Insolvent America

Our response to the oil crises, of the 1970s was dangerously reminiscent of our behavior during the Vietnam war. In both cases, we were profligate. Waging the Vietnam war to contain communist expansion, we expended lives and treasure and spread destruction in a region that was hardly vital to our national interest. In refusing to curb our use of imported oil, we not only put ourselves in economic jeopardy through inflation but we made ourselves dependent on oil supplies far away from us, and controlled by unstable governments adjacent to Soviet forces whose geographical proximity gave them a clear tactical advantage.

Moreover, in becoming so dependent on imported oil we have dangerously extended the range of our vital interests to the point where the security of the Persian Gulf has become for us a matter of life or death. We have neither earned enough abroad to cover the ever higher oil bills for imported oil nor significantly reduced oil imports. Had we been determined to do so, we could have combined higher earnings from the exports of our goods and services with reduced consumption of imported oil through both conservation and substitution, and so counterbalanced the oil price increases.1

We did not do so. We did just the opposite. Our oil imports nearly doubled between 1972 and 1978. Inflation rose along with consumption. As inflation rose, so did the cost of imported oil as the oil-producing countries hiked their prices. These price rises worked as a kind of foreign tax on the United States. They simultaneously reduced our capital for domestic investment, thus slowing growth, while raising the cost of energy even higher and so contributing to higher inflation.2 No explanations will ever suffice to make future generations understand the timidity of politicians who refused to say that the game was over and that we had to conserve oil immediately, even if this meant imposing a stiff gas tax or the draconian solution of gas rationing. Not to do so was folly even less explicable than that of the Vietnam war.

Furthermore, our relations with our allies became gravely strained when we exhorted Germany and Japan in 1977 to stimulate their economies, even at the risk of inflation, in order to buy more US goods, although we had made little serious effort to reduce our own oil dependency. In their eyes we were seen as the worst energy wastrel of all, while, even with their best efforts, continental Europe and Japan will remain for some time to come truly dependent on Persian Gulf oil—Western Europe for about 60 percent of its oil imports and Japan for 70 percent. They are highly vulnerable to any oil cutoff. So are we—but we need not be if we take steps to reduce oil dependency in that part of the world.

The figures revealing our vulnerability to a cutoff of oil supply from the Persian Gulf present us with a fateful paradox: while we increase our reliance on potentially hostile oil…

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