“I can’t downplay this. It’s obviously very exciting for us…. This is opening up a new chapter in Alaska’s oil and gas history that is literally starting today.”

– Pete Slaiby, Shell Alaska. Quoted in Jennifer A. Dlouhy, “Shell Begins Drilling Well off Alaska,”  San Francisco Chronicle, September 9, 2012.

Profit-seeking, consumer-directed business is proper, necessary, and heroic. Free-market-based energy enterprises (oil, gas, and coal) are quite unlike government-dependent (crony) businesses (ethanol, windpower, and on-grid solar). Ken Lay’s Enron is (was) a leading example of the latter; Koch Industries’ Charles Koch, writing in the Wall Street Journal yesterday, epitomizes the former.

Shell has scaled back its (scarcely profitable) renewable energy investments and is back to its oil and gas roots. Its advertising is no longer about pie-in-the-sky energies and more about here, now energy.…

Editor note: This post follows those of Walter Donway, who authored Crony Capitalism: Principles (Part 1) and Crony Capitalism: Practice (Part 2).

America’s energy industries (oil, gas, electricity) have been a bastion of crony capitalism for much of their history. Leading gas and electricity firms sponsored state and then federal public-utility regulation during the Progressive Era and New Deal. Like other so-called public utilities, they welcomed the prospect of making commission-approved “reasonable” profits in an entry-restricted environment rather than taking their chances in open-entry markets.

The U.S. coal industry also longed for federal aid. “The bituminous coal industry has been one of the most chaotic industries in the United States in recent years,” an Ohio University professor wrote in 1940. “Because of this lack of order it has recommended itself to the Nation as an industry urgently in need of social control and, as a result, it has come to serve as a significant laboratory for experiments in certain types of government regulation.”…

[Ed. note: On August 27, 1997, the Cato Institute published Policy Analysis #280, which criticized the government push to subsidize politically correct renewable energy, particularly solar and windpower. Today and tomorrow, different authors revisit what was the free-market-movement’s first full-scale rebuttal, on economic and environmental grounds, to so-called “green” energy policy .]

“The policy implication of [a thorough examination of renewable technologies] is, stop throwing good money after bad. All renewable energy subsidies from all levels of government should cease.”

Such is the conclusion voiced today by a rising chorus of energy experts, economists, even politicians, after many years of failed renewables projects and more expensive utility bills in the growing shadow of a $16 trillion national debt ($140,000 per taxpayer). But, remarkably, fifteen years have passed since Rob Bradley crafted this statement for the Cato Institute as the bottom line of his comprehensive six-part policy alarum, Renewable Energy: Not Cheap, Not ‘Green’‘

An Opening Shot

Few knew about or shared Bradley’s concerns at the time.…

Consider the preconceptions that surface in your mind when you read the name “Enron”. Chances are that they are negative, and not particularly nuanced — fraudulent business activity, tarnishing the idea of free markets by trying to manipulate them using the political process, and so on.

If that’s true for you, then you are probably in a pretty similar mental space to mine when I started reading Rob Bradley’s Edison to Enron: Energy Markets and Political Strategies. Rob’s detailed and thoroughly researched book is a well-told analysis of the valuable and interesting regulatory and business history that formed the backdrop of Enron’s spectacular failure.

Samuel Insull, Father of Modern Electricity

The name of the book is somewhat misleading, because the first third of the book focuses not on Thomas Edison but on Samuel Insull.…