Abstract: Big Oil's Search for Alternate Fuels in the 1970s and 1980s

Joseph Pratt and Tom McKinney

Abstract

The energy crises of the 1970s raised both oil prices and fears of long-term shortages of oil in the industrial nations. Assuming that oil supplies would be increasingly difficult to find despite steady future increases in oil prices, the major oil companies aggressively diversified into a variety of energy-related ventures, including synfuels, coal, uranium, and renewables. Each company developed its own energy strategy while the U.S. government sought with little success to pull together a comprehensive national energy policy. The dramatic drop in oil prices in the 1980s brought an abrupt end to many alternative energy projects. As a result, despite the enthusiasm to move beyond oil in this era, few of the initiatives to do so ultimately succeeded. The impact of this cycle of boom and bust in oil prices on investments in alternatives to oil is illustrated by the case of shale oil. Numerous major oil companies saw excellent long-term opportunities in developing the energy potential of the vast deposits of oil shale in the western United States. In its quest for domestic sources of energy, the federal government began offering substantial subsidies for the development of western oil shale. For a brief period beginning in the late 1970s, the companies and the government cooperatively launched a massive program to create a commercial oil shale industry. But the program collapsed quickly with the decline of oil prices. The history of the failure of business and government to create a coordinated long-term approach for producing oil shale in response to the energy crises of this earlier era offers a useful context for understanding the energy challenges of the present and the future.