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Macmillan Childrens Publishing Group

Panic at the Pump

The Energy Crisis and the Transformation of American Politics in the 1970s

Meg Jacobs

Hill and Wang


Introduction: An Energy Pearl Harbor


FORTY YEARS AGO, Americans were suffering from what contemporaries called “the energy crisis,” a crisis that in many ways defined the decade of the 1970s. During the twin oil shocks of 1973 and 1979, oil supplies dropped and prices soared, and the average citizen understood the energy crisis to mean a panic at the pump—the fear that we would not have enough oil to fill up our gas tanks, heat our homes, or run our factories. And whatever fuel we did have would go up and up in price. Ever since, gas lines, cardigan sweaters, dark Christmas trees, and even woodstoves have become part of the collective memory of that era. At the time, Americans worried that life as they had come to know it—big cars, big suburban homes, and boundless consumption—was over. John Updike’s title character Rabbit Angstrom summed it up best when, surveying his car sales lot, he thought, “The great American ride is ending.”1

Part of what made this a “crisis” was the sense that it happened all at once. The crisis began when the Arab producers of the Organization of Petroleum Exporting Countries (OPEC) put in place an embargo on oil exports to the United States in October 1973 and threatened to cut back overall production 25 percent. Led by Saudi Arabia, these Arab states sought to retaliate for President Richard Nixon’s support of Israel against an attack from Egypt and Syria in the Yom Kippur War. The oil sheikhs wanted to change American foreign policy, making it less friendly to Israel, and they also hoped they could wield their so-called oil weapon to raise the price of this precious commodity. With less oil on the market, prices would jump. Indeed, by December, the OPEC oil ministers had quadrupled the selling price of each barrel of their oil, telling buyers to take it or leave it.

As soon as they announced an embargo, one of President Nixon’s top advisers dubbed it “an Energy Pearl Harbor.”2 There were no bombs, no bloodshed, no loss of life. But the embargo stunned Americans, as if they had come under a surprise attack, if not an outright act of war, because of the serious implications for the economy and the country’s security. By 1973, Americans relied on oil for almost half of all their energy needs, and each day imports made up an expanding portion of the country’s supply. Americans were vulnerable to scarcity and shortages as well as to higher fuel prices, which rippled through the entire economy and plagued the pocketbooks of all consumers. Oil was both the lifeline of the economy and a vital resource for the country’s national defense. American oil had played a decisive role in the Allies’ World War II victory, and with the Cold War raging on, U.S. oil remained a top national security concern.

The news was also stunning because the public was generally not aware that the country imported any oil at all. The United States was still the greatest single producer of oil in the world, as it had been since 1901, when Spindletop, near Beaumont, Texas, became synonymous with a sometimes uncontrollable 150-foot-high gusher of black gold. But with the spread of cars, suburbs, and factories in post–World War II America, demand rose faster than supply. In 1970, U.S. oil fields reached their peak of production at 9.6 million barrels per day. Imports quickly filled the gap between what Americans produced and what they consumed, more than doubling in volume between 1970 and 1973, when the United States was importing 36 percent of its oil.

The embargo did not stop the oil tankers already en route from the Middle East from completing their journeys. But the Arab countries ordered the major oil companies operating in the Middle East, which included the American corporations of Exxon, Texaco, Standard Oil of California, Gulf, and Mobil, to halt any future shipments to the United States. These multinational corporations were powerful, but they were nothing without access to oil in the ground, which the OPEC members owned. No one knew for sure when the embargo would end; the White House was projecting a loss between 10 and 17 percent of the country’s gasoline supply. It was hardly a total shutoff, but the use of the oil weapon sounded a clarion call, ushering in a future world very different from the recent past. The gas lines that curled their way across the American landscape seemed to embody a mentality that was a far cry from the 1950s motto “Fill ’er up.”

In the winter of 1973–74, during the darkest days of the embargo, that sense of optimism, of unlimited bounty, was gone, replaced by doom and despair. The New York Times ran an article, one of a countless daily barrage, “For Gasoline, Little Is Certain but High Prices.” It featured an eighteen-year-old nursing student from Westchester County, New York, who was searching for fuel at the height of the shortage. After visiting her sick mother, she got in her first gas line at 7:00 a.m., needing to get enough fuel to get back to college. By the afternoon, she still had not had any luck. “They closed down four lines on me this morning,” the young student complained. When she finally landed in her last line, where she would have to wait for another hour, she “craned her neck toward the service station and gazed disconsolately at the 50 cars ahead of her, all waiting for a turn at the gas pump.”3

Despair bled easily into anger, especially at the American oil companies. Feeling they had few choices but to comply with the Arab producers, these companies cut off shipments and cut back overall supply. But the public found it hard to believe that the oil sheikhs could tell these corporations—the biggest, most influential companies in the country ever since the days of John D. Rockefeller—what to do. Instead, the vast majority of Americans, something like three-quarters of the public, insisted that Big Oil, as the industry was disparagingly known, created an artificial shortage. Rumors spread that tankers were waiting offshore, hoping to jack up prices as pumps ran dry.

This sense of crisis, whether people believed it was real or manufactured, quickly triggered a panic, with drivers topping off at every chance, waiting in line so long they ran out of gas. These panic purchases magnified the shortage, because drivers chose to put gas in their car tanks rather than leave it in storage in the ground. A New York Times columnist captured the crisis mentality, writing, “‘Chaos is come again,’ to borrow a phrase from Othello, but our chaos arises from an ‘energy crisis’ about which no two people, even the best authorities, seem to agree, and this disagreement encompasses the legitimacy of the ‘crisis,’ its extent, and what to do, and how and when.”4

If Americans were mad at the oil companies, they were even madder at the nation’s politicians who seemed unprepared and unable to resolve this crisis. “We appeal to you for relief from the disastrous fuel situation in Central New Jersey,” a group of housewives wrote to the president.5 By now, Nixon was already suffering politically because of his troubles from the Watergate break-in and the White House cover-up. The panic at the pump threatened greater political trouble for the weakened president. A resident of Fair Lawn, New Jersey, complained, “What is worse than ‘Watergate’ and all the various charges against the President? Answer—the gas crisis in Bergen County.”6

Americans sent letters to the White House because they expected the president to do something. That mind-set reflected the persistence of a New Deal mentality, one born in the depths of the Great Depression, that not only saw markets as malleable and businessmen as manipulative but also regarded the president and his policy makers as both responsible and capable of providing relief. “Government has final responsibility for the well-being of its citizenship,” said Franklin Roosevelt. In this view, dominant for much of the early postwar era, politics and the market did not exist in separate spheres but were one; wages, prices, profits, production—all resulted as much from negotiations in congressional hearing rooms and in the halls of Washington’s regulatory agencies as from the wheels of commerce.

Politics and policy making were also central to recessions, unemployment, and inflation, according to this view. In 1952, in American Capitalism, the liberal economist John Kenneth Galbraith described what he saw as the secret to the country’s success. The nation had a political economy that worked to generate robust levels of steady economic growth. He stressed the importance of countervailing powers—the trade unions and consumer groups, which bargained with the nation’s businessmen—all under the watchful eye of Washington politicians who stood ready to provide a stabilizing force in the marketplace. Without this system, he wrote, “private decisions could and presumably would lead to the unhampered exploitation of the public.”7

The energy crisis ultimately helped shift American politics to the right in the 1970s and bring an end to Galbraith’s conception of the American system. This seismic shift in national politics, however, was anything but inevitable. When the crisis began in 1973, the strong arm of the New Deal seemed intact for much of the country. That outlook—one that saw government as the solution to national crises—resulted in a dramatic expansion of government intervention, especially as liberals in Congress advanced policies to place price controls on oil and create the Department of Energy (DOE) as a massive new government agency. The problem of shortages caused by international events was new, but the political solutions—from price controls to rationing to antitrust initiatives to break up Big Oil—were old. Washington was stuck in the past.

Richard Nixon himself was not a New Dealer, but he lived and governed in this world. Three weeks into the Arab embargo, on November 7, 1973, he delivered a nationally televised address from the White House to confront the energy crisis head-on. The centerpiece of the speech was what Nixon called “Project Independence.” The goal, Nixon declared, was for the country to achieve energy self-sufficiency by 1980. For the rest of the decade, the object of American energy policy was to become independent. Only by freeing itself from reliance on unstable sources of foreign oil, according to this view, could the country reclaim and maintain its global hegemony, economic vitality, and national security.

By naming the solution, the president was also implying the problem: dependence. Not only was our economy threatened, but so too was our status as the global leader of the free world. The Arab embargo heightened Americans’ sense of vulnerability. The day before the embargo began, the Nobel Peace committee awarded Henry Kissinger the prize for his successful cease-fire negotiations in the Vietnam War. The peace accord was not an American triumph but rather a sign of substantial defeat, and the Arab embargo solidified the idea that America was indeed in decline. When OPEC announced the embargo, few thought that a military solution was on the table. After a decade of failed policies in Vietnam, the country was war weary, and the United States had no regional military presence in the Middle East and feared triggering hostilities with the Soviets, whose military stood in closer striking distance. Still, the idea that the leaders of what Americans regarded as small and powerless countries could attempt to blackmail the United States seemed hard to fathom. In a single act, the Arab oil producers were bringing this superpower to its knees.

Even worse, the nation’s political leaders appeared unable to devise any effective domestic policy. Project Independence was a grand vision. But there was little consensus on how to achieve self-sufficiency. The result was a pitched political battle, an epic conflict that got to the very heart of how much government was good for the economy and forever changed American politics. Some, like Nixon, called for greater production of domestic energy and the scaling back of environmental and economic regulations, many of which he had put in place himself, under pressure from a Democratically controlled Congress. An ambitious generation of young conservative insiders, all working within the administration of Nixon and then in that of his successor, Gerald Ford, said that government restrictions made it more difficult, and more expensive, to discover and refine oil, burn coal, and build nuclear power plants. Arriving in Washington for the first time, these young conservatives, free from New Deal influences, argued that it was these very regulations that thwarted American production of energy and made the country vulnerable. Without them, said their champion Milton Friedman, there would be no crisis. “Big brother is the problem, not the cure,” he wrote in the pages of Newsweek.8

Others called on the nation to use less oil. The Democratic senator Henry Jackson, who was both a committed environmentalist and a foreign policy hawk, as well as a longtime New Dealer, supported federally funded development of alternative energies. “Oil supplies are limited,” he warned. “By failing to act now to develop alternative sources of energy we are prolonging the period during which the supply and price of imported oil can be dictated by whoever might happen to control a handful of Persian Gulf nations.”9 In addition, Jackson promoted a policy of conservation, even government-enforced rationing if necessary. He found it appalling that Americans could not fight back against the oil weapon by curbing their seemingly unbounded appetite for petroleum. “We need to ask whether we must put ourselves in hock to Middle Eastern sheikdoms to keep roads clogged with gas-hungry automobiles,” Jackson said.10

But neither approach—greater production or greater conservation—gave Americans the immediate satisfaction they wanted. The motorists, the country’s truckers, the factory workers, the housewives—all wanted Washington to stare down the big oil companies and, if necessary, the Arab sheikhs, and demand more oil, and fast.

For nearly the next two decades, the nation’s leaders devoted enormous political capital to make the United States more independent, but they failed. While conservatives advanced their free-market agenda, their ideological opponents in the Democratic Party divided among themselves. Old New Deal liberals wanted the government to guarantee fair and equitable access to affordable energy; it was up to Washington to give American consumers the oil they wanted and, as many saw it, deserved. At the same time, environmentalists called on Americans to scale back and use less. Jimmy Carter, when he came into office, declaring the energy crisis the moral equivalent of war, said that it was his job, as chief executive, to make sure Americans changed their wastrel ways to save not only the environment but ultimately their souls.

From within their perches of power, conservative Republicans challenged all kinds of governmental activism. While they drew support from conservative grassroots activists, intellectuals, and think tanks, these Washington insiders knew better than anyone how hard it was to transform American politics, especially when shortages and high prices made Americans demand help from government, confounding conservatives’ hopes for a frontal assault on liberalism. To them, there would be no energy crisis if the government got out of the way and let the market work. Democrats from oil-producing states agreed. These political battles led to a stalemated Washington where the result was greater imports and a public that grew frustrated with the lack of effective leadership on this fundamental issue.

As the pages that follow show, the failure of the nation’s politicians to address the energy crisis contributed to the erosion of faith that Americans had in their government to solve their problems. There were many causes of that erosion, but the energy crisis, with its long gas lines, soaring prices, and sense of vulnerability, was an important object lesson in the limitations of governmental power.

If the Vietnam War and the Watergate scandal taught Americans that their presidents lied, the energy crisis showed them that their government didn’t work. Even worse, according to conservatives, by the very act of trying to help, Washington policy makers made things worse. When Ronald Reagan was governor of California during the Arab embargo, he said the federal government created the energy crisis. When the gas lines returned in 1979, in the wake of the Iranian Revolution, the country was ready to listen.

As Washington proved unable to design an effective national energy policy, the inability to develop resources and conserve made Americans more dependent on oil from abroad. The story of the 1970s energy crisis truly culminated in February 1991, when George H. W. Bush sent ground troops into war to repel Saddam Hussein and his Iraqi army’s invasion of Kuwait, which Bush believed threatened a cutoff of Middle Eastern oil. This short war is now seldom discussed, but it proved a decisive marker and transformed the political and military content of the energy crisis. Washington would now solve the problem of energy dependence not by reforming American energy production and use but instead by sending troops abroad to protect what President Bush called the “security and stability of the Persian Gulf.” With the United States importing more than half its oil supply, Project Independence had clearly failed. The solution to failed domestic policy at home was, as it turned out, military intervention abroad. As a New York Times reporter concluded, “Mr. Bush has replaced energy policy with foreign policy.”11

Today, and for the time being, America seems awash in oil and gas. It is perhaps no coincidence that the current skepticism about our military commitments in the Middle East coincides with the very increase in domestic production that many in the 1970s hoped but failed to spur. In 2016, it seems at last that the market, with production nearly at record levels, has promised to bring security, if not independence.

But all that lies ahead. We begin our story in an earlier moment of optimism with a young George Bush, right after World War II, arriving in the oil fields in West Texas at a time when the future looked bright.


Copyright © 2016 by Meg Jacobs