The Fuse

Princeton’s Meg Jacobs on the 1970s Energy Crisis and Her Book ‘Panic at the Pump’

by Matt Piotrowski | June 22, 2016

Meg Jacobs is a Research Scholar in the Woodrow Wilson School at Princeton University. She spoke with The Fuse’s Senior Reporter Matt Piotrowski about her new book, Panic at the Pump: The Energy Crisis and the Transformation of American Politics in the 1970s, which explores why the government has failed to put together long-term energy solutions.

Piotrowski: What motivated you to tackle the energy crisis of the 1970s for a book?

Jacobs: I became interested in the 1970s when I was researching for work on the 1930s and the large expansion of government in response to the Depression. I was interested in the 1970s because I wanted to see when the next moment of economic dislocation on a sustained basis occurred and what the political and government responses were. That’s how I began with that question in mind. The conventional wisdom is that in the 1970s amid globalization and other economic forces leading up to Reagan’s election in 1980, there was a shift away from government solutions to market-based solutions. I became interested in the energy crisis as a way to tap in and get at that story. It turns out that the energy crisis was not merely a lens but really the central problem for many of the policy makers. Contrary to what I thought I was going to find, the response by both ordinary citizens and liberal Democrats who were in power on Capitol Hill was a call for more government and not less.

Could you explain how the New Deal mentality and the fight with the Young Conservatives during the time affected the domestic debate and what solutions did and did not come about during the energy crisis?

What’s interesting to note is that the Department of Energy, which is now part of the regulatory landscape, did not even exist until 1977. Up until the 1970s, there was no sense that energy was a problem. We always had an abundance and relatively inexpensive oil and other sources of energy in this country. When that reality began to shift, there were a lot of political realities that affected the responses. People like Senator Henry Scoop Jackson, who was very powerful on the Democratic side in energy matters along with Tip O’Neil and Ted Kennedy—their response and from that of Midwestern Democrats when there was a gasoline shortage was for government to come in and allocate increasingly scarce resources and put in price controls. Amazingly, which is hard for us to imagine today, those policies happened. They had appeal on a popular level too.

But they were ultimately failures.

For the public, though, they were their number one demands. So, when there was the Arab Embargo in the winter of 1973-74, this leads to long lines and shortages. The nation’s independent truckers went out on strike and their number one demand was to roll back prices at the pump, and that had political traction. The group in and around the Nixon and the Ford White House thought this type of governmental intervention was a disaster, and would only further escalate what was then perceived as an energy crisis and increase reliance on imports from abroad, which was a relatively novel situation for the United States. Their critique was articulated most loudly by someone like William Simon, who was at first on Wall Street and then came into the Nixon administration as the assistant Secretary of the Treasury, and Nixon tapped him as the country’s first energy czar. Even as he was in charge of making decisions such as whether the Daytona 500 should go on as planned, he had no choice but to implement all of these allocation measures that Congress had enacted. He freely said from the seat of government itself that these would be a disaster and weren’t a substitute for the market. They’re not going to work, but we’ll implement them anyway.

Leon Mill spray-paints a sign outside his Phillips 66 station in Perkasie, Pa., in 1973 to let his customers know he's out of gas. An oil crisis was the culprit, squeezing U.S. businesses and consumers who were forced to line up for hours at gas stations.

Leon Mill spray-paints a sign outside his Phillips 66 station in Perkasie, Pa., in 1973 to let his customers know he’s out of gas. An oil crisis was the culprit, squeezing U.S. businesses and consumers who were forced to line up for hours at gas stations.

One thing that you pointed out in your book that I found fascinating was that Americans at the time did not even know that they were vulnerable to changes in the global oil market. Why was there such a lack of awareness?

When the Arab Embargo began, one of Richard Nixon’s advisors called it the “Energy Pearl Harbor,” which really gets at this sense of shock and surprise.

When the Arab Embargo began, one of Richard Nixon’s advisers called it the “Energy Pearl Harbor,” which really gets at this sense of shock and surprise. Part of this reason that this came as such of a shock is it occurred at a time of a new phenomenon—our increasing reliance on imports. So, all throughout the Eisenhower years up until Nixon’s time in office, there was a restriction on the amount of oil we could import. Imports were so inexpensive that they would undercut domestic production. The import restriction was happening at a time the U.S. reached its perceived geological peak in the 1960s. Nixon was under pressure to relax the import restrictions, and he did so. It wasn’t the most popular idea in Texas, but it was less problematic because by now with growing demand around the world, prices were starting to go up a little bit. After the restriction was lifted, the amount of oil the U.S. imported doubled in just three years, from 1970-73. Very few Americans knew that we imported any oil at all. The other component was more of a foreign policy/geopolitical aspect. No one believed, even though they were told explicitly by the Saudis, that they would unleash the oil weapon. There was ongoing discontent in the Mideast after the 1967 war, and in 1973, there were discussions between Egypt and Saudi Arabia about whether or not Egypt would lead some type of invasion [of Israel], and if the Saudis would back them and use the oil weapon. The Nixon administration was warned by the Saudis that using oil as a weapon was on the table, and they did so in a public way, in a news interview. Nixon, at a press conference, dismissed this idea, saying there was no way that they would do this. Oil is worth nothing without a market. The embargo really came as a shock.

So, even to those in power it came as a shock?

No one was thinking that oil was going to be used as a diplomatic tool. No one thought that OPEC was a credible, powerful cartel.

Right. After the Yom Kippur War, with the invasion of Israel by Egypt and Syria, no one was thinking that oil was going to be used as a diplomatic tool. In hindsight, it makes perfect sense. No one thought that OPEC was a credible, powerful cartel. No one thought these Arab sheiks would take unilateral action, especially because the U.S. had a special relationship with Saudi Arabia and Iran at the time.

I’d like to shift to what happened in the 1970s to what has happened regarding energy since then. How much did the crisis and energy policy from the 1970s affect U.S. energy security and the political and international dynamics surrounding oil since then?

Our framework shifted from one of trying to seek independence to trying to seek access to supplies wherever they’re produced.

You start out with the response to the Arab Embargo being Richard Nixon’s, what he called, Project Independence. By naming the solution as independence, Nixon promised that the country would be energy self-sufficient by 1980. Obviously that didn’t happen. By virtue of naming the solution, they also named the problem—which was dependence. Throughout the 70s, the perception was that the problem was dependence on imports that made the country vulnerable, not only an economic threat, but also a national security threat. In spite of the promise to make the U.S. independent, Americans ended the decade being even more dependent on imports. This situation began to change the way Americans saw the problem, or how to think about the import question throughout the 80s. This culminated in 1991, when George H.W. Bush sent troops in response to Saddam Hussein’s invasion of Kuwait. The mindset, the framework shifted from one of independence to one of security. That is, there was increasing acceptance of relying on imports. By 1991, we were importing more than 50 percent of our oil needs. Our framework shifted from one of trying to seek independence to trying to seek access to supplies wherever they’re produced.

In some ways, we’re just as vulnerable as we were 40 years ago. The U.S. consumes more than 20 percent of the world’s oil, national oil companies own most of the world’s reserves, OPEC controls some 40 percent of the world’s markets. Do you foresee a 1970s crisis ever happening again? Or have we taken enough measures here and there to reduce vulnerabilities?

In some ways, we perceive ourselves to be less vulnerable. And you have to include the fracking revolution and how that has changed the landscape really quite significantly.

If you just look at the different sort of precautionary or forward-looking public policies that have been in place since the 1970s, they at least offer the sense that we will not be that vulnerable again. Everything from the Strategic Petroleum Reserve, which was created in the mid-70s, to public policy measures that promote energy efficiency and the shift away from fossil fuels toward renewables, have been generated in part by policies such as CAFE standards, for example. In some ways, we perceive ourselves to be less vulnerable. And you have to include the fracking revolution and how that has changed the landscape really quite significantly. As to where we are at this exact moment, the Saudis actions reveal an awareness that fracking has transformed the global oil market. Having said all this, I’ll go back to where we started this conversation—there’s always a lot of uncertainty and unpredictability and volatility, not just because of economics but also geopolitics, which make future predictions that much harder. Historians don’t like to predict. They’re always more confident looking at the past to say what could happen again.

Let’s discuss Jimmy Carter. There are two other important issues regarding his presidency. One, he tried to get Americans to conserve, and two, there’s the Carter Doctrine. Could you explain why it was so hard for him to make the case for Americans to conserve energy, and why it’s been so hard even since he’s left office? And what’s the importance of the Carter Doctrine for U.S. foreign policy and its relationship with oil?

Carter came into office in 1977 during one of the coldest winters on record. Much of the country was in a deep freeze, and this is the context for Carter, a couple of weeks into his presidency, appearing in a cardigan sweater sitting by a fireplace, urging Americans to dial down their thermostats, wear cardigan sweaters, and conserve energy. He announced that the energy crisis was permanent and would always stay with us. Therefore, it was going to require conservation. This is a theme that Carter stressed throughout his presidency, both because it will make Americans less vulnerable to blackmail. That’s how policy makers understood the use of the embargo and the oil weapon at the time. And Carter was really committed to conservation as a moral proposition. Here’s a president who bought his shoes for inauguration off the rack in Georgia, grew up in a house without electricity, and he believed overabundance and consumption was rotting the core of American virtue. So, he was very committed to a conservation ethos. This did not play well with Americans. At the height of the second American oil shock, which occurred in the wake of the Iranian Revolution, there was the return of gas lines in the summer of 1979. This was the context for Carter to go on television to give an incredibly somber speech. He said that happiness does not come from piling up more and more things. At the same time he was giving this speech and urging Americans to conserve as a way to renew national spirit, there was literally a gas riot in Levittown, Pennsylvania, where truckers and local residents were setting gas stations and cars up in flames, chanting “More gas, more gas!”

levittown

There was a real disconnect between the message that Carter was trying to convey and the Americans’ belief that it is almost their birthright to have as much energy as they crave and desire.

So there was a real disconnect between the message that Carter was trying to convey and the Americans’ belief that it is almost their birthright to have as much energy as they crave and desire. And to their credit, it wasn’t something that was just culturally unique. By the 1970s, America had created an entire infrastructure such as the National Highway System, the suburbs and independent free-standing homes that Americans had become accustomed to. What we’ve seen since the 1970s, even as the country becomes more efficient, citizens use more and more energy. As soon as gas prices dip, they buy bigger and bigger cars.

How about the Carter Doctrine?

What Carter was as equally concerned about along with the economic and moral decay were these national security questions. This was the height of the Cold War. There was a lot of concern from the Nixon administration on through that our reliance on Middle Eastern oil was making us more vulnerable and that this was a vulnerability that the Soviets could exploit. They had greater proximity to the region and this all came to a head in 1979 starting with the Iranian Hostage Crisis, which was a graphic display of American vulnerability. But what was perhaps more consequential in Cold War terms was the Soviet invasion of Afghanistan a month later at the end of 1979. In response, Carter, in his State of the Union address in January 1980, issued what came to be known as the Carter Doctrine, in which he articulated really clearly what had been a de facto policy of Americans probably all the way back to Franklin Roosevelt—that the U.S. would use any means necessary to defend its interests in the Persian Gulf. At this moment, it’s where you can really see a pivot from an agenda seeking independence whether it’s through boosting American production or urging Americans to consume and the willingness to commit troops to the region to guarantee the free flow of oil.

And that has been one of the cornerstones of U.S. foreign policy since then.

Exactly. From that moment on, and then escalating in the Reagan years, when he created U.S. Central Command, which focused on the Middle East, and we became even more committed to the region. By committing troops, we now had a new moment in America when foreign policy moved beyond our commitment to Europe and Asia to now a regional command in the Middle East particularly focused around access to resources.

 

 

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