Prior to the Russian invasion of Ukraine, Russia supplied one out of every 10 barrels of crude used around the world. However, the global oil market is experiencing one of the worst disruptions since the 1973 oil crisis, when members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, declared an oil embargo on Western countries for their support of Israel during the Yom Kippur War.
Due to the mid-1970s energy price shock, maximum national speed restrictions were reduced from 70 to 55 mph. Gas usage was reduced by 21% as a result of the speed reduction.
Of course, we shouldn’t forget that the Department of Energy was pretty much created to answer for these rough times in the ’70’s-and to reduce our dependence on foreign oil.
The Department of Energy (DOE) was not established to empower the executive branch to do anything it wants, or even to determine where its priorities fall within the scope of its energy policy jurisdiction. In 1977, Public Law 95-91 established the Department of Energy (DOE) to carry out specific tasks in accordance with congressionally defined goals and priorities. All of those goals and aspirations are being undermined by, well, pretty much every administration since concept.
- First on the law’s list—“to achieve…effective management of energy functions of the Federal Government…and observe policies consistent with a coordinated energy policy, and to promote maximum possible energy conservation measures …”
- Third on the list—“to create and implement a comprehensive energy conservation strategy that will receive the highest priority in the national energy program;”
- Fourth on the list—“to carry out…energy research and development…including… undertaking programs for optimal development of the various forms of energy production, and conservation; ”
- Fifth on the list—“to place major emphasis on…renewable energy resources;”
- Eighth on the list—“to promote the interests of consumers…”
- Twelfth on the list—“to assure incorporation of national environmental protection goals…and to advance the goals of restoring, protecting, and enhancing environmental quality, and assuring public health and safety.
‘Fraid we’re going to have to call that a ‘swing and a miss’.
According to the IEA, by controlling how people drive, Western economies might lower daily oil demand by 2.7 million barrels in four months, implying that the initiative to reduce highway speed could almost balance the 3 million barrel-a-day loss of Russian output in April.
Be aware that this does NOT apply to the rest of the world-just us.
“These efforts would reduce the price pain being felt by consumers around the world, lessen the economic damage, shrink Russia’s hydrocarbon revenues, and help move oil demand to a more sustainable pathway,” IEA said.
The International Energy Agency (IEA) has announced a ten-point action plan aimed at reducing oil demand in Western countries.
–Reduce speed limits on highways by at least 10 km/h
-Work from home up to three days a week where possible
-Car-free Sundays in cities
-Make the use of public transport cheaper and incentivise micromobility, walking and cycling
-Alternate private car access to roads in large cities
-Increase car sharing and adopt practices to reduce fuel use
-Promote efficient driving for freight trucks and delivery of goods
-Using high-speed and night trains instead of planes where possible
-Avoid business air travel where alternative options exist
-Reinforce the adoption of electric and more efficient vehicles
Today’s oil price shock could be a rerun of the mid-1970s oil crisis, as it could signal the impending imposition of price controls. Mario Draghi, Italy’s prime minister, said on Friday that price restrictions might be implemented in the natural gas markets, implying that fuel could be next.
“History does not repeat itself, but it often rhymes,” remarked Mark Twain. Baby boomers who remember the upheaval of the mid-1970s and the suffering caused by a commodities shock are likely to recognize that today’s turmoil is far from done.
As a member of the group that could not purchase gasoline on a Monday, a Wednesday, or a Friday because my license plate ended with an odd number, this feels like a re-watched movie: I know how it ends.