A demonstrator holds a poster of Imam Khomeini outside the American Embassy, which was occupied by “students following the line of Imam Khomeini” in Tehran, Iran, November 16, 1979.
Kaveh Kazemi | Hulton Archive | Getty Images
President Donald Trump is striking a tone of triumph as he plans to address the nation on the Iran war Wednesday night. But there is reason to worry that the conflict and its economic impact on Americans will get worse before it gets better. If so, Trump will have a hard time shaking off the war’s harmful political legacy.
In that, he joins a long lineage of U.S. presidents dating back to the 1970s whose terms were defined by the energy crisis and inflation, an economic calamity that Trump called “national destruction.”
“The oil crisis of the ’70s probably planted it in the basement of our brains,” said presidential historian Jay Hakes, who led the U.S. Energy Information Administration in the 1990s during the Clinton administration.
“It’s been there for a long time because it was such a huge shock, and I think this will be such a shock as well,” Hakes said.
Gasoline prices on Tuesday averaged more than $4 a gallon for the first time since the war began. The gas continued brent crude oil price It has risen 27% since the war began, hitting just over $100 a barrel on Wednesday. Oil tankers and other commercial shippers that normally pass through the narrow Strait of Hormuz off Iran’s southern coast have been grounded due to Iranian threats and attacks. This waterway typically carries 20% of the world’s oil.
But $4 a gallon of gas, while painful, may be just the tip of the iceberg. So far, that’s more evident in other parts of the world than in the United States. Britain is expected to receive its last jet fuel shipment for the foreseeable future this week. Jet fuel prices around the world have increased by 96%, according to Platts data released by the International Air Transport Association. Japan and South Korea’s liquefied natural gas futures contracts are up 43%, according to FactSet data.
Asia, and to a lesser extent Europe, are immediately exposed to supply disruptions from the Strait of Hormuz. Unlike the United States, they buy directly from the Middle East, as President Trump has repeatedly pointed out. However, all these products are connected through global markets. Disruption in one part of the world quickly spreads to other parts. Analysts are concerned that oil prices could surpass the record of around $150 a barrel set in July 2008 during the Great Recession.
So far, the world has benefited from energy supplies that were already being transported just a month before the war began, with the help of emergency releases from the Strategic Petroleum Reserve. But the world is running out of those supplies.
“Even on our current conservative estimates, the oil losses in April will be double the oil losses in March,” Fatih Birol, Director-General of the International Energy Agency, said in a podcast published Wednesday.
Energy saving after supply disruption
Governments around the world are trying to encourage energy conservation in the face of crisis. An IEA follow-up study revealed that 26 countries have taken measures such as lowering Pakistan’s speed limit.
President Trump has taken steps to encourage markets to improve supply, but has stopped short of calling on Americans to conserve energy. Doing so may bring back uncomfortable comparisons to President Jimmy Carter’s efforts after the 1979 crisis that began with the Iranian revolution. Ronald Reagan turned President Carter’s call for consumer restraint into a powerful political weapon that won him the presidency the following year.
And Mr. Trump has spent part of his term in the White House pushing for limits on construction and subsidies for renewable energy production.
Energy policy is damaging the nation. “We have lost the ability to ask the American people to sacrifice,” Hakes said.
Hundreds of thousands of people gathered at Tehran Freedom Square, a former monument to the king, to cheer on the motorcade carrying Ayatollah Ruhollah Khomeini, Iranian opposition leader and founder of the Islamic Republic of Iran, who returned from exile on February 1, 1979, as an uprising against the Shah’s regime spread across the country.
Gabriel Duval | AFP | Getty Images
Presidents before Carter had emphasized the need to share sacrifices, including among Republicans. After the 1973 Arab oil embargo, President Richard Nixon proposed a national speed limit of 55 mph. It was passed into law the following year, but even before then President Nixon had called on people to slow down, “and they did,” Hakes said.
“We still had a little bit of the World War II spirit,” Hakes said.
The energy crisis of the 1970s put a nail in the coffin of that thinking. Nixon and Carter struggled to keep prices down, and inflation skyrocketed. President Carter appointed Paul Volcker as Chairman of the Federal Reserve System to combat inflation. It eventually did, but it only raised interest rates high enough to cause a recession, followed by record-high mortgage rates. Of course, Mr. Carter was not re-elected.
Americans’ sense of what government can and should do has been forever changed.
“The failure of the nation’s politicians to respond to the energy crisis contributed to a decline in Americans’ trust in their government to solve problems,” writes Princeton University historian Meg Jacobs in “Panic at the Pump: The Energy Crisis of the 1970s and the Transformation of American Politics.”
“If the Vietnam War and Watergate taught the American people that the president was lying, the energy crisis showed us that government is not working,” Jacobs wrote.
Trump’s current premise as president is that government only works when he is in charge. “No one knows this system better than me, and that’s why I’m the only one who can fix it,” he said at the 2016 Republican National Convention. He centralized the executive branch in the Oval Office, drawing power from cabinet secretaries and government agencies that had previously operated autonomously.
Worst-case fears may not come true. The United States could quickly force Iran into surrender, and the world economy could recover as quickly as it did after the shock of Russia’s invasion of Ukraine. But otherwise, President Trump’s decision to go to war with Iran could further alienate many Americans from their government. And as the sole decision-maker at the top of the federal bureaucracy, Mr. Trump will have a hard time convincing the public that anyone but himself is in charge.
