Demonstrators hold posters of Ayatollah Khomeini outside the American Embassy which is occupied by ‘students following the Imam Khomeini’s line on November 16, 1979 in Tehran, Iran.
Kaveh Kazemi | Hulton Archive | Getty Images
“The hard part is done,” President Donald Trump said in his address to the nation Wednesday night about the Iran war. The recent jump in gas prices is “short term increase” that should “will rapidly come back down” once the vital Strait of Hormuz is reopened, he said.
But there is reason to worry that the conflict and its economic consequences for Americans may get worse before they get better. If so, Trump will struggle to shake off the damaging political legacy of the war.
In that he would join a long line of U.S. presidents going back to the 1970s who have seen their tenures defined by energy crisis and inflation — the economic scourge Trump has called a “nation-buster.”
“The oil shock of the ’70s was planted in the maybe subterranean part of our brains,” said Jay Hakes, a presidential historian who led the U.S. Energy Information Administration in the 1990s during the Clinton administration.
“It was there for a long time because it was just such a jolt. And I think this will be that kind of jolt,” Hakes said.
Gas prices on Tuesday rose above $4 a gallon on average for the first time since the war began. Gas has followed Brent crude prices that have risen 27% since the war began to just over $100 a barrel Wednesday. Oil tankers and other commercial shippers that would normally travel through the narrow Strait of Hormuz off Iran’s southern coast have been idled due to Iran’s threats and attacks. The waterway normally carries 20% of the world’s oil.
But $4 a gallon gas, painful as it is, may only be the tip of the iceberg. That is clearer in the rest of the world than the U.S., for now. The U.K. is set to receive its last shipment of jet fuel for the foreseeable future this week. Prices of jet fuel worldwide are up 96%, according to Platts data published by the International Air Transport Association. Futures contracts for liquid natural gas in Japan and South Korea are up 43%, according to FactSet data.
Asia and to a lesser extent Europe are more immediately exposed to disruptions in supply from the Strait of Hormuz. Unlike the U.S. — as Trump has repeatedly pointed out — they buy directly from the Middle East. But all of these commodities are connected through global markets. Disruptions in one part of the world will quickly spread to others. Analysts fear the price of oil could jump above the record near $150 a barrel set in July 2008 during the Great Recession.
So far, the world has benefited from energy supplies that were already in transit when the war began just over a month ago, aided by emergency releases from strategic petroleum reserves. But the world is burning through those supplies.
“With even the modest estimates we have now, the loss of oil in April will be twice the loss of oil in March,” International Energy Agency Executive Director Fatih Birol said on a podcast released Wednesday.
Energy conservation in the wake of supply disruption
Governments around the world are trying to encourage energy conservation in the face the crisis. A tracker from the IEA shows 26 governments have taken steps such as Pakistan lowering the speed limit.
Trump has taken steps to encourage the market to improve supply but has stopped short of calling on Americans to try to conserve energy. Doing so might call back uncomfortable comparisons to President Jimmy Carter’s attempts after the 1979 crisis, which began with the Iranian Revolution. Ronald Reagan turned Carter’s calls for consumers to limit themselves into a potent political weapon, winning him the presidency the next year.
And Trump has spent part of his terms in the White House calling for limits on construction of and subsidies for renewable energy production.
The politics of energy have taken a toll on the nation. “We’ve lost our ability to ask the American public to sacrifice,” Hakes said.
Hundred thousand of people gather at Tehran Freedom Square, formerly Monument to the Kings, to cheer the motorcade carrying Iranian opposition leader and founder of Iran’s Islamic republic ayatollah Ruhollah Khomeiny upon his return from exile on February 1, 1979 while the insurrection against the Shah’s regime spreads all over the country.
Gabriel Duval | AFP | Getty Images
Before Carter, presidents — including Republicans — called on a need for shared sacrifice. President Richard Nixon proposed a national speed limit of 55 miles per hour following the Arab Oil Embargo of 1973. It was passed into law the next year, but even before that Nixon urged people to slow down, “and they did,” Hakes said.
“We still had a little bit of the World War II mentality,” Hakes said.
The energy crises of the 1970s put the nail in the coffin of that mentality. Nixon and Carter struggled to lower prices, and inflation surged. Carter put Paul Volcker in place as Federal Reserve chair to tackle inflation — which he eventually did, but only by raising interest rates high enough to prompt a recession, followed by record-high mortgage rates. Carter, of course, wasn’t re-elected.
Americans’ sense of what government can and should do was permanently changed.
“The failure of the nation’s politicians to address the energy crisis contributed to the erosion of faith that Americans had in their government to solve the problems,” Princeton University historian Meg Jacobs wrote in “Panic at the Pump: The Energy Crisis and the Transformation of American Politics in the 1970s.”
“If the Vietnam war and Watergate scandal taught Americans that their presidents lied, the energy crisis showed them that their government didn’t work,” Jacobs wrote.
Today, Trump’s premise as president is that government only works when he is in charge. “Nobody knows the system better than me, which is why I alone can fix it,” he said at the 2016 Republican National Convention. He has centralized control of the executive branch in the Oval Office, drawing power from cabinet secretaries and agencies that previously operated autonomously.
The worst-case worries may not come to pass. The U.S. could quickly force Iran to capitulate, and the global economy could heal fast, as it did after the shock of the Russian invasion of Ukraine. But if not, Trump’s decision to go to war in Iran may only deepen many Americans’ alienation from their government. And as the sole decider atop the federal bureaucracy, Trump will have a difficult time convincing the public that anyone but him bears responsibility.