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the formation of the Organization of
Petroleum Exporting Countries. lni–
tially the oil companies tried to ig–
nore OPEC, hoping this upstart
coalition might soon be dissipated.
But time was on the producing
countries' side. In the early 1970s.
Colonel Muamma r e l Qaddafi of
Libya forccd the majors' hand in
agreeing to a proposed oil price
hike. Still thc oil companies contin–
ued to play hardbaU and ignored
repeated requests for increased par–
ticipation.
By the carly 1970s the oil-produc–
ing nations held most of the trump
cards. The West, because of its bur–
geoning economic growth. was now
critically dependen! on their oil. No
longer cou ld surplus United Statcs
production take up the slack as it
had done during previous abortivc
Arab embargoes. Ironically. OPEC
took its cues on limiting the tlow of
oi l from the practices of its prede–
cessors in the o il business. the major
oil companies.
Mlsmanagement
by
Washington
Government actions prior to th e
emba rgo had also been particula rly
shortsighted and in many cases had
exacerbated America's energy prob–
lems. The oil depletion allowance is
a case in point. In theory it was
supposed to compensate a company
for sorne of the risks involved in
drilling for oil. But instead of en–
couraging increased exploration. as
the oil companies claimed it would,
it actua lly encouraged increased oi l
consumption. The allowance was
based on the value of crude oi l pro–
duced. not the actual expenses in–
volved in drilling new wells. In
effect it acted as a government sub–
sidy in the form of tax relief to the
oil companies, thus a llowing petro–
leum products to be priced arti–
ficially low.
Lower than normal natural gas
prices set by government regu–
la ti o n s likewi se cause d over–
consumption of this relativ e ly
limited energy sou rce. Industria l
~nd
residential users. auracted by
cheap natural gas, eagerly aba n–
doned coal- the nation's most abun–
dant energy resource.
As Hollis M. Dole, then assistant
secretary for Minera l Resources, ex–
plained: "The intent ofwellhead gas
The
PLAIN TRUTH February 1978
price regulation was to ensure that
consumers were able to enjoy a pre–
mium fue! at a low price. But the
price of gas was set so low that tril–
lions of cubic feet of it were burned
under boilers for a purpose that coal
could have served as well. ..."
·
Domest ic oi l and gas drilling a lso
declined along wi th actua l produc–
tion in the United States, as pro–
ducers sought more lucra tive finds
overseas. By the early 1970s. with
the exception of the Alaskan North
The Nixon
Administration displayed
an equal lack of
foresight by making
statements to the effect
that " the Arabs
can' t drink their oi l."
Slope, the outer cont inental she lf
and finds in South Alaska and the
Arctic Ocean region, the re were no
new major oil and natura l gas fields
being discovered .
Polit ics also wreaked havoc with
energy pol icy, or what there was of
it. In 1969 the Canadian govern–
ment asked Washing ton to lift im–
port res trictions o n i ts oi l a nd
natural gas. Canada had a lso in–
dicated it had no objections to a
proposed Alaskan gas pipeline that
would traverse its territory. But the
Nixon Administration wasn't ínter-
Whohas
theOil?
Given the present energy
status quo, the U.S. has little
choice but to depend on a
handful of nations for its
continued economic viability.
However, if 11 were to
deemphaslze the automoblle,
develop renewable energy
resources and utilize its coal,
Middle East oil would take on
progressively less
significance.
(Percentage of World's
Proven Reserves)
ested in a good-neighbor energy
policy. Rather than cooperate with
the Canadians. it chose instead to
keep its political cronies happy–
namely El Paso Natural 'Gas Com–
pany-and turned down both pro–
posals. The Nixon Administration
then displayed an equal lack of
foresight in its response to warnings
about an impending embargo by
making sta tements to the e ffect
that "the Arabs ca n' t drink their
oil."
"Sorne people did see it [the en–
ergy crisis] coming and sounded
warnings a number of years ago."
one oil company presiden! observed
at the time. "but the problem had to
come to cri sis proportions before
even lead ership in Washington
could recognize it."
Had positive action been taken in
advance. the Wes t might have fore–
stalled sorne of the more serious ef–
fects of the embargo. Had the major
oil companies initially treated the
OPEC countries as partners rather
than economic vassals, and had they
been more amenable to OPEC's
earlier demands. it's highly likely
that many of the traumas the West–
ern world late r experienced might
have been mitigated or avoided al–
together. And had the United States
kept the a utomobile in check, it
would no t have become so depen–
den! on imported oil. As it was.
d ecades of misma nagement and
waste left us w ide ope n for
the opening rounds of the energy
crisis when it hit in the fall of
1973.
o
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