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Cato Policy Report, November/December 1995

Bradley's Magnum Opus on Oil and Gas Published

"A Landmark in Regulatory Studies..."

by Robert L. Bradley Jr.

Robert L. Bradley Jr. is president of the Institute for Energy Research in Houston and an adjunct scholar of the Cato Institute.

More than a decade in the making, the two-volume, 2,000-page Oil, Gas, and Government: The U.S. Experience by Robert L. Bradley Jr., published by the Cato Institute and Rowman and Littlefield, ranks as the definitive history of government intervention in the U.S. oil and gas market. Economist D. T. Armentano of the University of Hartford calls Oil, Gas, and Government "the most comprehensive and critically astute analysis of petroleum industry regulation in print. A landmark in regulatory studies, it is required reading for academics, industry executives, and would-be regulators."

Meticulously detailed, chronologically ordered by industry sector, and drawing on insights from the social sciences, the book is an invaluable reference as well as a perceptive analysis of the political motivations and economic consequences of regulation. Written in an understandable style and using "the common sense of political economy," Oil, Gas, and Government is accessible to both the energy specialist and the general reader with an interest in economic policy.

Among the highlights of the book are a novel reconsideration of the "market failure" of petroleum production under the rule of capture, the development of a "homestead" rule in place of the rule of capture, an explanation of the secretive oil reselling boom during the 1970s' energy crisis, and the first detailed look at the history of service station regulation. In this comprehensive history, even familiar regulatory episodes take on new meaning as the cumulative result of earlier government intervention. By chronicling and interpreting thousands of government interventions in two of America's most important industries, and developing a theoretical framework for understanding the dynamics of government intervention that can be applied to other industries, this work takes its place as a classic in free-market literature.

Oil, Gas, and Government challenges critics of the free market not only to offer a theoretical justification for government intervention in the marketplace but to deal with the history of failed regulation. Free-market economists, meanwhile, will find it a rich source of evidence and analysis and a model for other regulatory studies.

The book is divided into three sections: theory, history, and policy. The theory section presents the outline of a market-process approach to economics. The heart of the book, the historical section, follows with an exhaustive account of the U.S. oil and gas industries--and the federal and state governments' extensive, varied, and distorting interventions at all stages of those industries, from the wellhead to the retail level.

The final section, on policy, makes the case for what Bradley calls a "laissez faire" policy toward oil and gas. The closing chapters draw economic and political conclusions, pointing out that "interventions not only distorted market processes responsible for consumer welfare but led to complementary regulation, taxation, or subsidization, thus creating an interventionist dynamic." In the chapter on politics, the author emphasizes that, for the most part, the oil and gas industry enthusiastically supported government intervention.

In the final chapter, Bradley offers a pro-market oil and gas policy. He argues that a completely free market is good for most of the industry and all consumers.

"We are very proud to be involved in the publication of what will undoubtedly be the standard work on oil and gas regulation for decades to come," said Cato president Edward H. Crane. "Rob Bradley has established himself as the premier historian of these critical industries and the government's incessant intervention in them."

"This is an important book that should be read for its critical look at the oil and gas industries," says William A. Mogel of the Energy Law Journal. "Bradley's interdisciplinary approach is unique and includes social science, public policy, applied economics, and history. A good addition to any library."

Richard Gordon of the Pennsylvania State University called Bradley's book "a valuable contribution to our knowledge of oil and gas policy. He has thoroughly and carefully reviewed all aspects of the long, dismal record of intervention. Even experienced analysts will learn new information. His effort to relate this to the broader debate over government regulation is a valuable bonus."

Energy economist M. A. Adelman of the Massachusetts Institute of Technology said that "Robert Bradley's book belongs in every library covering the relation of government to the petroleum industries. It is unique in its range over time and subject. In rich detail it shows how mixed but mostly good intentions led always to economic waste with no offsetting social gain."

This article originally appeared in the November/December 1995 edition of Cato Policy Report.