Energy Crisis Redux

By Gordon Hopkins “Those who cannot remember the past are condemned to repeat it.”It is perhaps one of the most quoted quotes ever that wasn’t originally said by Yogi Berra. Most people seem to think the first person to say this was Winston Churchill. In fact, it first appeared in 1905 in American philosopher George Santayana’s five-volume magnum opus, “The Life of Reason.”What Mr. Santayana didn’t realize was that, even if we do learn from history, it sometimes repeats itself anyway. To illustrate, let’s jump back to October of 1973. In the aftermath of the Yom Kippur war, OAPEC (Organization of Arab Petroleum Exporting Countries) announced a total oil embargo on any country that had supported Israel in any way during that war.In the early 70s, demand for oil was increasing and U.S. production was declining, so President Nixon eliminated the Eisenhauer-era quotas on foreign oil. In an interesting future echo, critics of the quotas called it the “Drain America First” policy. The result was a drastic increase in, and dependance on, oil imports. So, when the oil embargo hit, it was a shock to the system. One of the indelible images of the 1970s are those loooooong line at the pump. Fuel shortages led to panic buying. A rationing system was put in place where people could only fill up at the pump on certain days, depending on if your license plate ended in an odd or even number. I knew a number of people who got around the system by swapping licensed plates. By the time the embargo was lifted in March of 1974, the price of oil had increased nearly 300 percent.Now let’s jump to 1979 and the second oil crisis, caused by a drop in production in the aftermath of the Iranian Revolution, aka the Islamic Revolution. Again, prices jumped and lines at gas stations wound around the block. These incidents were pointed to by those who sought to increase American-produced oil. These oil crises, they said, were the direct result of our dependency on foreign oil. It was a perfectly reasonable argument. It seemed like common sense. If American produced more of its own oil, we wouldn’t have to pay more for oil if production overseas dropped.Well, the United States is now the largest oil producer in the world, dwarfing even the next highest producers; Saudi Arabia and Russia. This morning, the cost of oil per barrel in now more than $100. With the ongoing war in Iran and the bottleneck at the Strait of Hormuz, all indications are that prices will only get higher. But why? After all, we produce more oil than anyone else.Yeah, but unfortunately, oil prices are set by the world market. If the oil supply drops anywhere, the price increases everywhere. The only real lesson in all of this is, beware of simple-sounding solutions to complicated problems.

Pamela Kluver

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