John Chamberlain has enjoyed a varied and illustrious career as critic, editor, and journalist. He has been a reporter and daily book columnist for The New York Times. In addition to corporation and industry studies for Fortune, Barron’s and The Wall Street Journal, his writings have appeared in numerous other magazines. This article is from his newspaper column, here reprinted by courtesy of King Features Syndicate.
Mr. Chamberlain has taught at the School of Journalism of Columbia University and serves as Dean of the Program for the School of Journalism at Troy State University in Alabama. Among his several books are The Roots of Capitalism and The Enterprising Americans: A Business History of The United States.
John Chamberlain’s book reviews have been a regular feature of The Freeman since 1950.
Even though the deregulation of oil prices won’t be complete until 1981, practically everybody is certain that the big oil companies—the so-called Seven Sisters—are going to make some exorbitant profits on a "windfall" situation.
But what if the profits fail to materialize? If ordinary economic law has anything to do with it, the increased competition for the expanded energy dollar must, at some point, lead to lower, not higher, retail prices. If this isn’t the truth, then Henry Ford never lived, the American Way was a misnomer, and all the classical economists from Adam Smith to Alfred Marshall were a bunch of hams.
My colleague John Roche accurately notes that the big oil companies escalated prices the minute the energy tap in Iran was closed off, even though the fuel they were charging for at the gas pump had already cleared the Persian Gulf before the Shah had taken it on the lam. Of course! The market always anticipates the future. If something is going to become scarce, it makes no sense to get rid of old inventories as if nothing were going to happen. Conversely, if there is a reasonable expectation of a more plentiful supply of fuel in the future, the inclination of buyers will be to lower their inventories, waiting for the day when prices will come down. So everything between now and 1981 will swing on what is done to lighten the burden of car drivers, manufacturers who use electricity, and home owners who have to heat and light their houses.
What are the prospects for new oil and gas wells? What sort of deal for fuel can be worked out with Mexico? How soon will that pipeline from Southern California, and the other one from Puget Sound to the Middle West, be finished? How quickly will gasohol, made in a thousand stills from vegetable matter, be available to motorists to mix with gasoline in their tanks? What differences will the new motors that get close to 30 miles a gallon make when Detroit begins to catch up with the Japanese in the competition for the small car market?
The other day this column wrote about the experiments of a Miami company in mixing hydrogen and chlorine, two components of sea water, with light in a closed-cycle engine to form an explosive mixture. Hydrogen unlike crude oil, is all around us. I can’t vouch for the chemistry and physics of a hydrogen engine, but Nation’s Business, in a long and patient article in the April 1979 issue, quotes from the endorsements of a number of disinterested authorities (Dr. Daniel Wells, a professor of physics at the University of Miami who has been an investigator for the U.S. Air Force and NASA projects, is an example).
For the life of me, I can’t figure out why the testing of the Solar Reactor Corporation’s hydrogen/chlorine-light motor at Aberdeen, Maryland, didn’t make a few of our front pages. But then, the Dayton, Ohio, papers missed a palpable scoop when the Wright brothers first flew their plane. Besides, all the energy experts were off to Harrisburg to cover the Three Mile Island disaster. The Gresham’s Law of the media is that bad news always drives out good news.
The other day, on the sports page I read about a racing driver who had personally altered his engine to get 67 miles from a gallon of gas. Why wasn’t this front page stuff? And why was it left for the Jerusalem Post international edition to print the story of Israel’s new technique for extracting oil and gas from shale by the use of laser beams which, when directed at shale through a small diameter pipe for deflection by a mirror, kindles an underground flame that sends gas to the surface to be condensed into keroten, a burnable fuel?
Israel has known reserves of two billion tons of shale. If this can be economically exploited, it means just so much less pressure on oil companies that are willing to sell to pariah nations. As for South Africa, one of the pariahs, it intends to get half of its gasoline from coal by the early 1980s.
I fully realize that nothing in economics comes easy. But when the market promises profits, and there is no bar to freedom of entry into the market by the inventors, the explorers and the wildcatters, no OPEC can sit on the lid forever. Windfalls there may be, but when the government removes its cotton picking regulatory hands from the market the price cutters will take over. They will either give us more efficient motors or cheaper fuel—or a combination of the two.
Copyright, King Features Syndicate.
John Chamberlain
John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.