That 70s Oil Crisis is Baaack!

We Americans, who collectively have memories no longer than the average television commercial, are forced regularly to do. Helping recall the oil crises of the 1970s is the memory of televised long lines at gas stations summoned by the recent experience of paying hundredths of a cent over $4 per gallon of gasoline at the pump for the first time (granted, I buy premium).

Back in 1973, the first crisis, such things were irrelevant to me: I did not own or drive a car. Moreover, for most of the cold season I lived as a student in Canada where, thanks to the tar sands of Alberta, OPEC's oil embargo had no practical effect.

Let's backtrack.

The Organization of Petroleum Exporting Countries had declared an embargo on all Western allies of Israel on Oct. 16, 1973, smack dab in the middle of the Yom Kippur (or, depending on your perspective, Ramadan) War started by Egypt and Syria. The Arab belligerents haled the initiative for the first two days but, as might have been expected, the Israeli army began to sweep them back. OPEC intervened.

On the whole, my feelings about the Middle East can be summed up in the notion that those Arabs and Israelis deserve one another. We should let them blow each other up to smithereens, if that's what they want.

A funny thing happened to an inveterate neutral like myself: I found that when oil was scarce the price of everything rose. Coming back to the USA in the spring, I found galloping inflation.

Why? Because, if you think of the economy as a complex organism (within which we're all microbes), oil is its blood. (Note the interaction between blood and oxygen and you'll find good imagery for the interaction of oil-produced hydrocarbons and air pollution.)

Note the items involved, because they come up again: steady U.S. oil consumption, trouble in the Middle East, sharp crude oil price increases (to about half what they are now), inflation.

In 1979, I was similarly uninvolved at a personal level, as I lived in London, England, where no sane person would drive.

Once again: oil consumption remained unabated, leading President Carter to preach about "malaise" in the middle of the "Me Decade," when no one was listening; Iran had its revolution and oil supply became unstable; prices rose to well above $80 for a barrel of crude, inflation (then stagnation) ensued.

Now we have another crises: a decade of U.S. gasoline gluttony leading to SUVs and Hummers, Iraq-Afghanistan-Iran plus unstable Lebanon, crude oil prices at over $100, inflation, coupled with a slowing economy.

This time we have three new factors: India and China have become big consumers; some believe the world supply is nearing known limits; and the short-term sustainability of an oil-based economy has been called into question by climate change predictions.

Perhaps this time we can learn that among those factors that we can influence, it's perhaps time to change the roles of oil producers and consumers.

We were warned about this by Jorge Agustín Nicolás Ruíz de Santayana y Borrás (aka George Santayana) in his the following passage, whose third sentence is oft-quoted remark that "Those who cannot remember the past are condemned to repeat it."¹

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1. "Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it. In the first stage of life the mind is frivolous and easily distracted, it misses progress by failing in consecutiveness and persistence. This is the condition of children and barbarians, in which instinct has learned nothing from experience." (The Life of Reason, Volume 1, 1905)