In the 16th century, the Mogul Emperor Akbar the Great decided to erect a new capital for his empire on the dry plains of northern India. Vast amounts of money were spent, and the best architects and artisans were hired to lay out its imposing squares and build its graceful, airy palaces. Virtually untouched by the centuries, Fatehpur Sikri still stands—a beautiful monument to bad planning. Just 15 years after it was completed, Akbar’s capital exhausted its water supply and was summarily abandoned.
History is full of such expensive errors, of cities and civilizations brought low because their leaders failed to exercise even ordinary foresight. Any good agronomist, for example, could have predicted that overplanting of semiarid land would lead to the vast Midwestern dust bowls of the ’30s. Anybody with ordinary intelligence could have discerned in the ’50s the potential for violence that resulted in the black explosions of the ’60s. No disaster, however, has been more visible from a distance—or caught people more off guard—than the energy crisis. The failure to head it off, despite loud and repeated warnings, may some day be considered America’s economic Pearl Harbor.
The basic problem was obvious to anyone who could read a simple line graph. For years, American consumption of oil has been rising faster than American production of oil. After the two lines crossed in the mid-’60s, the difference had to be made up by imports, with an ever-increasing percentage coming from Arab countries that disagreed with American policy toward Israel. The possibility of a cutoff was thereafter always present and predictable, and in hindsight, it is clear that the U.S. failed on every level to prepare for it.
It would not have taken the CIA to decipher Arab intentions. As far back as 1948, Arab nationalists were urging the use of oil as a political weapon in the fight against Israel. Two decades later, at the time of the Six-Day War, the Arab oil producers did, in fact, briefly cut off oil to the West. Their boycott did not succeed then because supplies outside the Arab world were still adequate, but the experience should have been warning enough that overdependence on such an uncertain supplier was foolhardy.
Many said as much. Wayne Aspinall, former Chairman of the House Interior Committee, said long before the current crunch, for instance, that he was “truly frightened by the potential conflict between pro-Israel sentiment in this country and our increasing reliance on Arab oil. I believe the U.S. is about to be caught in a Middle Eastern power play.”
Underlining domestic warnings, Saudi Arabia’s King Feisal was bluntly hinting as long ago as last April that unless the U.S. altered its Middle East policies, Saudi Arabia would begin to close the oil spigot. The hints were ignored, and Feisal sent his oil minister, Ahmed Zaki Yamani, to Washington to give the word directly to then Secretary of State William Rogers. When Washington yawned, Feisal himself gave the alarm in interviews with American reporters.
Still, no one in authority seemed to realize the gravity of the situation. “Oil without a market . . . doesn’t do a country much good,” President Nixon blandly said only a month before the Middle East war broke out anew, seemingly unaware that in oil there is now only a seller’s market. Even in such a simple matter as providing adequate petroleum stockpiles, the U.S. was caught flatfooted. When the boycott began, Europe had, in proportion to its consumption, a far larger emergency supply in its oil bank than the U.S.
Why was Washington so oblivious to the Arab threat? Part of the reason may be that the memory of the brief and ineffectual 1967 Arab oil boycott made policymakers complacent. In fact, the Arabs had never been able to act together until this year, and there was at least some reason to think that they might never be able to. There seems, nonetheless, to have been an arrogant misreading of the Arab character, an inability to believe that the leaders of preindustrial societies could apply sophisticated economic pressures. “At the beginning of World War II there was this saying: ‘The Japanese cannot fly planes. They have bad eyes,’ ” says Peter Drucker, one of the country’s foremost management experts. “Well, here we were saying: ‘You know Arabs. They cannot cooperate.’ ” The biggest block to understanding, however, was probably the fact that neither Nixon nor his top advisers—or predecessors—seemed aware that the U.S. was on the brink of running short of energy even without the Arab boycott.
The shadows of the larger crisis have loomed over the U.S. for years. Back in the ’50s, the Paley Report, commissioned by President Eisenhower, pinpointed a coming shortage of oil and coal. The warnings increased in tempo in the ’60s. Biologist Paul Ehrlich was among the decade’s many Cassandras. “Using straight mathematics,” he now says, “what I was predicting then was foreseeable in the late ’40s and early ’50s. It was a case of simple multiplication—the number of people times what we were doing.”
By 1970 John A. Carver Jr., a member of the Federal Power Commission, was saying: “A crisis exists right now. For the next three decades we will be in a race for our lives to meet our energy needs.” Nor was the Nixon Administration unaware—or totally unaware. In a speech to oilmen in Dallas in the fall of 1970, Paul McCracken, then chairman of the Council of Economic Advisers, clearly sketched the genesis of the problem and recommended a reserve capacity in the U.S., just in case anything went wrong with foreign suppliers. It seems that nearly every body knew. “We could see it coming,” says James Boyd, who directed a federal commission that last summer predicted: “We conclude that an energy shortage, of severely disruptive and damaging proportions, is a distinct possibility in the immediate future.”
Had the U.S. moved soon enough, much could have been done to avert the crisis. Mass transit could have been encouraged over highway building, bringing great savings in fuel as well as comfort. Research into ways to remove pollutants from coal, or to turn it profitably into oil or gas, could have been pushed much harder; that would have enabled the country to make much greater use of its most abundant fuel. Building codes could have been changed to require more effective heat-conserving insulation of houses.
Instead, with remarkable consistency and perverse ingenuity, the nation kept doing the exact opposite of what was required. For almost two decades, Washington has been spending tens of billions of dollars to subsidize highway building. Almost all American office buildings have been constructed with closed air systems that require air conditioning no matter what the outside temperature, and cities like Las Vegas even brag about how bright their lights are. As a result, energy consumption in the U.S. has been growing at about 7% a year. If the whole world consumed energy at the American rate, the entire globe would run out of oil within ten to 20 years.
The errors go a long way back, but the Nixon Administration, as the one in office when the situation was approaching the crisis point, must bear a major share of the blame. As late as 1971, when energy warnings were already frequent and loud, Nixon persuaded Congress to remove the 7% excise tax on U.S.-built cars and temporarily slap a 10% tax surcharge on imported goods, including gas-saving small cars.
Although Nixon was the first President to issue a statement on energy, in the summer of 1971, he did little to meet immediate problems and nothing at all to coordinate often conflicting energy policies, which were divided among more than 60 federal agencies. Spotty shortages of heating oil last winter prompted Nixon to issue another energy message last April, but he still rejected talk of an immediate crisis and conveyed no sense of urgency about the need for conservation. Although he warned against “a false sense of security,” he nevertheless stated: “We should not be misled into pessimistic predictions of an energy disaster.”
“We talked about the need to be prepared for the worst 18 months ago,” remembers David Freeman, a former White House energy adviser and now head of the Ford Foundation’s Energy Study. “Maybe the solutions were so difficult that the policy makers avoided moving.” Adds Greenville Garside, head of another energy-study group: “There was a general lack of interest. The Administration, specifically the White House, paid no attention to the problem until after the election.”
The oil industry can share much of the blame. Its lobbyists have long succeeded in getting the industry special tax breaks. The most important: oil companies can credit against their U.S. income tax bills every dollar paid in taxes to foreign governments. This loophole gave the industry an enormous incentive to explore for oil overseas rather than inside the U.S. In the light of events, Nixon’s just demoted Energy Boss John Love admitted to a Senate subcommittee last week that “the whole concept [of the loophole] needs to be re-examined.”
Harvard Economist Marc Roberts traces the problem with the oil companies back to the Supreme Court decision of 1911 that split up the old Standard Oil Co. into a number of vertically integrated companies. Since each company controlled everything from oilfields to gas stations, Roberts argues, the group as a whole was powerful enough to stifle independent competition. Even if there were enough oil this year, there would not be enough U.S. refinery capacity to process it because the companies have built no new refineries in the U.S. for at least two years. “Couldn’t the oil companies have forecast the fact that they were going to be short of gasoline by this year?” Roberts asks. “The answer is absolutely yes. Those companies have good economists, and they had to have known that some time in 1973 they would bump up against the restraints of their refining capacity.” Oilmen retort that until recently they could not get high enough prices for their products to make new refineries yield an adequate return on investment.
Thornton Bradshaw, president of Atlantic Richfield, further contends that the industry was caught short by a whole congeries of events beyond its control. As recently as 1968—a “year of euphoria” for the industry, in his words—the companies thought that their supply problems were over: the Alaska North Slope oilfield had just been proved and was expected to be powering cars by 1972, drilling had started on a large offshore field in California’s Santa Barbara Channel, and coal production was still going strong and was expected to take some of the slack from oil. Within months, all the promises were reversed: environmentalists stopped the Alaska pipeline, which was only recently given final go-ahead; a giant oil spill forced a shutdown of the Santa Barbara fields; and environmental and safety laws slowed coal production. “Everything that could go wrong did go wrong in the energy business,” remarks a top official in the Interior Department.
When blame is apportioned for the crisis, however, the Nixon Administration and the oil industry have plenty of company. Who gets the rest? Just about everybody. “The central thing is that the whole economy was based on growth,” says Caltech Environmentalist Lester Lee, “and there was almost a religious conviction that growth and per capita energy use go together. That was a hard assumption to challenge.” Paul Ehrlich agrees: “Our whole economic system is set up to maximize profits and put the emphasis on more production rather than on less usage.”
Many experts see the roots of the present crisis in the simple fact that oil and natural gas have been too cheap. Not only has their low price encouraged waste, they argue, but it has made the country too dependent on one source of energy. If oil had been more costly, coal, atomic power and even the exotic sources (such as geothermal energy or energy from the tides) would have been more attractive to energy producers. “Energy was so damn cheap that it was not worth it to consider the alternatives,” says M.I.T.
Management Professor Carroll L. Wilson. “All you have to do is look around at M.I.T. and the other universities to see who the energy specialists are. There aren’t any because there was no call for such expertise.” The higher prices that consumers did not pay in the past — and now must — may eventually solve much of the crisis, reducing waste while at the same time encouraging development of alternative sources of energy.
The deepest roots of the crisis, perhaps, are psychological. Probably the biggest reason that the many warnings of trouble went unheeded was the disinclination of people to think about potential unpleasantness until it can no longer be avoided. Messengers of gloom have never been warmly welcomed by the rulers of nations or the ruled, and the avoidance of bad news —a mental habit epitomized by the “What, me worry?” of Mad magazine’s Alfred E. Neuman — has long been an underrated force in human affairs. “People could never believe it could happen here,” says Carroll Wilson. “One doesn’t like to be told that a lucrative method of operation is potentially disastrous in the long run.”
The development of the energy shortage is also a classic example of the difficulty that democratic governments experience in nerving themselves to alert citizens to a crisis and thereby head it off before it breaks in full force. U.S. Administrations, elected for four years, are not used to planning past their terms or worrying about the problems of their successors. Many of the moves that might have averted the present danger are the intensely unpopular type that elected politicians will not consider until they can point to a justifying emergency — if then. How many votes would a presidential candidate have received, for example, if he had proposed in 1964 a horsepower tax that would have fallen heavily on gas-guzzling, fast-getaway cars? How many votes would such a proposal get even now? Still, the mark of a leader is that he sometimes takes an unpopular position and changes public apathy to public concern.
Beyond that, there is the American myth that ingenuity and technology can solve all problems, from bad breath to empty gas tanks, and that tomorrow is bound to be good, no matter what. “There has always been in this country a reaction against the prophets of doom,” says John Holdren of Berkeley’s energy and resources program. “There is an inherent human optimism that makes people always think things will get better.” But things sometimes get worse, and the prophets of doom are often worth listening to — as Americans may learn in the next few months.
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