Old oil fears don’t match 2007 reality

U.S. vulnerability, economic threat are largely overstated

Congress is debating action to address the nation’s dependence on foreign oil. This would seem to be good news. Not necessarily.

While tightening requirements on fuel efficiency is a good idea, many other envisioned policies aimed at “energy independence” fix a problem that no longer exists, while moving in the wrong direction with regard to today’s actual energy challenges — particularly those related to climate change. Rather than staying the course with energy priorities of the past, congressional leaders should declare independence from oil fears and craft an energy policy relevant to the 21st century.


Let’s start with the problem that the policies are intended to fix. Do you believe that the United States is dangerously vulnerable to oil supply disruptions? Then, ask yourself: “When was the last time I saw clear evidence of this vulnerability?” If you’re like most Americans, you’ll think back to the Arab oil embargo of 1973, with its long gas lines and associated recession. There are three problems with using 1973 as a point of reference in our current energy debates:

– First, the long gas lines in 1973 were caused by price controls imposed by President Richard Nixon in 1971, not embargoes of oil imposed by Arabs two years later. Without price controls, we would have had higher prices at the pump when supplies were reduced, not long lines. Unpleasant, but not as memorable.

– Second, many studies of the era — including a landmark 1997 paper co-authored by current Federal Reserve Chairman Ben Bernanke — have found that monetary policy had more to do with the recessions of the ’70s than did oil price shocks.

– Third, 2007 is not 1973. Evidence less than a quarter-century old indicates that years of warnings about the nation’s troubling vulnerability to oil price shocks have turned out to be seriously overstated. Consider the most obvious fact: From 2002 through 2006, the price of oil nearly tripled. And what were the observable macroeconomic impacts? What crippling effects did this unprecedented price run-up produce?

San Francisco Chronicle