Steven Mufson is a Washington Post staff writer covering energy and other financial news
It seems hard to remember a time when oil wasn’t fueling a crisis of some sort: invasions of Mideast oil exporters, a roller coaster of prices, boom and bust cycles from North Dakota to Nigeria, and a quixotic quest for American energy independence that started with President Richard Nixon.
In her well-researched book “Panic at the Pump,” Meg Jacobs takes us back to the twin oil shocks of the 1970s, which shook not only the American economy but also American politics. These jolts were a rude discovery of the limits of U.S. resources, will and global power. They exposed a sense of impotence and disillusion already fanned by the Watergate scandal and the unhappy end of the Vietnam War. Many of the debates of the ’70s remain touchstones of our politics today.
In the first shock, Arab oil exporters imposed an oil embargo on the United States for helping Israel during the Yom Kippur War in 1973 — “an energy Pearl Harbor,” a Nixon aide called it. In the second, a drop in Iranian output after the revolution ousted the shah in 1979, and output cuts and price increases by the Organization of the Petroleum Exporting Countries (OPEC), inflicted grave damage on Jimmy Carter’s presidency as well as the global economy. (The humiliating hostage crisis in Iran also overshadowed Carter’s last year.)
Both oil shocks led to long lines at gasoline pumps and anger among American motorists and voters. It was, Jacobs argues persuasively, a time that transformed American politics. Democrats and Republicans fought among themselves as well as with each other over how best to respond. Many Americans worried that an era of boundless optimism, economic growth and prosperity would give way to limits and scarcity. Others came away convinced that the United States would have to boost its military capabilities and be ready to fight to protect its economic as well as national security.
The oil crises drove both parties away from heavy-handed regulation, but it was a long process. Among Republicans, President Dwight Eisenhower had imposed oil import restrictions to protect domestic producers. Later, Nixon, eager to curb widespread anger at the pumps, imposed price controls, including different prices for “old” oil and newly discovered oil as well as a byzantine system that allocated restricted supplies of gasoline to service stations. Nixon, in the wake of an oil spill off the coast of Santa Barbara, Calif., and massive Earth Day demonstrations, oversaw the creation of the Environmental Protection Agency.
Yet Republicans such as George H.W. Bush, who made a fortune in the oil patch, and Ronald Reagan pulled the party in another direction, and they believed that the oil crises bolstered their case. They and a growing conservative intellectual movement declared that free markets would promote new oil production and ration supplies. Jacobs, in describing this, does not lose sight of the fact that most of these Republican advocates of deregulation still clung to subsidies such as the oil depletion allowance. And, as oil prices soared, they sought to soften EPA regulations to ease burdens on the petroleum industry.
Jacobs, a research scholar at Princeton University’s Woodrow Wilson School, gives us a rich chronicle of this period. She describes how the Watergate struggles undercut Nixon’s authority and distracted his attention from energy. She recounts the too-often-overlooked battle that took place in the Ford administration over energy policy. President Gerald Ford signed a bill that extended price controls and established fuel-efficiency standards for automobiles over conservatives’ protests. But as Jacobs notes, there was a group of “free-market Mohicans” in the administration that was moving to the center of the Republican policy establishment, tugging in the other direction toward fewer controls.
Few figures are more divisive and misunderstood in that turbulent decade than Carter. The Democratic president came into office declaring “the moral equivalent of war” against high oil prices and U.S. dependence on foreign oil. Sen. Henry Jackson (D-Wash.) joined Carter in pressing for conservation — a word later banished from the energy policy lexicon and replaced by “energy efficiency.” Both men sought to subsidize investment in alternative sources of energy. Carter put solar panels on the White House roof; Reagan later took them down. At that time, Democrats, for the most part, still opposed letting the free market dictate conditions and wanted to protect the members of the lower and middle class, most of whom drove to work.
But Carter and his posture on energy became objects of mockery for Republicans. Never mind that many of the measures associated with him actually began under Nixon — although Carter did have every other light bulb in the White House unscrewed. As the energy crisis deepened in the summer of 1979 after new rounds of OPEC price increases, Carter delivered a speech lamenting that Americans faced “a crisis of confidence” and saying that “too many of us now tend to worship self-indulgence and consumption.” It became known as the “malaise” speech, although Carter never used that word. For a few days the speech sharply boosted his approval ratings, but today it is seen as a failure. Indeed, while Carter did deregulate airlines and trucking, he kept to a gradual phasing out of oil price controls, even though higher oil prices would have brought about the lower consumption he sought.
To this day, Carter remains a symbol of weakness in part because of his handling of the energy crisis. Yet after the Soviet Union invaded Afghanistan in December 1979, he issued what became known as the Carter Doctrine. Scrapping his initial version of his State of the Union address shortly after the invasion, Carter delivered a stern warning that the United States would intervene in the Middle East to protect oil supply lines. That initial step led to a buildup that has enabled America to project force in the region.
As early as 1968, the elder Bush — here an intriguing character who pushed for partial deregulation under Nixon — predicted that “the next struggle will be in the Middle East.” When as president in 1990 he chose to oust Iraqi forces from Kuwait, Bush could rely on a military that had been bolstered first by Carter and later by Reagan, who created U.S. Central Command in 1983.
At a time when political candidates are bickering over how to make America great again, there is much to recommend in this book.
First, it explains that the oil crisis was exacerbated by regulations but was also a product of peaking U.S. supplies and rapidly increasing consumption. Today, we are benefitting from a boom in shale oil, thanks to technology that wasn’t available back in the ’70s. But now that oil prices are going down, so is U.S. shale oil production, and Americans are consuming more gasoline than they have since 2007. Four decades after Nixon’s call for energy independence, the United States still imports more than half its total petroleum needs.
Second, a free market in oil can still take account of costs not priced into a barrel of crude. To slow climate change, it seems that policymakers must find a way to slow carbon dioxide emissions, whether by fiat or a carbon tax or cap and trade. We may have more plentiful oil reserves than we ever imagined, but climate change is shouting that there are, in fact, limits to certain kinds of consumption after all.
Jacobs ends on a downbeat note. She says, “We are living with the failures of the 1970s to craft public policies to induce conservation and promote alternative energies.” The unwillingness of Congress and Americans more broadly to back a bit of sacrifice in the form of a gasoline tax drives her to despair. And in wondering whether we might tackle energy security, stable growth and climate change simultaneously, she says, “the lesson of the 1970s does not provide much optimism.”
I wish I could say she was wrong.
By Meg Jacobs
Hill and Wang. 371 pp. $35