Misery at the gas station, but let’s keep everything in perspective

Ask practically anyone in the Chicago area about the price of gasoline and you can count on hearing a diatribe. As of Thursday, Cook County averaged a shocking $5.96 per gallon for regular unleaded, according to AAA. Motorists are angry, and no wonder.

Sticker shock at the pump has become Exhibit A of how inflation is pushing up the cost of living across the board. For the many businesses reliant on gas, diesel or jet fuel, high costs are hammering growth plans and profitability. It’s small consolation that Europe is suffering even more, as Russia’s war on Ukraine sends European Union members scrambling for alternative oil and gas suppliers. Prices in the U.K. are now close to the equivalent of $9 a U.S. gallon.

Previous energy shocks suggest that high prices won’t go away anytime soon. During the Arab oil embargo of 1973-74, prices soared and never returned to their previous levels, apart from a couple of short-term blips in the market.

Yet as painful as they are to live through, a surprising lot of good can come out of these debacles. We hope the U.S. is on track for some positives once the sting of higher prices begins to subside.

For starters, the world now recognizes the folly of relying too heavily on energy supplies from Russia — or any other corrupt autocratic power, for that matter. The EU had been importing 27% of its oil and 40% of its natural gas from Russia. Now, belatedly, it’s shifting gears. Landlocked countries like Hungary will take longer to wean themselves off energy from Putin & Co., but over time the EU is on track to become less dependent on Russian imports.

America learned a similar lesson during the 1970s, when Arab countries protesting U.S. support for Israel cut off supplies. At the time, the U.S. had price controls in place that discouraged domestic oil production, contributing to an artificial supply shortfall and long lines at gas stations. Removing those price controls not only revived domestic production but also, happily, discouraged similar anti-free-market regulations in the future.

Although oil imports went up again after going down in the immediate aftermath of the crisis, America today is less dependent on imported oil and gets more of its foreign supply from the friendly governments of Canada and Mexico. The country is better off for it.

Another legacy of the 1970s oil shock was a steady increase in energy efficiency in everything from transportation and power generation to household appliances. Part of the impetus was the political necessity to “do something.” The oil embargo pressured the U.S. to adopt fuel-economy standards for passenger vehicles, a gas-saving, 55-mph highway speed limit and increased government support for alternative energy sources such as solar and wind — mostly positives from our point of view.

The 1970s also were a decade of reckoning for the U.S. Federal Reserve. Faced with skyrocketing inflation and slow growth, the Fed raised and lowered interest rates in stop-and-go fashion, making it impossible for businesses to plan future investments. The result was stagflation — inflation plus a stagnant economy.

Pundits who say the country is facing another period of stagflation to rival the 1970s clearly don’t remember the 1970s. True, inflation is at a 40-year high, but the U.S. economy is a lot stronger now than it was, interest rates are still lower and, importantly, the Fed is a different beast, providing much clearer advance guidance on its intentions and goals.

Anyone who lived through the 1970s also surely recalls the finger-pointing that characterized political discourse. Politicians casting blame on others is not something invented in the current era by the rise of Fox News, MSNBC or Twitter.

The list of villains for the Arab oil embargo started with the Arab oil producers, naturally, but also included Detroit automakers, multinational oil companies and hapless federal bureaucrats, among other juicy targets. Publicity hounds like Ralph Nader were active in spreading conspiracy theories. Sound familiar?

The finger-pointing had its most obvious effect on presidents. If not for the Watergate scandal, Richard Nixon might have been best remembered for his mismanagement of the national economy. Gerald Ford hardly did better, and Jimmy Carter was an apt punching bag for the economic disaster of the late 1970s.

The low approval ratings of President Joe Biden are no accident and, if gasoline stays near $6a gallon, he and other Democrats will pay a price at the ballot box during the midterm elections later this year.

When the dust clears from this latest energy shock, let’s hope America and its closest allies emerge more self-reliant, smarter about economic policy and careful to conserve precious energy. The last thing America needs is a rerun of the 1970s.