ENERGY IN THE 1970s

The Source of Change

A major source of the instability and change of the economy during the 1970s was energy. In early 1973 the United States faced shortages of electricity, gasoline, and heating oil, leading to the shutdown of factories and schools, the cancellation of some commercial airline flights, electrical brownouts, and lines at gasoline service stations. Blackouts plagued cities and industries, most spectacularly in New York City on 13-14 July 1977. High fuel prices reduced the productivity of American industry. Heavy imports of fuel harmed the U.S. balance of payments and destabilized the international monetary system.

The Embargo

On 6 October 1973 the Yom Kippur War between Israel and its Arab neighbors broke out. When the United States moved to support Israel, several of the oil-exporting nations of the Middle East cut off exports of oil on 19 October. The price of oil in December 1973 rocketed to between fourteen dollars and nineteen dollars per barrel, up from two and three dollars a year earlier. The energy problem quickly became an energy crisis. President Nixon addressed the nation on 7 November 1973 about the energy crisis and spoke about the trends that had caused the shortages:

The average American will consume as much energy in the next seven days as most other people in the world will consume in an entire year. We have only 6 percent of the world's people in America, but we consume over 30 percent of all the energy in the world.

Causes

America's energy dependency and crisis were caused by several factors. In the 1950s and 1960s strategic and geopolitical concerns had led the government to promote the imports of fuel from overseas, especially from the Middle East. Nixon's 1971 New Economic Policy had placed price controls on the entire economy, and while other restrictions were lifted, oil remained regulated, keeping the price artificially low to consumers and increasing demand. Americans were extravagant in their use of energy; few American-made cars got better than ten miles to the gallon; homes and businesses were poorly insulated and designed. Diverse special interests had skewed portions of the government's oversight and regulation of the oil industry toward their particular interests, and passing general legislation regarding energy became a political nightmare. Accordingly, efforts to develop a consistent energy policy throughout the 1970s were diluted and diverted—and the decade would end much as it began, with the United States wastefully consuming inordinate amounts of energy, and subject, once again, to an oil crisis.

A National Policy

President Nixon, although hampered by the Watergate scandal, took steps to formulate a national energy policy. In June 1973 Nixon formed a federal Energy Policy Office, the forerunner of the Department of Energy. He asked Congress for the authority to relax environmental standards and regulate transportation schedules. Later in 1973 Congress authorized construction of the Trans-Alaska Pipeline to transport oil from well to port. William Simon was appointed to head the energy office, a position that came to be known as the "energy czar."

Simon's Actions

Simon ordered refineries to produce more heating oil than gasoline, and year-round daylight savings time was ordered to begin on 6 January 1974, He also asked motorists to drive no faster than 55 MPH and service stations to limit individual sales and operating hours.

Project Independence

Nixon also announced an ambitious program of longer-term remedies to the energy problem. Called Project Independence, the program had as its goal energy self-sufficiency for the United States by 1980. The technologies to be explored, studied, and possibly utilized in meeting the goal included fast breeder reactors, solar energy, geothermal energy, wind and hydroelectric power, coal liquefication, oil extraction, and nuclear fusion. Because of Watergate, Nixon was never able to implement his program. But Gerald Ford resubmitted the program to Congress in January 1975. Ford proposed a ten-year plan to build 200 nuclear-power plants, dig 250 new coal mines, construct 150 coal-fired power plants, erect 30 new oil refineries, and create 20 major synthetic-fuel plants. He also proposed the creation of a $100-billion synthetic and high-energy fuels program, under the supervision of Vice-president Nelson Rockefeller. Congress, balking at the cost of these programs, for the most part rejected them, but did mandate new fuel efficiency standards for American automobiles and authorized construction of the $10-billion Trans-Alaska Pipeline.

Nuclear Power

Utility companies had been well aware of the coming energy shortage during the 1960s. One of their methods to prepare for the shortfall was to construct nuclear reactors. In January 1973 there were twenty-seven functioning reactors in the United States, providing only five percent of the power generated. Fifty-five plants were under construction, and an additional seventy-eight were in the planning stages. The majority, however, would never be built. Security expenses, nuclear-waste disposal costs, and construction overruns made the return on investment in nuclear-power plants slim. Seeking to assist the nuclear industry, the Ford administration in 1974 disbanded the Atomic Energy Commission (AEC), which for twenty-eight years had overseen American nuclear development. In its place were constructed the more industry-friendly Nuclear Regulatory Commission (NRC) and the Energy Research and Development Administration (ERDA), which was empowered to develop new energy sources and market American nuclear industry abroad. The NRC streamlined the licensing and commission of reactor projects, but many of the old problems remained. Safety was a pressing issue: fires at the Indian Point 2 reactor in New York in 1971, the Zion reactor in Illinois in 1974, the Trojan reactor in Oregon in 1974, and the Brown's Ferry reactor in Alabama in 1975 under-scored the potential for a catastrophic accident at nuclear plants. In 1975 the Union of Concerned Scientists presented the White House with a petition signed by two thousand scientists which called for a reduction in nuclear construction. Public opinion followed that of the scientists, and environmental groups increasingly challenged the construction of nuclear projects in the NRC and in the courts, delaying the deployment of projects and driving up the start-up costs. The 1978-1979 protests at the Seabrook nuclear power plant in New Hampshire were particularly vocal and drew national attention to the issue. Then, in the spring of 1979, an accident at the Harrisburg, Pennsylvania, Three Mile Island nuclear-power plant resulted in a partial core meltdown. Although no one was injured, the accident terrified the public and placed the future of the nuclear industry in jeopardy. Thus nuclear power was no more likely to resolve America's energy crisis in the 1980s than it had been in the 1970s.

The Carter Years

Part of the problem with the energy crisis in the 1970s was the short attention span of the public. When the oil embargo precipitated soaring prices and cutbacks in supplies, the American people complained loudly of the energy crisis. Upon the restoration of fair prices and supplies, public attention lagged. Ford's energy program in part fell victim to this apathy, and so too did Jimmy Carter's. More than his predecessors, Carter was sensitive to the U.S. energy crisis. As a former submariner in the nuclear navy, Carter was familiar with the strategic and political dangers involved in a drifting energy policy. Upon election in 1976 Carter promised an energy policy within ninety days of his inauguration, and he kept his promise. Setting former Nixon secretary of defense James Schlesinger to the task of formulating the policy, Carter introduced it to the public in April of 1977. It was a mix of programs: deregulation of oil and gas prices in place since the Nixon administration; incentives for alternative energy development, especially gasohol, a mixture of gasoline and ethyl alcohol produced from corn; and the creation of the Department of Energy. Congress and the special interests gutted much of the program, and by 1979 Carter had returned to square one, attempting to forge a new energy policy in the wake of a new energy panic impelled by the 1979 Iranian revolution.

The Effects on Business

The effects of the energy crisis and the attempts at governmental relief were myriad. The automobile industry bore the brunt of the change, being affected not only as a user of energy but also as the provider of gasoline-guzzling automobiles. Detroit lost a significant share of the domestic market to smaller, more-fuel-efficient imports in the wake of the 1973 embargo. Other manufacturers were faced with continual shortages of fuel oil, forcing many either to shut down or undergo expensive and time-consuming conversion to natural gas. Conversion called for capital expenditures, which were much more expensive given the high rates of interest from investors, concerned in part over the risk involved in oil investments and fueldependent industries. Risk also presented opportunities, and around the globe oil exploration expanded, particularly in Alaska, the North Sea, and Mexico. Oil companies, fearing projections that suggested inevitable depletion of their oil reserves, began to diversify their interests. Mobil Oil bought the Montgomery Ward chain of department stores, ARCO invested in copper, Exxon inaugurated an office-automation division, and Gulf Oil put in a bid for Ringling Bros, and Barnum & Bailey Circus. All told, however, the main effects of the energy crisis were higher costs, lower profitability, and sometimes, eventually, layoffs and bankruptcy.

The 1979 Shock

The 1979 Iranian revolution resulted in a de facto embargo and virulent inflationary pressures. Following soaring fuel costs, by October 1979 the inflation rate was 12.2 percent. Interest rates briefly peaked above 20 percent. World oil markets were in disarray, shortages returned to the gas stations of America, and once again the public muttered darkly about oil companies hoarding gas in tankers offshore. The resulting economic slowdown caused massive unemployment, especially in the automobile industry. Carter scrambled to meet the emergency; he decontrolled the price of gas and slapped a "windfall profits tax" on oil companies to prevent price gouging. He reactivated Nelson Rockefeller's multibillion-dollar proposal to develop synthetic fuels and fired James Schlesinger. In his farewell speech to his staff, Schlesinger warned gravely of an "energy future bleak and …likely to grow bleaker in the decade ahead." For Carter that dismal future had already arrived. The recession of 1979-1981 was one of the most severe since the Great Depression and contributed to Carter's defeat in the presidential election of 1980.

Source:

Michael Barone, Our Country: The Shaping of America From Roosevelt to Reagan (New York: Free Press, 1990).

sources of energy origins of the power used for transportation, for heat and light in dwelling and working areas, and for the manufacture of goods of all kinds, among other applications. The development of science and civilization is closely linked to the availability of energy in useful forms. Modern society consumes vast amounts of energy in all forms: light, heat, electrical, mechanical, chemical, and nuclear. The rate at which energy is produced or consumed is called power , although this term is sometimes used in common speech synonymously with energy.

Types of Energy

Chemical and Mechanical Energy

An early source of energy, or prime mover, used by humans was animal power, i.e., the energy obtained from domesticated animals. Later, as civilization developed, wind power was harnessed to drive ships and turn windmills , and streams and rivers were diverted to turn water wheels (see water power ). The rotating shaft of a windmill or water wheel could then be used to crush grain, to raise water from a well, or to serve any number of other uses. The motion of the wind and water, as well as the motion of the wheel or shaft, represents a form of mechanical energy. The source of animal power is ultimately the chemical energy contained in foods and released when digested by humans and animals. The chemical energy contained in wood and other combustible fuels has served since the beginning of history as a source of heat for cooking and warmth. At the start of the Industrial Revolution, water power was used to provide energy for factories through systems of belts and pulleys that transmitted the energy to many different machines.

Heat Energy

The invention of the steam engine , which converts the chemical energy of fuels into heat energy and the heat into mechanical energy, provided another source of energy. The steam engine is called an external-combustion engine, since fuel is burned outside the engine to create the steam used inside it. During the 19th cent. the internal-combustion engine was developed; a variety of fuels, depending on the type of internal-combustion engine, are burned directly in the engine's chambers to provide a source of mechanical energy. Both steam engines and internal-combustion engines found application as stationary sources of power for different purposes and as mobile sources for transportation, as in the steamship, the railroad locomotive (both steam and diesel), and the automobile. All these sources of energy ultimately depend on the combustion of fuels for their operation.

Electrical Energy

Early in the 19th cent. another source of energy was developed that did not necessarily need the combustion of fuels—the electric generator , or dynamo. The generator converts the mechanical energy of a conductor moving in a magnetic field into electrical energy, using the principle of electromagnetic induction . The great advantage of electrical energy, or electric power, as it is commonly called, is that it can be transmitted easily over great distances (see power, electric ). As a result, it is the most widely used form of energy in modern civilization; it is readily converted to light, to heat, or, through the electric motor , to mechanical energy again. The large-scale production of electrical energy was made possible by the invention of the turbine , which efficiently converts the straight-line motion of falling water or expanding steam into the rotary motion needed to turn the rotor of a large generator.

Nuclear Energy

The development of nuclear energy made available another source of energy. The heat of a nuclear reactor can be used to produce steam, which then can be directed through a turbine to drive an electric generator, the propellers of a large ship, or some other machine. In 1999, 23% of the electricity generated in the United States derived from nuclear reactors; however, since the 1980s, the construction and application of nuclear reactors in the United States has slowed because of concern about the dangers of the resulting radioactive waste and the possibility of a disastrous nuclear meltdown (see Three Mile Island ; Chernobyl ).

Environmental Considerations

The demand for energy has increased steadily, not only because of the growing population but also because of the greater number of technological goods available and the increased affluence that has brought these goods within the reach of a larger proportion of the population. For example, despite the introduction of more fuel-efficient motor vehicles (average miles per gallon increased by 34% between 1975 and 1990), the consumption of fuel by vehicles in America increased by 20% between 1975 and 1990. The rise in gasoline consumption is attributable to an increase in the number of miles the average vehicle traveled and to a 40% increase in the same period in the number of vehicles on the road. Since 1990 average fuel efficiency has changed relatively little, while the number of vehicles, the number of miles they travel, and the total amount of fuel consumed has continued to increase.

As a result of the increase in the consumption of energy, concern has risen about the depletion of natural resources, both those used directly to produce energy and those damaged during the exploitation of the fuels or as a result of contamination by energy waste products (see under conservation of natural resources ). Most of the energy consumed is ultimately generated by the combustion of fossil fuels, such as coal, petroleum, and natural gas, and the world has only a finite supply of these fuels, which are in danger of being used up. Also, the combustion of these fuels releases various pollutants (see pollution ), such as carbon monoxide and sulfur dioxide, which pose health risks and may contribute to acid rain and global warming . In addition, environmentalists have become increasingly alarmed at the widespread destruction imposed on sensitive wildlands (e.g., the tropical rain forests, the arctic tundra, and coastal marshes) during the exploitation of their resources.

The Search for New Sources of Energy

The environmental consequences of energy production have led many nations in the world to impose stricter guidelines on the production and consumption of energy. Further, the search for new sources of energy and more efficient means of employing energy has accelerated. The development of a viable nuclear fusion reactor is often cited as a possible solution to our energy problems. Presently, nuclear-energy plants use nuclear fission, which requires scarce and expensive fuels and produces potentially dangerous wastes. The fuel problem has been partly helped by the development of breeder reactors, which produce more nuclear fuel than they consume, but the long-term hopes for nuclear energy rest on the development of controlled sources using nuclear fusion rather than fission. The basic fuels for fusion are extremely plentiful (e.g., hydrogen, from water) and the end products are relatively safe. The basic problem, which is expected to take decades to solve, is in containing the fuels at the extremely high temperatures necessary to initiate and sustain nuclear fusion.

Another source of energy is solar energy . The earth receives huge amounts of energy every day from the sun, but the problem has been harnessing this energy so that it is available at the appropriate time and in the appropriate form. For example, solar energy is received only during the daylight hours, but more heat and electricity for lighting are needed at night. Despite technological advances in photovoltaic cells, solar energy has not become a more significantly more financially competitive source of energy. Although several solar thermal power plants are now in operation in California, they are not yet able to compete with conventional power plants on an economic basis.

Some scientists have suggested using the earth's internal heat as a source of energy. Geothermal energy is released naturally in geysers and volcanoes. In California, some of the state's electricity is generated by the geothermal plant complex known as the Geysers, which has been in production since 1960, and in Iceland, which is geologically very active, roughly 90% of the homes are heated by geothermal energy. Still another possible energy source is tidal energy. A few systems have been set up to harness the energy released in the twice-daily ebb and flow of the ocean's tides, but they have not been widely used, because they cannot operate turbines continuously and because they must be built specifically for each site.

Another direction of research and experimentation is in the search for alternatives to gasoline. Possibilities include methanol, which can be produced from wood, coal, or natural gas; ethanol, an alcohol produced from grain, sugarcane, and other agriculture plants and currently used in some types of U.S. motor fuel (e.g., gasohol and E85, a mixture of 85% ethanol and 15% gasoline); compressed natural gas, which is much less polluting than gasoline and is currently used by a 1.5 million vehicles around the world; and electricity, which if ever practicable would be cheaper and less polluting, especially if derived from solar energy, rather than gasoline.

Bibliography

See G. R. Harrison, The Conquest of Energy (1968); F. Barnaby, Man and the Atom: The Uses of Nuclear Energy (1971); W. G. Steltz and A. M. Donaldson, Aero-Thermodynamics of Steam Turbines (1981); T. N. Veziroglu, ed., Alternative Sources of Energy (1983 and 1985) and Renewable Energy Sources (Vol. 4, 1984); G. L. Johnson, Wind Energy Systems (1985).

Natural Resources, Nonrenewable

BIBLIOGRAPHY

It is common to subdivide natural resources into the non-renewable and renewable categories, respectively. The former, predominantly metals and fossil fuels, are derived from a limited stock, whose ultimate size is unknown. The supply of the latter, primarily of biological origin, relies on regeneration that can be repeated in perpetuity. This difference leads to frequent assertions that sustainability requires more reliance on renewables, to avoid, or at least delay, an impending and unavoidable depletion of nonrenewable resources.

The differences in the conditions of long-term supply between the two categories are often exaggerated. Everything being equal, the supply of both tends to become more costly with expanded use, for that necessitates the employment of more meager mineral deposits and more marginal soils. Everything is not equal, however, and technological progress has more than compensated for this upward push, so that the real cost of mineral as well as agricultural output has tended to fall over time. Furthermore, examples of dramatic exhaustion are easier to quote from the renewable category. Witness how the forests disappeared in antique Italy and in seventeenth-century England, or the virtual extinction of cod in the world’s oceans in the late twentieth century.

The fear of depletion of exhaustible resources is almost as old as humankind, but the available experience suggests that painful scarcity is less of an immediate threat than ever in history. Despite impressive growth rates in usage, which have raised present world consumption to many times that of the early or mid-twentieth century, the reserves of virtually all metal minerals and fossil fuels have expanded at even faster rates, through a combination of discovery and subsequent appreciation of the newfound deposits. Extraction costs show a falling trend in real terms, and the prices of most exhaustible resources have declined in parallel. All this is counter to the predictions of a dire future made by the Club of Rome in the early 1970s. These predictions completely missed the point, primarily because they neglected technological progress in exhaustible resource exploration and exploitation. There are no indications that the benign trends caused by technological innovation are in the process of reversal.

Though in most cases, declining costs have resulted in falling prices, there are important exceptions. The price of oil has followed an upward trend in real terms ever since the Organization of Petroleum Exporting Countries (OPEC) took effective command of the oil market in the early 1970s. The cartel has been able to exercise market management to its advantage because its members control the world’s largest and most economical reserves, those in the Middle East. The most potent tool for maintaining monopolistic pricing in the oil market has been a virtual arrest since the late 1970s in the cartel’s expansion of capacity to exploit this resource wealth. The prices of petroleum have spilled over to other fossil fuels, since the latter can substitute for oil in many cases. Monopolistic market conditions are likely to be maintained so long as the cartel remains in charge.

The prices of virtually all primary materials, exhaustible as well as renewable, rose impressively in the first half of the 2000s. The price of oranges and rice increased by 50 percent between 2002 and 2005, coffee went up by 68 percent, and rubber by 95 percent. The price of oil doubled while the prices of nickel and copper increased by even more. This was the third powerful and general commodity boom since World War II (1939–1945). As was the case with commodity booms during the time periods between 1950 and 1951 and between 1973 and 1974, this boom was triggered by a sudden and sizable demand expansion at a time when inventories were small and no slack capacity existed to satisfy the surge. As on previous occasions, the rising prices were temporarily decoupled from the costs of production.

The demand shock centered on 2004 was primarily due to a very fast growth in world gross domestic product (GDP). The new phenomenon was that the economies of several large developing countries, notably China and India but also Brazil and Indonesia, expanded at voracious rates, and contributed strongly to the global boom. The successful growth performance in those nations was primarily due to the economic liberalization measures implemented during preceding decades. An intensified participation in the integration of the global economy was a key factor behind these countries’ impressive growth rates. At the present stage of their economic development, involving industrialization, urbanization, and the buildup of infrastructure, these economies are very intensive resource users. This accentuated the demand shock in the raw materials markets.

Normality will likely return to these markets before the end of the 2000s, just as it did a few years after the outbreak of the earlier commodity booms. The year 2004 was exceptional in terms of global growth, unlikely to be repeated in the near future. The profitability of the natural resource industries at the prevailing prices is exceedingly high, so the incentive to invest in capacity expansion is strong. Sizable investment efforts are also under implementation. Building new capacity will take several years to complete, but once that capacity becomes operational, and the supply can increase, prices are bound to fall, to reflect once more the cost of production. Oil is an exception in this regard. The cartel’s efforts to keep capacity constrained may permit it to continue extracting monopolistic prices.

Successful globalization could well result in higher world economic growth than was attained in past decades. But there is no reason to believe that this will compromise the nonrenewable natural resources availability. The world is still very far from the bottom of the barrel of the resource wealth, and with continued cost-reducing technological progress, it is uncertain whether that bottom will ever be seen. Faster growth in the demand for natural resource commodities can easily be accommodated by a more speedy supply expansion, but producers must be given a sufficiently early warning of what to expect in order to adjust their production capacity. Successful globalization brings prospects for a speedier increase in the incomes of the poor in this world, which should be seen as a blessing and not a resource threat.

BIBLIOGRAPHY

Radetzki, Marian. 2002. Is Resource Depletion a Threat to Human Progress? Oil and Other Critical Exhaustible Materials. Energy Sustainable Development: A Challenge for the New Century (Energex2002 ). Krakow: Mineral and Energy Economy Research Institute, Polish Academy of Sciences.

Tilton, John. 2003. On Borrowed Time? Assessing the Threat of Mineral Depletion. Washington, DC: Resources for the Future.

Marian Radetzki

energy sources Naturally occurring substances, processes and phenomena from which we obtain energy. The vast majority of energy derives from the Sun. Fossil fuels are the remains of life that depended for growth on solar energy. Hydroelectricity also derives from solar energy, which maintains the Earth's hydrological cycle, while uneven heating of the atmosphere generates wind, whose energy harnessed by wind farms. The movements of the oceans, namely waves and tides, controlled by wind and the pull of the Sun and Moon, have been used successfully in some regions to create energy. Increasingly, solar energy is being used to heat some domestic water supplies directly, and for providing electricity from photoelectric cells. Geothermal energy is energy obtained from underground hot rocks. See also nuclear energy; renewable energy

nonrenewable energy sources Sources of energy that use up the earth's finite mineral resources; these include fossil fuels. Concern about the exhaustion of nonrenewable energy sources, together with the fact that burning fossil fuels contributes to air pollution and the greenhouse effect, is leading to increased use or investigation of renewable energy resources, which are not exhaustible. These include the sun (for solar heating and solar cells), wind power (for aerogenerators) and water (for hydroelectric generators).

non-renewable resource (finite resource) Resource that is concentrated or formed at a rate very much slower than its rate of consumption and thus, for all practical purposes, is non-renewable. Compare RENEWABLE RESOURCE.

non-renewable resource(finite resource) A resource that is concentrated or formed at a rate very much slower than its rate of consumption. Compare renewable resource.