BRIAN: A few minutes ago, we were discussing the ways that active government intervention had always been necessary to keep oil prices high enough to ensure that there were profits to be made by the producers. At the same time, however, it’s been necessary to keep oil prices low enough so that American consumers could continue to, well, consume it.
One way to do that was to skimp on the revenue that was shared with those who owned the land above oil. And that’s where our final story begins today.
ED: By the 1950s, many American companies had set up shop in the Middle East. These companies were technically partnered with the oil producing companies, but, in reality, says author Andrew Scott Cooper, nations, such as Saudi Arabia, were usually subservient to the whims of the oil giants.
ANDREW SCOTT COOPER: This naturally generated an enormous amount of antagonism and resentment on part of Iranians, Libyans, Saudis, who quite rightly said this is our resource you’re exploiting, and you’re telling us how much money we’re going to get paid for it. This is wrong.
ED: Unfortunately for them, there was only so much those countries could do about it. They got together to form OPEC in 1960. Now Americans, by that time, were consuming plenty of foreign oil, but the US was still also the world’s largest oil producer. And President Eisenhower had instituted quotas ensuring that Americans didn’t become too dependent on imported oil.
BRIAN: All of that changed in 1973. BackStory producer Nina Earnest spoke to Andrew Scott Cooper about the year that ushered oil into the modern age.
NINA EARNEST: 1973 started off with a harsh winter. Many Americans were using oil to heat their homes, but it just didn’t seem like there was enough to keep everyone warm. And why was that? Domestic oil wells had hit max production a few years earlier in 1970. And with Eisenhower’s quantitative import controls still in place, supply had sort of plateaued. And so by the beginning of 1973, Americans were very much feeling the discrepancy between how much oil the country had and how much it wanted to use.
MALE SPEAKER 12: The energy crisis in the United States grows more acute daily. Thousands and thousands of private homes have been without heat for lengthy periods this winter. The government has–
ANDREW SCOTT COOPER: Universities shut down. Schools shut down. Airports shut down. Airlines flying from New York to California were forced to stop in Pittsburgh and refuel. They didn’t even have enough fuel to get from one side of the country to the other. And so through 73, you see this awareness that we have a real problem on our hands.
RICHARD NIXON: America’s energy demands have grown so rapidly that they now outstrip our energy supplies. As a result, we face the possibility of temporary fuel shortages and some increases in fuel prices in America.
NINA EARNEST: That’s President Richard Nixon. He gave this speech, the first presidential address on energy, to Congress on April 18 of that year. In it, he laid out his ideas to combat the mounting fuel shortage. And his number one plan–
RICHARD NIXON: I am ending quantitative controls on oil imports and establishing a national–
ANDREW SCOTT COOPER: And that meat that the US could now import as much oil as it wanted to from any other country in the world.
NINA EARNEST: So how much oil did they buy? Well, a lot. Once the quotas were gone, imports surged. By summer of 1973, the United States was bringing in 6.2 million barrels per day, up nearly two million from the year before.
ANDREW SCOTT COOPER: So you can see that, on the one hand he’s trying to deal with a short term problem, and he’s got a short term fix, but he creates a whole other long term issue here of dependency on foreign oil.
NINA EARNEST: When oil guzzling America jumped into the world market, a tight supply got even tighter. Prices started to climb, and the shortage got worse.
ANDREW SCOTT COOPER: Over the summer of 1973, there were already lines forming outside gas stations. The country is extremely vulnerable to any interruption in the fuel supply, and it is going to take one trigger event to cause a national crisis.
NINA EARNEST: That trigger event came in October, October 6 to be exact.
MALE SPEAKER 13: There is artillery fire on the Suez Canal, the Egyptian threat. And air activity over the Golan Heights.
NINA EARNEST: It was the start of the Yom Kippur War, when Egypt and Syria led an Arab assault against Israel. That’s when Middle East oil producers got the idea to try and sway the developed world away from supporting their enemy.
MALE SPEAKER 14: The oil producing countries of the Arab world decided to use their oil as a political weapon. They will reduce oil production by 5% a month until the Israelis withdraw from occupied territories. If the Arab countries keep that pledge, it would reduce their production by almost 50% in one year.
NINA EARNEST: Nixon brushed this threat off. Just a few days later, he authorized Congress to send a huge 2.2 billion aid package to its ally, Israel. And that did not go over so well with the Arab states. In retaliation, countries like Saudi Arabia completely cut off oil supplies to the United States. The message was clear. Until you stop supporting Israel, we’re going to stop sending you oil.
The Yom Kippur War was over by the end of October, but the embargo’s effect was just beginning.
MALE SPEAKER 15: A country more accustomed to surplus than shortage has seen some strange events lately.
ANDREW SCOTT COOPER: When the fuel runs out, we forget that basically our whole way of life can ground to a halt. There were stampedes in the United States in grocery stores. And there were shortages of all sorts of consumer products.
MALE SPEAKER 16: When people go to the grocery store and find there’s no food on the shelves and can’t find anything to wear to in stores, then they’ll realize what’s going on.
MALE SPEAKER 17: We need a revolution, really. It’s not just diesel fuel. It’s everything.
ANDREW SCOTT COOPER: There were riots. People pulled guns on fellow drivers outside gas stations. The National Guard was called out to escort fuel tankers driving across country, because fuel tankers were being hijacked.
NINA EARNEST: All of this caught the United States off guard. Americans had come to take cheap oil and the bounty associated with it for granted. And on the world stage, well, as a superpower, they just weren’t used to being told what to do by seemingly weaker countries.
ANDREW SCOTT COOPER: But in 1973, it became very apparent that a country called Saudi Arabia with an autocratic monarch and only 4.5 million people becomes a petrol power, and is able to exert influence over the United States. Suddenly, the world’s greatest power doesn’t appear to be the world’s greatest power again, at least not economically.
NINA EARNEST: At the end of December, foreign oil producers drove the point home that they were finally turning the tables after decades of exploitation. At a meeting in Tehran, OPEC doubled oil prices in one fell swoop from nearly $6 to $12 a barrel. The Shah of Iran, who announced the decision, made the intention clear.
ANDREW SCOTT COOPER: He said you are going to have to live in our world now. You can no longer exploit us. He says the industrial world will have to realize that the area of their terrific progress and even more terrific income and wealth based on cheap oil is finished. And that’s a lesson that Western governments have never forgotten.
NINA EARNEST: Which leads to one final first of the year. In 1973, there seemed to be this realization. If the United States has to look beyond its own borders for oil, it won’t have real control over its foreign policy. So in November, Nixon announced a new initiative for the United States, energy independence. The idea was to wean America off foreign oil by 1980. And even though Nixon’s project independence failed, the dream did not die. In the decade since, President after President and Congress after Congress have been in search of this elusive ideal. Four decades later, it still stands true that declaring independence is a lot easier than actually achieving it.
RICHARD NIXON: In the last third of this century, our independence will depend upon maintaining and achieving self sufficiency in energy.
JIMMY CARTER: Beginning this moment, this nation will never use more foreign oil than we did in 1977. Never.
RONALD REAGAN: By deregulating oil, we’ve come closer to achieving energy independence and helped bring down the cost of gasoline and heating fuel.
GEORGE BUSH: America is addicted to oil.
ED: Nina Ernest is one of our producers.