The Biden administration faces an oil crisis the likes of which haven’t been seen since the price shocks of the 1970s.
That troubled decade is burned on the American imagination with its Nixonian price controls to slash petroleum costs, gasoline shortages, trucker strikes and Middle Eastern conflicts.
But could it also serve as a guidebook, or cautionary tale, for today’s energy challenges? Some experts think so.
“If we look at the ’70s as a whole and don’t make too many glib assumptions, I think there are a lot of really good lessons there that could get us through this,” said Jay Hakes, who served as administrator of the U.S. Energy Information Administration under President Bill Clinton (D).
Oil historian Daniel Yergin said earlier this month in an interview with Bloomberg that the current energy crisis is “potentially worse” than the ’70s, rippling across not just oil but natural gas and coal.
There are some obvious similarities between now and then: Gasoline prices are high; oil supplies are tight; and President Joe Biden, like former Democratic President Jimmy Carter, is under political pressure from all sides to curb inflation.
The comparison between the two presidents is popping up with pundits and politicians. Rep. Jim Jordan (R-Ohio) tweeted last year that Biden “is the new Jimmy Carter,” for example.
But there are major differences between today’s crisis and the 1970s, including that oil prices are unregulated now and the supply crisis pushing up prices is partly a political choice. Also, both interest and inflation rates are still significantly lower than decades ago.
“Anyone who lived through the economic conditions of the late 1970s should laugh at the suggestion that we’re in the same spot,” Ed Kilgore wrote in New York magazine in October.
Today’s challenges also have an element that was less in the forefront in the 1970s: climate change, combined with a deeper call from the left to use this time to shift away from reliance on fossil fuels.
What is clear is that the 1970s was a pivot point for energy.
Political actions following the Arab oil embargo in 1973 and 1974 and the Iranian Revolution in 1978 and 1979 shaped the energy landscape for decades. They helped bring about the 55 mph speed limit, the Department of Energy and the Strategic Petroleum Reserve.
Moreover, the 1970s’ energy upheaval wasn’t brief. Issues that dominated the decade like higher energy costs hammered three consecutive presidential administrations, and their struggles to respond would shape their political careers.
Fifty years on, Biden is juggling his own energy crisis, following his embargo on Russian crude oil as retaliation for President Vladimir Putin’s war against Ukraine.
The cutoff arrived amid already inflated energy prices from post-pandemic global supply shortages. And it could get worse as the U.S. heads into high summer demand for gas. Meanwhile, European leaders are in a Catch-22 — caught between the merits of cutting off oil and gas dollars fueling Putin’s war chest and their own need for Russian energy.
As was the case decades ago, how these dynamics shake out could shape energy policy for years.
Some say Russia, the globe’s third largest oil producer, could be cut out of the global supply picture “forever,” a seismic shift in the energy landscape.
“Wakey, wakey, we are not going back to normal business in a few months,” well-known hedge fund manager Pierre Andurand told the Financial Times Commodities Global Summit in Lausanne, Switzerland, late last month. “I think we’re losing the Russian supply on the European side forever.”
In the U.S., the oil crisis offers the country two options: a shift away from fossil fuels or an entrenchment in petroleum dependence, said Matto Mildenberger, a political science assistant professor at the University of California, Santa Barbara, who studies the politics of climate change.
“I think in five or 10 years, we’re gonna look back at this moment and say that it was a critical moment,” he said.
But the energy outlook is also cluttered, said Antoine Halff, former chief oil analyst at the International Energy Agency, an institution created in response to the Arab oil embargo.
“We’re in a new stage, with a transition, more interesting competition … between oil, gas, hydrogen, renewables and much more complex markets,” he said.
If the 1970s set off the energy architecture of the last 50 years, now is the beginning of something else, less predictable and difficult to forecast, he added.
With the U.S. facing an energy upheaval that promises to persist for the foreseeable future, here are three lessons learned from the 1970s energy crisis, a period that continues to shape America’s perception of oil and federal policy.
If the 1970s offered one political takeaway, it’s that high gasoline prices hurt politicians — particularly presidents, experts said.
Meg Jacobs, a senior research scholar at the Princeton School of Public and International Affairs, said this phenomenon was particularly notable during Republican President Richard Nixon’s tenure, 1969 to 1974, and later with Carter, 1977 to 1981.
The U.S. oil market was already under stress from limitations on foreign oil imports when Nixon instituted price controls on crude oil in 1971. Jacobs said the move was calculated to boost his popularity ahead of the 1972 election by making it cheaper for everyday Americans buying gasoline.
Nixon “understood this was a gut level issue and was going to be hurtful to him politically,” she said.
The price controls backfired and are credited with leading to gasoline shortages and setting up a nightmare scenario for the oil market when the Arab oil embargo hit shortly after. The crisis would help spur one of Nixon’s greatest challenges: runaway inflation.
In the history books, Nixon’s involvement in the Watergate scandal and impeachment defined his second term, but it was the economic crisis caused by high energy prices that likely tanked his popularity, leaving him vulnerable to the political pressure, said Hakes, who is also the former director of the Jimmy Carter Presidential Library.
“I’m not sure Nixon would have been impeached … if the inflation hadn’t been so high,” he said.
But no single president is marred by the 1970s oil crisis perhaps as much as Carter, a Southern Democrat who lost his bid for reelection in 1980.
Carter unleashed a flurry of actions to respond to energy insecurity in the long term. He urged Americans to conserve energy, famously telling people to wear a sweater rather than crank the thermostat and installing solar panels on the White House. But he also created the Department of Energy and poured money into research and development of alternative energy like solar.
“We simply must balance our demand for energy with our rapidly shrinking resources. By acting now, we can control our future instead of letting the future control us,” he said in a fireside address to the nation in 1977.
But Jacobs said “it’s a big, sort of permanent blot on his record that he could not sort of figure out how to deal with the panic at the pump in the summer of 1979.”
“Long gas lines and high prices and social unrest helped give Ronald Reagan momentum when he ran in 1980 against Jimmy Carter,” she added.
Similarly high energy prices could be contributing to lagging poll numbers for Biden. According to Gallup, Biden’s approval rating in March was lower than Carter’s at an equivalent spot in his presidency. Biden’s popularity on average also has trended lower than other presidents on average to date.
Biden seems to understand the hefty political risks. The president was first elected to the Senate in 1972 and is a creature of that era.
“I know how much this hurts,” the president said, sympathizing with Americans, last month when he announced a massive draw on the Strategic Petroleum Reserve. Then shifting the blame to the East, he added: “Putin’s price hike is hitting Americans at the pump.”
But one oddity of this energy crisis that’s starkly different from the 1970s is that it’s been partially created by the U.S.
Biden’s refusal to purchase Russian oil was an attempt to weaken Russia in its Ukrainian war by clipping its oil revenue. It was popular among both Democrats and Republicans in Congress, even though it meant taking additional supply out of the global picture voluntarily at a time of already inflated energy costs.
That makes it different from the Arab oil embargo that worsened the ’70s energy squeeze, when OPEC cut off America from its oil supply as retaliation for the U.S. supporting Israel in its war with Egypt and Syria.
“Biden keeps saying ‘Putin’s price hike.’ It’s not, not directly, because Putin never tried to withhold exports to the West,” Halff said. “It is us, as consumers,” lowering supply, he added.
There are solutions but just as many risks
Another difference with today’s oil squeeze is that many politicians and policymakers today have the benefit — or curse — of experience, having roots in the ’70s and being shaped by that time.
“There’s an entire generation, including economists, who remember the inflation of the ’70s and the way in which it was driven in large part by oil prices. And that sort of looms large in policy decisions,” Jacobs said. “The concern is not just energy insecurity, but that it’s going to sort of lead to global economic unrest.”
But the lessons of the 1970s are nuanced and can be interpreted in several ways. Contemporary politicians scrambled to yank down energy costs, save their political skin and shift dependence away from foreign oil all at the same time.
For politicians today, a message from decades ago is that sweeping proposals can make a lasting difference and become popular, but also be political minefields. It’s the kind of dilemma being grappled with today over whether to aim to move large energy and climate packages like “Build Back Better” or move more piecemeal with energy policy.
For example, in the 1970s some choices backfired, like the Nixon-era price controls and allocation oversight. Others didn’t.
The Corporate Average Fuel Economy standards of 1975 were put in place to improve fuel efficiency in cars and light trucks. They represented a sea change that ripples across the energy sector today.
“We use much more energy than we did. But we do it much more efficiently,” said Jacobs.
Other lasting impacts of policy choices include the formation of agencies like the Department of Energy as well as the International Energy Agency, an attempt to counterbalance OPEC with its system of strategic reserves of member countries and novel focus on shared data to introduce more transparency and research into oil markets. And in 1975, under Republican President Gerald Ford, the U.S. enacted a law to create its reserve of crude oil as a buffer against manipulations of the global crude supply.
All of this occurred with the hope that the U.S. would never again be held over a barrel for not having enough of the global commodity that fuels modern life: oil.
Hakes argued that today’s politicians face a similar challenge.
“It’s a Shakespearean tale,” he said. “They’re confronted with this big problem: You can take the easy road and kind of make the problem worse. And maybe that’ll even help you in the next election. … Or you can invest in a future.”
Today, the political responses to the oil crisis have been partisan and fraught. But Washington is again weighing immediate concerns like gasoline prices for consumers and inflation versus long-term objectives, like destabilizing Russian oil dominance and shifting away from fossil fuels.
Biden’s primary action against rising energy costs has been to release strategic reserves onto the market at a rate of 1 million barrels a day over the next six months. It’s not a long-term solution, but a stopgap measure until American producers can rebound and drill for more oil.
But Halff noted that the release from the SPR, a smart policy move in his opinion, shows how fractured the current energy market is by “mixed signals” from policymakers.
“It’s been hard to invest in oil and gas in the past few years,” he said, noting the pressure to pivot from the fossil fuels. The result is a private sector that’s depleted and that’s been unable to ramp up, he said.
Republicans have seized on this dynamic, using it to argue for more oil and gas. Biden too has called for more oil and gas drilling in the U.S. and promised to increase liquefied natural gas exports to Europe.
Congress is weighing its own ideas — like a windfall tax on oil operators and a gas tax holiday proffered by some Democrats to give consumers relief. But many on the left are resisting policy to increase fossil fuel reliance over near-term price shocks.
Republicans are nonetheless championing more U.S. production as a fail-safe against global shifts in supply and have advanced proposals to buff up existing laws that require the regular sales of crude oil drilling rights on public lands and offshore.
All the while, Washington is eyeing the midterm elections in November, when energy prices are expected to play a central role in campaign battles.
To transition or not to transition?
When Reagan came into office in the early ’80s, he did something that historians love to retell. He removed Carter’s solar panels from the White House.
It was a symbolic shift away from the former president’s message of conservation and renewable energy. And it was a doubling down on American fossil fuel production that coincided with slashing budgets for solar and clean energy set up during the Carter era.
Jacobs said the ’70s era failed to result in enduring clean energy policy despite interest at the time.
Now climate hawks are watching the Biden response to the oil and gas crisis with fears that it could similarly create a backlash, locking in oil and gas for years.
“If the public behaves as it has in past price surges, it will pressure Congress and the White House to take action,” said Eric Smith, an expert in environmental politics at UC Santa Barbara. “They will support more oil drilling.”
He added, “That is a problem for Biden, who has promised serious climate action but has not been able to deliver much yet.”
Some recent polls suggest that is happening. A Gallup poll released late last month, for instance, suggested that some support for climate policy could be waning amid high energy prices (Energywire, March 31).
At the same time, Biden’s recent push for oil and fossil fuels poses its own risks of alienating the left flank of his party that has pushed for policies to dramatically cut emissions.
But an even larger risk to climate policy lies in wait later this year, if high energy prices sour public support for Democrats in power.
“When prices go up, voters are upset and that helps the party that does not control the White House in the next election,” Smith said in an email. “When things go wrong, some people blame it on the president and their party. It will result in Democrats doing worse at the polls in November and more Republicans in Congress.”
If that is the case, climate action that is being pushed now by the left and the Biden administration will face political gridlock in Congress by next year, he said.
Mildenberger of UC Santa Barbara said that potential political backlash would be a “tragedy.”
“We’re locked into a system of fossil fuels that time and time and time again is being shown to be actually quite a vulnerable, fragile system,” he said.