What happened after Carter left office? What did the Reagan administration do that changed our course? This article looks pre-1980 at some of the causes of the oil crisis of the 1970's
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oil and triggered a nationwide movement that advocated energy conservation
and alternate energy sources.
and natural gas are fossil fuels, which means that they will eventually cease
to exist. This gives nations that have an abundance of these natural resources
much economic and political power. The thought of this supply ending also
causes a search for renewable resources that would never cease to exist.
Petroleum or “black gold” provides the world with nearly half the energy
used. (10, 330) 660 billion barrels or 67% of the world’s oil reserves are
found in the Middle East. Saudi Arabia alone has 258 billion of these barrels
which is one fourth of the world’s oil. One tenth of the world’s oil is found
in Abu Dhabi, Iran, Iraq, and Kuwait. (10,332) Compared with this extensive
supply, the U.S. and Canada have only 3% or 32 billion barrels of the world’s
reserves. (10,333) Despite this, the U.S. and Canada consume more than four
times the amount of petroleum than the Middle East. The Middle East produced
19.8 million barrels and only consumed 4.8 billion barrels according to 1994
figures. The U.S. and Canada produced only 8.5 million barrels and consumed
a whopping 19.4 million barrels. (10,334) Today it is hard to imagine relying
solely on ourselves, for our energy needs. The U.S. used to provide for themselves,
but consumption grew too rapidly for the small supply it possessed. As the
U.S. began to rely heavily on imported oil from other countries, power struggle
emerged between the producers and consumers of this oil.
The increase of oil imports became the number one concern
in America when Richard Nixon became president in 1969. A Cabinet Task Force
on oil Import control was established and was led by George Shultz the Labor
Secretary. (13, 589) He recommended doing away with quotas, having no minimum
of oil that the U.S. has to buy from foreign producers, but Nixon strongly
disagreed. Nixon believed that this would only increase imports and be a
threat to domestic industry, and he decided to keep the quotas. (13, 589)
This was obviously not in the interest of Middle Eastern countries and the
Shah of Iran quickly wrote to President Nixon. He explained that only if
the quotas were dropped could the stability of their country be ensured and
they could sell larger volumes of oil to the U.S. Nixon however, did not
agree to drop the quotas. (13,589) The problem with oil imports came to head
during the 1969-1970 winter which was the coldest in 30 years and power was
randomly turned off to preserve energy which caused brownouts along the Atlantic
Coast. (13,590) Nixon put price controls on oil consumption and discouraged
domestic oil in 1971. (13,590) These artificially low prices however could
not keep up with the changing market. If prices were low, there was little
incentive for conservation of energy or for new exploration for oil reserves.
(13, 590) Money was not coming in and some drilling was even ended prematurely.
This attempt at federal energy regulation was a failure. (3, 338)
To work on the energy crisis, Nixon assigned James Akins
to the White House. He was the State Department chief oil expert and even
before the crisis was at its worst in 1973 he suggested we reduce consumption,
increase domestic production and only import from “secure sources”. In April
1973 Akins published some of his ideas in Foreign Affairs in an article entitled
“The Oil Crisis: This Time the Wolf Is Here.” He was comparing the oil crisis
with the Middle East to a ferocious wolf ready to attack. The wolf had certainly
arrived and that same year Nixon did away with quotas because America’s demand
for oil was too high for domestic production to keep up with it. For the
first time, the U.S. was vulnerable and not able to supply it’s allies in
the event of a crisis. (13, 591)
The wolf was at full attack in the fall of 1973 when the
Yom Kippur War sent gasoline prices soaring in America. The same thing happened
in 1979 when the Shah of Iran fell from power. (13, 512L) In the Middle East
the Arab- Israeli wars of 1967 and 1973 greatly affected the flow of oil
throughout the world as they reduced or cut off their petroleum exports to
Japan and western countries. (10, 349) Egyptian jets attacked the Israeli
posts along the border of the Suez and in the Sinai on October 6, 1973. Also
Syrian aircrafts attacked northern Israel. This was the fourth and most dreadful
of the Arab-Israeli Wars. (13, 588) After Egypt launched this attack on Israel
the Soviets threatened to intervene. Breshnev, who was the Soviet leader
at the time believed that the Watergate scandal had weakened Nixon to such
a degree that he would not react. The Soviets did back down, but the Arab
world held the U.S. responsible for Egypt’s defeat by the Israelis. (2) On
both sides, the U.S. and the Soviet Union supplied armaments. But despite
all this machinery the strongest weapon in this war was oil in the form of
an embargo, which is a cutback on production and exports. (13, 588)
Many believe that there was actually a shortage of oil, but there was no
shortage at all. The Middle East just decided they weren’t being paid enough
for their problem. (9, 2) OPEC, or the Organization of Petroleum Exporting
Countries, which was originally formed to keep the price of oil down, was
too fragmented and competitive to help solve the crises or to be a successful
cartel, which is a combination of businesses or countries in this case to
limit competition. (11, 1) The economics and now the politics of oil were
changing. Iraq, Algeria and Libya were pushing for a price agreement and
they said if one was not made they would “exercise our rights on our own.”
This meant that they would not cooperate with OPEC and would set their own
prices, which would most likely be high, or in extremes would be in the form
of an embargo. Exporting countries took steps for the government to take
over oil companies because they did not want the growing gap between posted
prices and market prices to go to the favor of the oil companies. (13, 592)
They were using petroleum as a political weapon by using the dependence of
other countries on their oil supply and cutting off exports to those countries.
Petroleum gave them the power to ruin the economies of other nations by increasing
prices. (10, 349) Henry Kissinger said of the embargo, it “altered irrevocably
the world as it had grown up in the postwar period.” (13, 588) And as Nicholas
Lemann stated, “it demonstrated that America could now be ‘pushed around’
by countries most of us had always thought of as minor powers.” (8, 1142)
The Arab Oil Embargo demonstrated just how dangerous the United State’s dependence
on foreign oil was becoming. (8, 1132) This embargo resulted in the price
of gas per gallon to jump from 30 cents to over a dollar. Also a “windfall
profits tax” was presented to domestic oil producers. (9, 2) In 1973, the
Northeast suffered both from severe winter weather and the gas shortage,
which temporarily closed schools and factories. (8, 1132) The falling cost
of the dollar, expensive federal programs, and costly environmental regulations,
were just some of the few things Americans blamed for the energy crisis.
(8, 1134)
As the federal government became more and more involved with solving the
energy crisis, corruption became apparent. The Foreign Relations Committee
held hearings on the energy crisis during the week of June 2, 1973. Senator
George D. Aiken of Vermont attended and noted the corruption of the meeting
in his journal. Witnesses were going over what the energy would need to be
used for in the U.S. and completely left out agriculture. This was ludicrous
because the agricultural industry was the largest consumer of petroleum in
the national economy at the time. (1, 84) A bill was reported to Congress
in February 1974 that would give the president more authority over the distribution
of oil products. A cutback in the price of oil produced in the U.S. was presented
and senators from the oil states wanted to block this. To them it was more
important for the oil companies to remain stable than the nation as a whole
to be stable. (1, 85)
As the energy crisis began striking close to home, citizens of the United
States could see how huge of a problem energy had become. The 1970's had
the highest unemployment rate since 1941 and the lowest industrial production
since 1937. (8, 1140) By 1979 the inflation rate was all the way at 11.3%
and rising. (8, 1135) This new inflation caused many Americans to doubt the
“American dream” that their children would have a better life. Writer Nicholas
Lemann wrote, “The nearly universal assumption in the post-World War II United
States was that children would do better than their parents. Upward mobility
wasn’t just a characteristic of the national culture; it was the defining
characteristic.” (8, 1140) Insanely high prices throughout the 1970’s increased
these concerns. In 1973 a barrel of crude oil cost $2.75 and in 1981 it went
to 34 dollars. (10, 349) Crude oil prices quadrupled between October 1973
and March 1974. By 1981 the nation was consuming 20 trillion cubic feet of
gas per year. Arab nations embargoed oil exports to the United States for
a total of six months. Ironically, the production of natural gas in the United
States was at its highest in 1973. But, this certainly did not counteract
the embargo. (12, 5)
Running out of usable oil, or supposedly running out was become a major concern
of the nation. Senate reports in 1975 indicated that the U.S. would run out
of usable oil before the year 2000. (6, 32) Although energy use is still
a problem today in 2003, it obviously did not happen as quickly as predicted.
Without a doubt the entire crisis sprung from our reliance on foreign oil.
Fewer oil wells were drilled in the U.S. starting in 1955 because foreign
oil was cheaper and more accessible. But after 1973, foreign oil was more
expensive and less available. (12, 59) 30 billion barrels of oil was discovered
in northern Alaska in the late 1960’s, but this large addition to the world
reserves was counterbalanced by an increase in oil consumption. (10, 333)
Imports were greatly increased in the years leading up to the crisis. In
1970, the U.S. imported 3.2 million barrels per day. In 1972, 4.5 million
were imported, and in the summer of 1973, 6.2 million were being imported.
(13, 591) America’s response to the crisis was interrupted because of Nixon’s
resignation of office due to the Watergate scandal. Ford, who did not take
any impacting steps to solve the energy crisis, carried out the remainder
of his presidency. (13, 512M) Carter, who was the next president-elect, carried
out many acts to encourage energy conservation. He practiced this conservation
in his own home by keeping the White House at 55 degrees during the night
and 65 degrees during the day, and wore long underwear to keep warm. His
plan for the nation promoted increased fuel production in the U.S. and development
of alternate energy sources. (8, 1133) Prior to Carter presenting his plan
to Congress, he appeared on television to address the public stating, “The
energy crisis has not yet overwhelmed us, but it will if we do not act quickly….
This difficult effort will be the ‘moral equivalent of war’, except that
we will be uniting our efforts to build and not to destroy.” He proposed
an Emergency Natural Gas Act to control the distribution of gas throughout
the country. Within one week Congress passed the act. (8, 1132) In November
1978 the National Energy Act was signed into law. (8, 1133)
The “second oil shock” occurred in 1979 when OPEC held
up oil production, which caused gas prices to rise by 50%. Motorists in the
U.S. waited in line at gas stations for hours frantically buying gas before
it ran out. Carter was blamed for this. (8, 1133) Carter said of this “second
oil shock”, “It is a crisis of confidence. It is a crisis that strikes at
the very heart and soul and spirit of our national will. We can see this
crisis in the growing doubt about the meaning of our own lives and in the
loss of a unity of purpose for our nation. The erosion of our confidence
in the future is threatening to destroy the social and the political fabric
of America” (8, 1134) His television address did not include ways of dealing
with the problem or looking to the future. Americans felt that Carter was
not the man to lead them out of the crisis. His reelection campaign was made
difficult because right before the election the Federal Reserve Board caused
interest rates to soar when they put strong monetary controls to control
inflation. (8, 1143) Also, making his reelection campaign difficult was the
humiliation Americans felt as Iranian students took hostage sixty-three Americans
in November 1979. (8, 1137) Ronald Reagan ended up winning the election to
lead the U.S. into the 1980’s. Being a former actor, and holding strong conservative
views, Reagan presented Americans with the strength that they desired for
their weakening country. (8, 1143)
Throughout the 1970’s many steps were taken to make energy conservation an
important aspect of American life. On October 31, 1973 in New York the Public
Service Commission looked into the possibility of closing schools and cutting
off heat in the subways. (4, 1) The president could limit hours of operation
for schools and businesses, could ban advertising or displays of Christmas
lights, and could enforce a maximum temperature in office buildings all due
to the broad “Emergency Actions to Reduce Energy Consumption”. As early as
November 2, 1973, an emergency energy act was proposed to Congress to “to
suspend all environmental standards, to tax fuels, prohibit pleasure driving,
order early closing of schools and businesses, impose rationing and take
other steps to curb energy consumption.” (5,1) The energy crisis affected
all aspects of society, even the automobile market. In 1973, 30-cent gasoline
was no more and so was the “big American car.” Models such as the Honda Civic
became popular because of their fuel efficiency. (2) For two decades there
was even a federally mandated speed limit of 55 miles per hour in order to
save energy. Later it was done away with to keep the government from getting
too involved in state and local matters. (9, 7)
Some administration and Congress members wanted to add a 20 or 30 cent per
gallon tax, but George P. Shultz, Secretary of the Treasury, knew this would
only put more weight on the economy. The major problem with a large-scale
conservation effort was getting Americans to conserve energy without causing
more economic problems. (5, 26) Congress passed the Energy Policy and Conservation
Act in 1975. These acts regulated domestic oil prices and set up standards
for automobile use. (12, 5) The 800 mile long trans-Alaska Pipeline System
built in 1977 brought 2 million barrels of oil a day from Prudhoe Bay to
the port of Valdez. Due to this, imports from the Middle East were greatly
reduced. (8, 1143)
Many called the energy crisis an “energy shortage”. This term should not
be used because gas and oil are not the only forms of energy. Energy will
only cease to exist the day our sun disappears. (9, 7) John R. Quarles believed
that coal should replace oil as a boiler fuel. He was the administrator of
the Environmental Protection Agency. (5, 26) Eventually the electric utility
industry will have to look to other sources, the best of which would be nuclear
power. Other choices would be coal, ethanol, and solar power. (9, 6)
Ethanol is what petroleum would most likely be replaced with. It is made
from corn and other crops and therefore renewable. Use of ethanol would be
extremely positive for the nation’s farmers and would be much safer for the
environment. If a tanker spilled ethanol, it would just evaporate into the
air. We do not use ethanol today because petroleum is cheaper. During the
Arab embargo in the 1970’s, petroleum prices soared making ethanol look like
a good deal. But the prices of petroleum were purposely kept below ethanol
so it would not be replaced. (9, 4) Efforts to find new oil reserves were
greatly reduced in the 1980's when oil prices fell. Oil and gas can also
be made from bituminous sands, coal, and oil shale. Scientists are working
on this, but it is extremely expensive. However, if oil prices continue to
rise as they have done since the 1970’s, these forms of energy could become
competitive in the worldwide market. (10, 349) Solar energy, wind energy
and geothermal energy, which are all possibilities to replace oil, are all
"diffuse" because they would not be useful in all areas of the world. (6,
42-43) Thomas E. Eastler said of finding alternate sources, "as a result
of this unchecked exploitation, we are forced to consider the consequences
of the end of the fossil fuel era. And, with the end of that era, I believe
also, will come the end of America's fleeting love affair with petroleum."
(6, 30)
Most experts believe that the demand for petroleum and the dependence on
Middle Eastern oil will only increase in the future. (10, 349) Even if petroleum
is replaced, the crisis could continue because the major companies that control
oil have already invested in gas, coal, uranium and new energy sources such
as oil shale and tar sands. So, the major problem is that the energy industry
is extremely monopolized. (7, 336) Today the energy crisis of the 1970's
seems so familiar. Oil prices are rapidly increasing, and our relationships
with some of the Middle Eastern countries are extremely shaky. As President
George W. Bush forges on in his efforts for a war with Iraq, most people
are concerned with disarming Iraq of their weapons of mass destruction. The
one weapon of mass destruction that could never be taken away from them is
oil. We import so much oil from the Middle East that a war could greatly
influence oil prices and imports. The energy crisis of the 1970’s caused
the United States to step up and begin conservation efforts and explore alternate
energy sources. If oil prices continue their uphill climb, these alternate
sources will without a doubt become economically and politically superior
to oil. And perhaps one day, we will discover a resource that will supply
the world with infinite energy.
Works Cited
1. Aiken, George D. "The 'Down Years' 1972-74, A Senator's View" American
Heritage. Aug 1976. Vol. XXVII 5. New
York: American Heritage Publishing Co., 1976
2. America and the World Since World War II. Vol. III 1961-1975 From the
Kennedy Era to the Final U.S. Withdrawal From Vietnam. ABC, 1986.
3. Bartlett, Dewey F. "The Energy Crisis" The Annals of America, Vol. 19
1969-1973. Chicago: Encyclopedia Britannica, Inc., 1974.
4. Clines, Francis X. "Curfews Hinted In Oil Shortage" The New York Times.
1 Nov 1973: A1.
5. Cowan, Edward. "Drastic Emergency Steps To Save Energy Proposed" The New
York Times. 2 Nov 1973: A1.
6. Hanley, Wayne and John Mitchell, eds. The Energy Book. Thomas E. Eastler:
The End of the Fossil Fuel Era. Brattleboro: The Stephen Greene Press, 1980.
7. Harris, Fred R. "Oil- Capitalism Betrayed in It's Own Camp" The Annals
of America. Vol. 19 1969-1973. Chicago: Encyclopedia Britannica, inc., 1974.
8. McDonnell, Janet. America in the 20th Century: 1970-1979. New York: Marshall
Cavendish, 1995.
9. Palm, Kirby. The Energy Crisis: A Unique Perspective (online) http://www.nettally.com/palmk/nrg.html.
28 Feb 2003.
10. "Petroleum". The World Book Encyclopedia Vol. 15. Chicago: World Book,
Inc., 1997.
11. The Energy Crisis Revisited (online) http://web.mit.edu/krugman/www.opec.html.
4 Feb 2003.
12. Weaver, Kenneth F. "America's Thirst For Imported Oil- Our Energy Predicament"
Energy A National Geographic Special Report. Feb 1981.
13. Yergin, Daniel. The Prize- The Epic Quest For Oil, Money, and Power.
New York: Simon & Schuster, 1991.
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