This article was originally published by Grist. The weekly Grist newsletter you can subscribe here.
During the infamous oil embargo of 1973, when the world’s oil-producing countries stopped their exports to the United States during the Yom Kippur War, the consequences for the country were devastating. Gasoline prices skyrocketed by nearly 50 percent, gas stations had to ration fuel, and lines at the pumps stretched for miles. President Richard Nixon announced drastic austerity measures: he asked workers to start the workday an hour earlier and appealed to citizens to forgo Christmas lights.
More than 50 years later, a war in the Middle East has once again halted the flow of much of the world’s oil. Around 20 percent of global oil exports pass through the Strait of Hormuz – which has been effectively closed because it is in the middle of the conflict zone since the US and Israel launched attacks on Iran late last month.
While this supply shock is already being felt at American gas pumps, the impact domestically is likely to be much smaller than in 1973. This is partly due to the fracking boom, which has tapped so much of the country’s enormous domestic oil reserves that the United States is now the world’s largest producer of the raw material.
Global market, global risks
However, the oil market is global, meaning Americans are still vulnerable to international shocks – although less so than before. This is where the federal government’s decades-long battle against oil dependence comes into play: Environmental and climate regulations have led to dramatic improvements in the fuel efficiency of cars and trucks since the Nixon era. A liter of gasoline takes the average driver almost twice as far today as it did back then – which means that rising gasoline prices have less of an economic impact. The so-called “gasoline intensity” of the US economy, i.e. gasoline consumption per unit of economic output, has fallen by more than 70 percent since the embargo.
The very measures that have so drastically reduced America’s oil dependence are under massive attack from the Trump administration. Last month, the Environmental Protection Agency (EPA) both repealed vehicle emissions standards and relinquished its authority to regulate greenhouse gas emissions from motor vehicles. The repeal followed a move by Trump’s allies in Congress to end enforcement of another landmark regulation aimed at improving fuel efficiency.
The arguments the Trump administration used to justify these rollbacks are already being undermined by the consequences of Trump’s own actions in the Middle East. To justify the repeals, Trump officials downplayed the benefits of fuel efficiency to consumers and assumed that gasoline prices would remain around $3 a gallon for the next three decades. That was never guaranteed — and almost certainly depends on avoiding exactly the kind of geopolitical conflicts the president just unleashed. The administration has promised that its new standards will save consumers $1.3 trillion in vehicle costs. In a world of high oil prices, the result could be deeply negative.
Hard to justify economically
“The fact that oil prices are higher now than they were at the time of repeal makes this even harder to justify economically,” said Richard Revesz, who led vehicle regulation at the EPA under the Biden administration.
The first U.S. fuel efficiency standards emerged in response to the 1973 oil embargo. Two years later, Congress created the so-called “Corporate Average Fuel Economy” standards, or CAFE standards, which required automakers to make their vehicle fleets more efficient on an annual basis. These rules doubled average fuel efficiency from about 10 miles per gallon in 1970 to about 20 miles per gallon in 1990. After that, progress stalled for decades because Congress blocked further tightening.
The Obama administration broke this deadlock. Not only did it raise CAFE standards again, but it also issued a separate EPA rule limiting carbon dioxide emissions from vehicle tailpipes. This regulation was the first direct climate regulation in US history and pushed manufacturers towards hybrid vehicles and even more efficient gasoline engines. Fuel efficiency rose again, approaching 30 miles per gallon by 2020. Thanks to these regulations, both automotive emissions and domestic oil consumption have peaked — even as Americans are driving more than ever.
Biden rules scrapped
Stricter greenhouse gas standards proposed by the Biden administration would have furthered this progress. These rules would have required automakers to achieve an average fuel efficiency of around 50 miles per gallon across their entire fleet – a standard that would have effectively forced them to produce significantly more electric vehicles and hybrids.
Trump eliminated both regulations in the first year of his second term. The so-called “One Big Beautiful Bill Act,” which Congress passed last summer, reduced penalties for CAFE standards to $0, effectively ending enforcement of the half-century-old efficiency program. Then in February, the EPA revoked Biden-era tailpipe rules while also repealing the so-called “endangerment finding” – a regulatory determination that allows greenhouse gases to be regulated under the Clean Air Act. That could prevent future presidents from issuing new rules. (Environmental groups are challenging the repeal in court.)
Even before the war against Iran, the Trump administration’s own analysis had shown that the repeal would ultimately cost consumers money. The EPA’s Regulatory Impact Analysis estimated that rolling back the tailpipe rules would save automakers about $1.3 trillion in production costs that they would pass on to consumers, which would lower the list prices of cars. What Trump failed to mention — and what was buried deep in an analysis by his own EPA — was that the repeal would increase fuel and repair costs by $1.5 trillion by 2055, more than negating any potential purchase price savings. Less efficient gasoline engines may be cheaper to buy under Trump’s plan – but they force drivers to pay higher maintenance costs and use significantly more gasoline.
Oil prices out of control
The war further exacerbates this disparity. The Trump administration’s estimate of fuel costs assumed that oil prices would remain at around $80 a barrel through 2055 and gasoline would remain at around $3 a gallon. In the past week, the price of benchmark oil has risen above $100 a barrel, and some analysts fear it could climb as high as $200 in the coming weeks – costing consumers billions of dollars more in gasoline.
Because EPA’s evaluation of the rule covers a 30-year period, a short-term price increase will not fundamentally alter the cost-benefit ratio. But the rise in oil prices triggered by the conflict makes it clear that even consumers who “save” by buying cheaper gasoline remain vulnerable to price shocks.
“The administration is talking about this as a temporary blip,” said Joshua Linn, a research fellow at Resources for the Future, a nonprofit environmental research organization. “But if we’re in a new world where oil prices are persistently high and volatile because of political instability, then that’s a whole different story.”
A lesson that Trump refuses
The Trump administration did not consider this scenario when repealing vehicle standards. On the contrary, it assumed the opposite, arguing that oil prices would fall to dramatically low levels and that gasoline would become so cheap that it would offset the higher fuel costs of less efficient vehicles. The EPA outlined several scenarios in which gasoline prices fall to as much as $2 per gallon by 2050 — a decline it attributed without further explanation to “actions President Trump is implementing to reduce the price of gasoline and diesel.”
After the 1973 embargo, the United States learned an important lesson from its dependence on fossil fuels. The repeal of efficiency standards suggests that Trump is determined to discard that very lesson, says Christof Rühl, an energy economist at Columbia University’s Center on Global Energy Policy.
“Their policies are designed to slow improvements,” he says. “Efficiency gains will slow – inevitably.”
