationalization: Bernie and Before

By Robert Bradley Jr. -- September 4, 2019

Presidential candidate Bernie Sanders has come right out and said it: The Green New Deal will require a government takeover of the US energy industries. As reported by Sam Dorman of Fox News:

The “Green New Deal” proposed by Sen. Bernie Sanders, I-Vt., seeks a complete transition to “energy efficiency” and “sustainable energy” — much of which would be owned and administered by the federal government.

During an appearance on MSNBC Thursday [August 22nd], Sanders told host Chris Hayes that the U.S. needed an “aggressive” federal approach to producing electricity and nodded after Hayes claimed he proposed a “federal takeover of the whole thing.”

Sanders agreed with Hayes’ assessment that he wanted to create a “Tennessee Valley Authority [TVA] extension for the whole country.” “You can’t nibble around the edges anymore,” Sanders added.

“For once I agree with Bernie Sanders,” stated Eric Worrall at WUWT. “Nationalizing energy production would drastically reduce the USA’s carbon footprint, if the catastrophic Venezuelan experience of nationalizing their oil industry is any guide.”

Worrall pulled up this quotation from Sanders back in 2011:

These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who’s the banana republic now?

With Sanders’ $16 trillion proposal to address climate change, such a takeover is not a giant leap. Perhaps Sanders in today’s CNN Town Hall climate event will tell us more.

Past Takeover Calls

The last call for nationalization of the US energy industry came during the 1970s energy crisis, which was ended by total price and allocation decontrol in early 1981. As I documented in Oil, Gas, and Government: The US Experience (pp. 28–29):

The energy shortages of the l970s again found the oil industry on the defensive as the public and the government assigned blame.  The AFL-CIO Executive Council in August 1979 unanimously asked Congress to consider nationalization if “the oil monopoly fails to adequately serve the public interest.” [1] Although never formalized in a bill, Congressional sentiment for national­ization was raised. As forty years before, Congress resorted to the regulatory approach instead.

The most recent voice for energy nationalization has been Barry Commoner, author of several books and articles on energy and a presidential candidate in l980. Although admittedly not an expert in economics, he has staunchly recommended nationalization as a cure for an energy crisis created by “produc[ing] for profit rather than social value.” [2] Yet Commoner fails to consider the free-market arguments about social knowledge and economic calculation, issues crucial to any case for national energy planning.

Commoner’s pronouncements on energy have been paralleled by the normative program of Robert Engler, a political scientist whose books on oil and natural gas regulation have detailed the political influence of the industry over government policy. Engler’s expose, along with his distrust of profit-seeking, has led him to identify the energy crisis with private ownership of energy resources and to advocate “a new beginning [of] . . . public ownership and democratic planning of all domestic energy resources.” [3]

Earlier Episodes

The 1970s was not the first call for nationalization, however. Again, from Oil, Gas, and Government: The US Experience: (pp. 27–28):

The United States petroleum market has been subject to occasional calls for nationalization, a forced transfer of private resources to government ownership and operation. Sentiment for this implementation of socialism has surfaced several times during oil shortages and once during over­production and falling prices as discussed below. United industry opposition prevented implementation. [4]

During and immediately after World War I, a tight crude oil market from wartime price controls led to concern over the govern­ment’s ability to satisfy its petroleum needs. Fuel-czar Harry Garfield openly considered nationalization of oil based on the precedents of the coal mining, railroad, telephone, and telegraph industries. [5] A Federal Trade Commis­sion report in 1918 warned of nationalization if the problem was not corrected. In the same year at their inaugural meeting, the Oil, Chemical, and Atomic Workers International Union called for oil nationalization. 

Two years later, Secretary of the Navy, Josephus Daniels, advocated the same policy to ensure the U.S. Navy of a steady supply of fuel oil at acceptable prices. [6] These warnings failed to materialize, although in another context the Mineral Leasing Act of 1920 nationalized subsoil rights by reserving minerals to the state in distinction to the prior policy of awarding patents to discover-claimants.

When unprecedented oil production depressed prices to exacer­bate industry problems during the Great Depression, the unwel­come specter of nationalization was again raised to encourage industry unity toward less severe remedies. Congress, like the industry, preferred an alter­native route of increased regulation.

The international experience with nationalization of oil and gas is a story unto itself, but the results have been devastating. This story remains for another day.

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    [1] Lester Sobel, ed., Energy Crisis: 4 Vols. (New York:  Facts on File, 1980), vol. 4, p. 89.

    [2] Barry Commoner, “Energy, Environment, and Economics,” in Gary Eppen, ed., Energy: The Policy Issues (Chicago: University of Chicago Press, 1975), p. 40.  Also see idem, The Poverty of Power: Energy and the Economic Crisis (New York: Alfred A. Knopf, 1976), p. 258; and The Politics of Energy (New York:  Alfred A. Knopf, 1979), p. 82.

    [3] Robert Engler, The Brotherhood of Oil (Chicago: University of Chicago Press, 1978), pp. 213-14.  Also see his prior work, The Poli­tics of Oil (New York: Macmillan, 1961), chap. 16.

[4] On the local level, the Osage Indian tribe “nationalized” individual allotments of mineral rights for tribal income equality.  John Ise, The United States Oil Policy (New Haven: Yale University Press, 1926), p. 391.

   [5] OGJ, May 30, 1919, p. 2.  On the sectoral level, an Oklahoma Senator unsuccessfully introduced a bill in Congress in 1914 to nationalize long-distance oil pipelines and associated facilities.

   [6]  George Nash, United States Oil Policy (Westport: Greenwood Press, 1968), pp. 35, 45.