The crude oil price shock came largely because oil stocks were running low in 1978 and 1979, with worldwide consumption close to capacity, and companies and countries stockpiled oil for fear of an Iranian cutoff. Oil giants like BP, Shell, and Exxon warned their customers they could no longer guarantee supplies. So brokers and refiners fled to the spot market (the public cash market in which oil and other commodities are traded for immediate delivery) in a panic that drove up the spot price for the additional barrels everyone was fighting to buy. It was the energy equivalent of a run on the bank. OPEC prices were following, not leading the spot market. The problem of the gasoline lines really began at home, and I accept my share of the blame.
For sure, there was a small imbalance between supply and demand, but it was a quirk in the market that cascaded a shortage into a panic. The problem had arisen the previous winter in California when local refineries ran short of distillates—the lighter crude oil by-products that must be mixed into the local gasoline formula to meet the state’s tough air-quality standards. To build up stocks during the spring, the refiners distilled more of the lighter petroleum oils instead of compounding gasoline, and a few gas stations ran dry. Word spread, the panic began, and anyone with a car (almost every adult among California’s then-forty-million-plus inhabitants) filled up the tank instead of driving around one-quarter or half full. That sucked one to two hundred million barrels of oil out of the tank farms. The news spread across the country, and it became normal to stop at a station and fill up and top off, even if there was plenty of gas left in the tank. The imbalance in the supply chain then shifted from a physical problem of a small actual shortage to a huge psychological problem of gasoline panic that created spot-market shortages around the world. It also did not help politically when California governor Jerry Brown, who had unsuccessfully opposed Carter in the 1976 presidential primaries, started accusing the president of causing the shortage.48
The spiraling disaster was compounded by our reaction to it. Rather than rely on the market, we used a government system pushed into law by Senator Bentsen that allocated gasoline based on historic consumption. It sent more gasoline to rural states than they needed; urban and especially suburban areas got much less. Oil companies followed this perverse formula even though they knew it did not correspond to the actual pattern of demand. What we should have done was simply stopped allocating gasoline by fiat, and freed prices. I believe that ordinary Americans would have adjusted to higher prices by driving less, rather than wasting time in long gas lines that were often rambunctious and occasionally worse. Perhaps it was a form of rough justice on federal bureaucrats that the Energy Department formula allocated extra supplies of gasoline to the capital’s favorite vacation resorts of Ocean City, Maryland, and Rehoboth, Delaware, while gasoline was so scarce that Washingtonians could not get there.49 I had to wait half an hour at the Exxon station near my home in Chevy Chase, Maryland, to get enough gas to travel to the White House to try to deal with the crisis—and then not very well.
President Ford exercised his authority to end gasoline price controls in his last days in office, ending the American driver’s era of rolling along the nation’s highways on gasoline at about 32 cents a gallon—after his electoral defeat. Even while calling for energy sacrifice, Carter disregarded Ford’s move. If he had taken advantage of Ford’s decree allowing him to free up prices when oil was much cheaper, price hikes would have been smaller and less noticeable than when the market exploded after the Iranian revolution, and there would have been no gasoline lines. While Schlesinger was eager to decontrol gasoline, he was talked out of it by his mentor Scoop Jackson. Natural-gas decontrol was still working its way through Congress, and the senator believed that the public confused natural gas with gasoline. Even emergency gasoline rationing might have been acceptable if fully explained to the public.
There was a dark humor in this. The Ford administration had ordered ration books printed for an emergency, but never used them. It was discovered belatedly that the government ration coupons could be used as legal tender for food stamps and even cash when slotted into cash machines, and the Secret Service had to destroy them.
Scoop Jackson or no Scoop Jackson, Schlesinger had come to the conclusion that the administration must decontrol gasoline prices and allow natural market forces to allocate gasoline. There were deep divisions within the administration. Schultze and Fred Kahn, the anti-inflation czar, philosophically supported decontrol but were concerned about the impact on rising inflation. I was influenced by their concerns about inflation, but also by the political intervention of allies like Sol “Chick” Chaiken, the president of the International Ladies’ Garment Workers Union, who urged “gas rationing rather than rationing by price.”50 And Mondale was also politically and philosophically opposed to decontrol.
What is unmistakable is that we would have been better off if we had left President Ford’s last-minute decontrol of gasoline prices in place and not reversed his decision, thus putting the unpopular decision on Ford’s back while taking advantage of it when the gasoline crisis hit two years later. I also believe that the American driving public would have traded higher prices for punishing thirty- to forty-five-minute waits at their gasoline stations and topping off even when their tanks were still half full, and after an initial bump-up, prices would probably have settled down.
While we were considering decontrolling gasoline and diesel fuel, the Teamsters Union and the long-haul drivers they represented were up in arms against it. Frustrated truckers were literally shooting gas station attendants who had run out of fuel. These burly drivers shut down the Pennsylvania Turnpike, leading to riots injuring more than one hundred people, and more than 150 arrests.51 They then converged on the White House with their heavy vehicles in a massive demonstration demanding a meeting with the president, or at least someone on the White House staff. As my energy aide, the brilliant Kitty Schirmer, remembered it, Jack Watson “courageously volunteered me to meet with them on the ground that they probably wouldn’t hit me because I was a woman.… It was an awful meeting … and they dropped F-bombs and things like that. They never did hit me, but they certainly beat me up around the head and ears verbally.” Schlesinger, with an air of condescension, remembered that Kitty was frightened to death by these truck drivers.52 Before the meeting in the Roosevelt Room, she promised me and Schlesinger she would not commit the administration to a special allocation of diesel fuel for the trucking industry. But that is exactly what she did. When Schlesinger later asked Kitty, whom he derisively called the “Wellesley girl,” why she had caved, Kitty replied: ‘Well, you’ve never sat down next to somebody who is six feet, six inches tall, looks very angry, and has a size 17 neck!”53
There was in fact something close to a national hysteria about the oil shortage. Conspiracy theories abounded that the major oil companies were withholding supplies from the market to drive up prices—an absolute myth. Just like sightings of Unidentified Flying Objects, there were supposed sightings of tankers hiding in the coves of North Carolina because their owners were unwilling to discharge the cargos until prices moved even higher.54 The president’s populist rhetoric against the oil companies helped stoke the tales of profiteering. So we responded by dispatching U.S. Coast Guard cutters to search for these ghost oil ships hiding in the Carolina marshes. Of course, none were ever found.
* * *
All the major players met often in an Energy Coordinating Committee from mid-December 1978 to March 1979, in the Situation Room, to find a consensus that would square the circle on the Bonn pledge, and to deal as well with the burgeoning domestic energy crisis. Carter decided to act boldly and not mortgage the future of decontrol to legislative caprice. He placed a high-stakes bet against Congress itself, by first letting Congress know that he would use his existing authority to start phasing in higher oil prices no matter what they did, and then ending control entirely by October 1, 1981. Rather than condition decontrol on the uncertain congressional passage of
a windfall profits tax, he simultaneously warned that the wrath of the public would fall on Congress if the windfall in higher revenues from old wells in a decontrolled market was not captured for the public instead of the oil companies. The windfall tax package was brilliantly designed to enlist the support of Democratic liberals by creating an “energy security fund” that would redistribute the revenues to the poor to help buffer the impact of higher energy prices. It also served as a substitute for the wellhead oil tax (COET) that had been killed by the industry and Senator Long. Schlesinger nicknamed it “Energy Two.”
This time we faced a palpable oil crisis and were careful not to waste it. With the public awakened by lengthening gas lines, we were careful not to repeat the original mistake of assembling our second package in secret, and spent weeks in talks with interests across the economic spectrum and in Congress, as well as with the government agencies that were able to do the economic and budget calculations for the new program. To obtain maximum public and congressional support for the windfall profits tax, we proposed everything but draining the kitchen sink—mass-transit and low-income assistance, alternative energy development in solar and magnetic fusion, and even wood-burning stoves. There was a minority set-aside program for the major construction projects to encourage the Congressional Black Caucus to support the package. Energy Two even won Metzenbaum’s vote and outflanked Ted Kennedy on the left.
The proof of this inclusive process lay in the pudding itself: A much larger percentage of Energy Two was enacted than our 1977 package.55 The president began the phased decontrol of crude oil, as he promised at Bonn, and through a combination of public anger and adept White House lobbying, Congress passed our windfall profits tax on the energy industry in April 1980, to capture for the public the unexpected revenues from the run-up of OPEC prices—it raised $80 billion through 1988, when it was repealed.56
In June 1980 he signed a third energy package, the Energy Security Act, which included a massive synthetic fuels corporation to encourage drilling for oil shale and liquefying coal, decades before the shale revolution of the twenty-first century began to make the United States more energy self-sufficient; a solar bank to commercialize solar energy; and the first major incentives for geothermal and biomass-based energy.
Over four full years Jimmy Carter struggled more than any other president with energy, accomplished far more, and suffered politically for it. He was ridiculed for proclaiming a moral equivalent of war, but when all the smoke had cleared from the battlefield and despite all the mistakes, stumbles, and reversals that are characteristic of any war, he was wounded but he had won, and so had the country. It was only when set against his overambitious standard that the final product paled. Market-based prices sent signals to consumers to use less and to producers to deliver more. It is hard to see how this century’s energy revolution could have taken place without his efforts.
By any objective measure Carter’s National Energy Plan in 1978, the 1979 decontrol of crude oil tied to a windfall profits tax, and the 1980 Energy Security Act made historic changes in America’s energy policy that have stood the test of time.
It set the United States on a new path to a sounder, more secure, more independent energy future. Carter created a rational market-based system of pricing and selling crude oil and natural gas, a cleaner fuel that had too often been burned away in oil-field flares and now was available to industry nationwide, encouraging consumers to use less and producers to deliver more. On a broader public horizon, a conservation ethic was born in the minds of the public that permanently changed the way in which the American people and our industries and utilities consume scarce energy resources. Things we now take for granted, everything from the way we drive to the way we live—from more fuel-efficient cars, homes, and appliances—were embedded in Carter’s new laws and eventually in our consciousness.
For the first time we formally recognized that our domestic supply of oil and gas was not limitless, and that our growing dependence on imported oil was a national security risk. And for the first time there were explicit incentives to produce clean alternative energy sources. Carter ended the thirty-year impasse over natural-gas pricing, creating one uniform, efficient national market; reformed to the benefit of consumers the way electricity was provided; and laid the foundation for the shale revolution which has made America more energy independent in the twenty-first century. At the time one of the least appreciated (but in the long run, most important) features of the final package was the revolutionary reform of monopoly electric utilities, through the Public Utility Regulatory Policies Act: A whole new competitive industry was created to produce power from cogeneration or steam and other renewable sources, and the utilities were required to buy it for mainstream distribution. And the president’s new Energy Department implemented these laws and gave energy a seat at the cabinet table. Independent studies found Carter “achieved significant reductions in energy consumption and oil imports.”57
Moreover, he achieved most of what he sought. In a study of the Carter energy program, the Harvard Business School concluded that Congress gave the president good marks with Congress.58 The energy wars he fought for four years are also a metaphor for the Carter presidency: great accomplishments achieved by unartful means and at great political cost. Carter paid a frightful political price for leading the country to a coherent energy policy. No one realized more than Carter himself the political cost of his focus on energy: “It sapped our strength,” he told me.59 Courageous as he was in pressing ahead, he barely got credit. Many of the benefits to the country of his energy programs were felt only after he left office, as they are even today.
PART III
THE ENVIRONMENT
11
AN EARLY INTEREST
Just as Bert Lance posed Jimmy Carter’s first Washington challenge to personal loyalty, Congress posed its first bruising political test to his deepest principles in preserving the environment. He learned from both encounters, but from the second he emerged as the greatest presidential protector of our nation’s natural bounty since Theodore Roosevelt, and if measured by acreage preserved and policies enacted, the greatest in America’s history. When Roosevelt left office in 1909, he had protected 230 million acres of public land. When Carter left office in 1981, he had more than doubled the total amount of protected public land from Roosevelt and every president since.
He inherited his appreciation of protecting the land from his father, the first farmer he knew to terrace all his land, rotate his crops, and protect wildlife in the hedgerows between his fields. James Earl Carter, Sr., was a leader of the Civilian Conservation Corps, and young Jimmy followed in his footsteps, working fields that drained into Choctawhatchee Creek, where he fished and learned about the outdoors as a member of the Future Farmers of America.1 He also drew much of his environmental inspiration from his Christian faith. He was at home in nature, and when he was alone in the woods, he felt “closer to God” and developed an appreciation for the protection of the land. As a child he heard sermons on such biblical texts as “The earth is the Lord’s, and the fullness thereof.” And even in old age, he wrote, “When humans were given domination over the land, water, fish, animals, and all of nature, the emphasis was on careful management and enhancement, not waste or degradation.”2
The breadth of what he accomplished in a four-year period is astonishing. One of his first major presidential messages in May 1977 was on the environment.3 As in so many other areas, he took on established interests oblivious of the political costs and often in ways that were politically maladroit, alienating the bulls of Congress and the powerful Army Corps of Engineers in tackling what he considered environmentally dangerous and economically wasteful water projects; coal mine operators in the Surface Mining Act, twice vetoed by President Ford to limit environmental degradation for strip mining; the chemical industry in passing the first broad-based toxic-waste-pollution controls; the automobile and oil lobbies in strengthening the Clean Air and Clean Water Ac
ts; and implementing tough fuel-efficiency and emissions standards for cars and trucks.
He did all this by substituting for heavy-handed, top-down government regulation a creative new cost-effective means that gave industry flexibility to meet new environmental standards in a so-called bubble. Each plant did not have to meet environmental standards if the entire company did so, and if they did better than the federal standards, they could then engage in free-market trading of credits for the emissions they had saved with companies that failed to meet the standards—a system known as cap-and-trade. This became the model used by Presidents George H. W. Bush and Bill Clinton decades later to deal with sulfur dioxide emissions, and by the European Union and China to meet their greenhouse-gas-emission obligations under the 2016 Paris Climate Change Agreement.4 As a lame-duck president after his landslide defeat in 1980, he worked with Representative John LaFalce of Buffalo, where Love Canal first brought toxic chemical waste discharges to the public attention, to sign a far-reaching Comprehensive Environmental Response, Compensation and Liability Act (Superfund) to clean up dangerous wastes around the country and have the chemical industry pay a large share of the cost.5
Carter was also the first U.S. president to put conservation of the environment on the global agenda, starting in the summer of 1979 for what became the pathbreaking Global 2000 Report released the next year. I worked on it with Gus Speth, the chairman of the White House Council on Environmental Quality, and Thomas Pickering, assistant secretary of state for the Bureau of Oceans, Environment, and Science. It called attention to global environmental trends in ten major areas of activity, such as world population growth, water resources, agriculture, fishing, and forests. In the Clinton administration in 1998, as undersecretary of state I was the lead negotiator of the Kyoto Climate Change Protocol reducing greenhouse gas emissions, and highlighting the need to protect tropical rain forests, which absorb greenhouse gases. Carter’s foresight is striking because when he released the Global 2000 Study while president, one proposal was to have the CIA use Landsat satellite photography to track the disappearance of the Amazon Basin forest.6 The administration took its findings to the United Nations to help it formulate a new international development strategy. Had Carter been reelected or future presidents followed the report’s recommendations, we would have a safer planet.
President Carter Page 30