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During a short period after the 1979 energy crisis, synfuels won over nuclear power in the national policy agenda. This was not because synfuel technology was better developed by then. Synfuel was chosen because political leaders needed to demonstrate to the public that they were actively addressing the unpleasant situation. The government treated the synthetic fuels policy as an economic issue. Facing the oil crisis, the policymakers were confused, indeterminate, and incompetent. The enormous crash program on synfuel was essentially a symbolic gesture in response to a crisis. It was accompanied by hardly any ideological mobilization. After the crisis was over, the political support dwindled, and the program was soon dismantled.
Although synfuel and nuclear power were, at first, initiated and sponsored by the U.S. government, they were both intended to be employed in the private sector. Therefore, the private-sector response to official policy is another focus of this book. The private sector's belief-based decision-making behavior in the commercializing stage of the technologies is discussed in chapter 4.
An important feature differentiates the power and fuel industries. Electrical utilities are regulated monopolies, while the oil market is competitive. The rate-of-return regulation created a moral hazard (known as the Averch-Johnson effect) for the utilities. They were able to recover their capital investment with a guaranteed rate of return even if the investment turned out not to be cost-effective. Therefore, utilities were not entirely sensitive to cost (at least before the 1970s). They were capable of pursuing symbolic prestige by pioneering in nuclear power. This condition changed after the oil crisis in the 1970s. With rising fuel costs and an uncertain economic outlook, utilities started to face financial limits. The regulators started to turn down requests for rate increase in the 1970s (rate increases were rarely requested and, therefore, were hardly ever turned down before the 1970s). The increased uncertainty in cost recovery contributed to the collapse of the nuclear bandwagon market.
Two misguided beliefs supported the nuclear bandwagon market in the late 1960s and early 1970s. One was the belief that nuclear power