He foresaw the problem
Former U.S. President Gerald Ford died yesterday at 93.
At the bottom of this post is a long section on energy from Ford’s 1975 State of the Union speech. In it he noted that America’s surplus oil — and its attendant ability to stabilize world oil prices and prevent the emergence of a petroleum cartel — had vanished in 1970; we had become net importers of oil. He worried about our loss of energy independence and recommended a crash course in energy production.
You will recall that President Carter took those concerns seriously and put in place programs to address them.
But the cartel that formed after we lost our energy independence, OPEC, quite enjoyed our dependence. Rather than use it to hurt us, it plied the world market with cheap oil, upon which floated enormous U.S. prosperity. Ronald Reagan abandoned all pretense of fighting for energy independence and instead cruised on cheap-oil-driven economic growth to “Morning in America.”
Reagan’s decision to suck at the teat of OPEC, and offer political obeisance in return, was driven by many things, not least political expedience, but high among them was the realization that cheap oil prosperity could help us expand our military and weaponry and spend the Soviet Union into the dirt.
Was it worth it? That’s a more complicated question than lots of folks will admit, but one thing’s for sure: We’re paying the piper now. We’ve got to figure out the energy independence equation in circumstances much more difficult than those that faced Gerald Ford. We import and use vastly more energy now, real shortages in our energy sources are imminent, and above all, we now know that fossil fuel use is driving global warming.
Look at Ford’s solution: more oil drilling; more coal mining and coal-fired power plants; more nukes; synfuels; oil shale; natural gas deregulation. Conservation was an afterthought, and attempts to tax oil imports or oil company profits were easily swatted away by Big Oil.
Despite our changed circumstances, and despite the demonstrated failure of supply-oriented energy strategy, those same priorities still hold sway in federal energy policy. The economic and political elites still push for more supply and more consumption.
It’s time to try demand reduction. And it’s time to think of an answer to "how much is enough?" more thoughtful than "more."
Economic disruptions we and others are experiencing stem in part from the fact that the world price of petroleum has quadrupled in the last year. But in all honesty, we cannot put all of the blame on the oil-exporting nations. We, the United States, are not blameless. Our growing dependence upon foreign sources has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973.
During the 1960’s, this country had a surplus capacity of crude oil which we were able to make available to our trading partners whenever there was a disruption of supply. This surplus capacity enabled us to influence both supplies and prices of crude oil throughout the world. Our excess capacity neutralized any effort at establishing an effective cartel, and thus the rest of the world was assured of adequate supplies of oil at reasonable prices.
By 1970, our surplus capacity had vanished, and as a consequence, the latent power of the oil cartel could emerge in full force. Europe and Japan, both heavily dependent on imported oil, now struggle to keep their economies in balance. Even the United States, our country, which is far more self-sufficient than most other industrial countries, has been put under serious pressure.
I am proposing a program which will begin to restore our country’s surplus capacity in total energy. In this way, we will be able to assure ourselves reliable and adequate energy and help foster a new world energy stability for other major consuming nations.
But this Nation and, in fact, the world must face the prospect of energy difficulties between now and 1985. This program will impose burdens on all of us with the aim of reducing our consumption of energy and increasing our production. Great attention has been paid to the considerations of fairness, and I can assure you that the burdens will not fall more harshly on those less able to bear them.
I am recommending a plan to make us invulnerable to cutoffs of foreign oil. It will require sacrifices, but it–and this is most important–it will work.
I have set the following national energy goals to assure that our future is as secure and as productive as our past:
First, we must reduce oil imports by 1 million barrels per day by the end of this year and by 2 million barrels per day by the end of 1977.
Second, we must end vulnerability to economic disruption by foreign suppliers by 1985.
Third, we must develop our energy technology and resources so that the United States has the ability to supply a significant share of the energy needs of the free world by the end of this century.
To attain these objectives, we need immediate action to cut imports. Unfortunately, in the short term there are only a limited number of actions which can increase domestic supply. I will press for all of them.
I urge quick action on the necessary legislation to allow commercial production at the Elk Hills, California, Naval Petroleum Reserve. In order that we make greater use of domestic coal resources, I am submitting amendments to the Energy Supply and Environmental Coordination Act which will greatly increase the number of powerplants that can be promptly converted to coal.
Obviously, voluntary conservation continues to be essential, but tougher programs are needed–and needed now. Therefore, I am using Presidential powers to raise the fee on all imported crude oil and petroleum products. The crude oil fee level will be increased $1 per barrel on February 1, by $2 per barrel on March 1, and by $3 per barrel on April 1. I will take actions to reduce undue hardships on any geographical region. The foregoing are interim administrative actions. They will be rescinded when broader but necessary legislation is enacted.
To that end, I am requesting the Congress to act within 90 days on a more comprehensive energy tax program. It includes: excise taxes and import fees totaling $2 per barrel on product imports and on all crude oil; deregulation of new natural gas and enactment of a natural gas excise tax.
I plan to take Presidential initiative to decontrol the price of domestic crude oil on April 1. I urge the Congress to enact a windfall profits tax by that date to ensure that oil producers do not profit unduly.
The sooner Congress acts, the more effective the oil conservation program will be and the quicker the Federal revenues can be returned to our people.
I am prepared to use Presidential authority to limit imports, as necessary, to guarantee success.
I want you to know that before deciding on my energy conservation program, I considered rationing and higher gasoline taxes as alternatives. In my judgment, neither would achieve the desired results and both would produce unacceptable inequities.
A massive program must be initiated to increase energy supply to cut demand, and provide new standby emergency programs to achieve the independence we want by 1985. The largest part of increased oil production must come from new frontier areas on the Outer Continental Shelf and from the Naval Petroleum Reserve No. 4 in Alaska. It is the intent of this Administration to move ahead with exploration, leasing, and production on those frontier areas of the Outer Continental Shelf where the environmental risks are acceptable.
Use of our most abundant domestic resource–coal–is severely limited. We must strike a reasonable compromise on environmental concerns with coal. I am submitting Clean Air [Act] amendments which will allow greater coal use without sacrificing clean air goals.
I vetoed the strip mining legislation passed by the last Congress. With appropriate changes, I will sign a revised version when it comes to the White House.
I am proposing a number of actions to energize our nuclear power program. I will submit legislation to expedite nuclear leasing [licensing] and the rapid selection of sites.
In recent months, utilities have cancelled or postponed over 60 percent of planned nuclear expansion and 30 percent of planned additions to non-nuclear capacity. Financing problems for that industry are worsening. I am therefore recommending that the 1-year investment tax credit of 12 percent be extended an additional 2 years to specifically speed the construction of powerplants that do not use natural gas or oil. I am also submitting proposals for selective reform of State utility commission regulations.
To provide the critical stability for our domestic energy production in the face of world price uncertainty, I will request legislation to authorize and require tariffs, import quotas, or price floors to protect our energy prices at levels which will achieve energy independence.
Increasing energy supplies is not enough. We must take additional steps to cut long-term consumption. I therefore propose to the Congress: legislation to make thermal efficiency standards mandatory for all new buildings in the United States; a new tax credit of up to $150 for those homeowners who install insulation equipment; the establishment of an energy conservation program to help low-income families purchase insulation supplies; legislation to modify and defer automotive pollution standards for 5 years, which will enable us to improve automobile gas mileage by 40 percent by 1980.
These proposals and actions, cumulatively, can reduce our dependence on foreign energy supplies from 3 to 5 million barrels per day by 1985. To make the United States invulnerable to foreign disruption, I propose standby emergency legislation and a strategic storage program of 1 billion barrels of oil for domestic needs and 300 million barrels for national defense purposes.
I will ask for the funds needed for energy research and development activities. I have established a goal of 1 million barrels of synthetic fuels and shale oil production per day by 1985 together with an incentive program to achieve it.
I have a very deep belief in America’s capabilities. Within the next 10 years, my program envisions: 200 major nuclear powerplants; 250 major new coal mines; 150 major coal-fired powerplants; 30 major new [oil] refineries; 20 major new synthetic fuel plants; the drilling of many thousands of new oil wells; the insulation of 18 million homes; and the manufacturing and the sale of millions of new automobiles, trucks, and buses that use much less fuel.
I happen to believe that we can do it. In another crisis–the one in 1942–President Franklin D. Roosevelt said this country would build 60,000 [50,000] military aircraft. By 1943, production in that program had reached 125,000 aircraft annually. They did it then. We can do it now.
If the Congress and the American people will work with me to attain these targets, they will be achieved and will be surpassed.