When Arab oil exporters imposed their embargo on the U.S. and the Netherlands in October 1973, George Schultz noted that the United Kingdom and France faced hardly any problem accessing crude oil supplies.Schultz was Secretary of the Treasury at the time and had earlier been in charge of Nixon’s Cabinet Task Force on Oil Import Control.
The United States too, despite the embargo’s intent, faced few problems accessing crude oil supplies–the effect of the embargo was mostly to rearrange tanker routes, at modest additional cost to U.S. importers, and import levels were barely affected. Supplies were not too affected, but world oil prices jumped. The oil import allocation system was not up to the challenges presented by the needed market response, and the result was an uneven pattern of regional shortages and surpluses that were difficult to correct: movements across U.S. government planning regions required government permission.
As I mentioned yesterday, it was the import allocation system in combination with oil price controls that turned the world oil price increase into an energy crisis in the United States.
Economic problems often create political problems for the President. But Nixon, increasingly entangled in Watergate scandal revelations in late 1973, found the growing energy crisis to be a useful political device. On November 7, 1973, the President announced “Project Independence”:
Let us set as our national goal, in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy sources.
Let us pledge that by 1980, under Project Independence, we shall be able to meet America’s energy needs from America’s own energy resources.
No people in the world perform more nobly than the American people when called upon to unite in the service of their country. I am supremely confident that while the days and weeks ahead may be a time of some hardship for many of us, they will also be a time of renewed commitment and concentration to the national interest.
Nixon’s simple political narrative–bad Middle Eastern oil producers were a threat to our economic security–was readily accepted and politicians have seized onto “energy independence” slogans ever since.
Nixon’s popularity had peaked near 67 percent at his second inauguration, January 1973, then began sliding down throughout the year. The Project Independence speech coincided with a stabilization of his popularity around 25 percent, where it remained until his resignation in August of the next year.
RELATED: Peter Grossman’s book, U.S. Energy Policy and the Pursuit of Failure, hammers hard on politician’s invocation of Apollo and Manhattan Project analogies when announcing outsized energy research goals. There is an immense difference, Grossman explains, between pursuing a known technological task at incredible expense and pursuing speculative scientific developments with the goal of fostering a new commercial energy product (fusion power, synfuels, wind power, solar power, cellulosic ethanol fuels, etc.). If the book could only cure politicians of this one failing, it would have been worth Grossman’s efforts in producing it. Of course, as Grossman points out, there are many other political failings as well.