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.” The industry was too competitive, he posited, necessitating “minimum price regulation … to prevent excessive exploitation of the industry by its consumers in other industries which are in a better position to exercise a sabotage of production.” Coal producers could not have been happier with what at least one Ph.D. economist was saying.
On the other hand, integrated and independent oil companies were against public-utility regulation. Cost-based rate ceilings were not considered compensatory for the risk of exploration and production. And gasoline service stations could hardly be cost-and-entry regulated without regulating refiners, and, in turn, producers. Still, crony capitalism roared in with the oil gushers in the 1920s. The quest for stability began with state efforts to limit oil production to “market demand”—a regulatory regime called market-demand proration—to achieve a price of one dollar per barrel (about $12 per barrel today).
Read more: http://www.masterresource.org/2012/09/crony-capitalism-energy-iii/
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.” The industry was too competitive, he posited, necessitating “minimum price regulation … to prevent excessive exploitation of the industry by its consumers in other industries which are in a better position to exercise a sabotage of production.” Coal producers could not have been happier with what at least one Ph.D. economist was saying.
On the other hand, integrated and independent oil companies were against public-utility regulation. Cost-based rate ceilings were not considered compensatory for the risk of exploration and production. And gasoline service stations could hardly be cost-and-entry regulated without regulating refiners, and, in turn, producers. Still, crony capitalism roared in with the oil gushers in the 1920s. The quest for stability began with state efforts to limit oil production to “market demand”—a regulatory regime called market-demand proration—to achieve a price of one dollar per barrel (about $12 per barrel today).
Read more: http://www.masterresource.org/2012/09/crony-capitalism-energy-iii/
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