A few weeks back George Schultz posted a few happy memories on a Hoover Institution website from his time heading Nixon’s Cabinet Task Force on Oil Import Control way back in 1969 and 1970. The task force was charged with reviewing the existing mandatory oil import quotas, first imposed under the Eisenhower administration, and recommending reforms if needed
At the AEI Ideas blog, Ben Zycher finds Schultz’s recollections of that effort maddening off point. Zycher concludes there is “something about oil imports or ‘dependence’ that has a deeply corrosive effect on clear thinking, a commodity all too rare in policy discussions generally, and in the Beltway in particular.”
I found a copy of the task force’s report at the library* to see what the fuss was about. Overall the report looks pretty comprehensive, and the process of preparing the report seems open and thorough (Schultz mentions receiving 10,000 pages of comments in response to the task force’s list of questions published in the Federal Register on May 22, 1969, and these were followed by task force site visits and extensive deliberations). The majority on the task force recommended scrapping the import quotas, imposition of a tariff that approximated the difference between the then current domestic and world oil prices, then periodic reductions in the tariff to bring the domestic price down to the world price over time.
I noticed how far from prescient the report was about how world oil markets would actually change during the 1970s. Forecasting being hard, and all that.
At the time the Texas Railroad Commission, with the help of the Interstate Oil Compact, import quotas and other supportive federal policies, limited domestic production to keep crude oil prices up in the U.S. Current oil prices were then around $3.30/bbl in the United States, and the task force’s proposed policy of shifting from import quotas to a slowly declining import tariff was deemed likely to yield prices drifting down to $2 over a decade. A dissenting view, included at the end of the report, objected to the tariff approach on the grounds that the lower prices expected would harm the domestic energy industry and therefore be bad for national security. Things went a little differently.
Of course the text frequently points out the hazards of prediction. Many things could happen, it acknowledged, and the report considered several seemingly-plausible scenarios within which to consider the policy alternatives. In any case, Nixon shelved the task force report, imposed price controls on oil the next year, then as energy shortages loomed in early 1973 he abolished the quota system and implemented an import allocation program to ensure that all regions got (the Nixon administration’s idea of a fair share of) access to cheaper imports.
It was this cumbersome oil import allocation system, combined with continued federal oil price controls, that created an energy crisis out of the sharp boost in world oil prices in late 1973. All in all, the task force’s recommendation would have been superior to Nixon’s actual policies.
*Actually, since I have a great librarian, I just emailed him and was able to pick it up at the library’s front desk the next day. (I could have had it delivered to my office in two or three days, but I’m an impatient person.)