

In 1973, the Arab-Moslem nations attacked Israel with the hope of annihilating her. They almost succeeded. Israel was in desperate need of supplies after the war wore on for a few weeks. President Nixon decided to send necessary supplies to Israel and, as a result, she was able to turn back her attackers and prevail. The Arab-Moslem nations blamed America for their defeat and their inability to annihilate Israel. As a consequence of this defeat, the oil-producing Arab-Moslem nations initiated an oil embargo against the U.S. Many of us remember the long gas lines that we endured at that time. Fortunately for me, I owned a small VW “bug” and got by better than most.
I remember a newspaper picture from that era: the King of Saudi Arabia, who was attending an Arab Summit in North Africa following the War, was pointing his antique rifle westward toward America. His gesture was symbolic: it conveyed his intentions of waging war on America. Oil prices increased by over an order of magnitude from between $1-$2 per barrel to $30-$40 per barrel. Now, over 30 years later the Saudis must be surprised and delighted at their success in this war.
Conservation: One obvious way of combating the use of oil as a weapon is conservation. President Carter used his position as President to emphasize the importance of conservation. He suggested lowering the thermostats in the Winter and raising them in the Summer. He was ridiculed for his efforts. Following the Carter years, Americans have demanded larger and larger vehicles. Now, we have a plague of SUVs on the road that you can not see through or around if you are driving a regular-sized car. These vehicles demand an ever increasing quantity of gasoline and we all are paying the price.
Nuclear Energy: In the decades leading up to the oil embargo, American energy policy was to increase the use of nuclear power to relieve the demand for foreign oil. Nuclear power is ideal for base loading the power grid. This was the policy at a time when oil was very cheap. I worked in the power industry as a nuclear engineer for a number of years during this era. Then came Three-Mile Island. Even before the accident at the Three-Mile Island plant, regulatory pressure was increasing the cost of nuclear plants to the point that they were only marginally feasible. The outcry that came after the accident caused the nuclear program to be scrapped. This outcry was irrational. No one but investors was seriously impacted by the Three-Mile Island accident. To my knowledge, no new nuclear plants have been built since this accident.
Domestic Production: The U.S. has ample reserves both in oil and coal. However, the cost of oil production is considerably less in Arab-Moslem states than it is here. Whenever prices are above $50 per barrell, domestic production becomes economically feasible. If there were significant capital applied to this production to begin to impact supply, the Saudis would simply lower the price of oil until domestic production became a losing endeavor. I traveled to west Texas for a few years to conduct Tzemach Institute classes there. This was in the heart of the Permean Basin fields. The oil industry was dead there. I saw huge equipment yards full of rusting equipment. With invested capital in domestic production lost, supply once again would be controlled by the Saudis and then the price would be raised again.

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