Forty years ago tonight, President Jimmy Carter delivered his Address to the Nation on National Energy Policy, better known as the “Moral Equivalent of War” speech. Seated behind his ornate desk in the Oval Office and wearing a sober pinstriped suit, he offered a litany of dark predictions:

  • “The oil and natural gas we rely on for 75 percent of our energy are running out.”
  • “Unless profound changes are made to lower oil consumption, we now believe that early in the 1980s the world will be demanding more oil than it can produce.”
  • “World oil production can probably keep going up for another six or eight years. But some time in the 1980s it can’t go up much more. Demand will overtake production. We have no choice about that.”
  • “We can’t substantially increase our domestic production…”
  • “Within ten years we would not be able to import enough oil—from any country, at any acceptable price.”
  • “If we fail to act soon, we will face an economic, social and political crisis that will threaten our free institutions.”

To avoid that fate, Carter proposed a stiff programme of energy industrial policy, tax-enforced conservation, and alternative fuels research, which he outlined to Congress two days later. The programme would have significantly altered American life, at a heavy cost to the public. (Shrewdly, the “Moral Equivalent” speech made no mention of the new taxes and gave few specifics on the other costs.) “This difficult effort will be the moral equivalent of war,” he said, employing the title of William James’ essay concerning the virtues of martial society.


Congress declined to adopt much of Carter’s programme (though it did embrace such lemons as expanding the Strategic Petroleum Reserve and creating the Synthetic Fuels Corporation). Instead, federal lawmakers chose to (somewhat) deregulate energy, giving more freedom to market incentives to direct private energy exploration, production, and conservation. Four decades later, the world is consuming nearly 100 million barrels of oil a day, up from 60 million in 1977, at an inflation-adjusted price little different than it was 40 years ago. U.S. natural gas production is booming. Armageddon, so far, has not occurred.


It’s tempting to ridicule Carter for his gloomy claims. But he was hardly a fool and his proposals and predictions echoed those made by esteemed energy experts and world leaders at that time—and at various times before and since. The earliest expert prediction I’ve seen that the world would soon run out of oil was John Strong Newberry in 1875. The most recent chorus was about a decade ago. Expect a similar chorus five to 10 years from now, and again about 20–25 years from now, and again about a half-century from now, and again…


As the great energy economist Morry Adelman explained in the pages of Regulation more than a decade ago, many energy sources—especially hydrocarbons like oil and natural gas—are disposed to price cycles. Demand at a given price sometimes grows faster than supply, which results in higher prices, which results in new energy exploration, innovation, and investment, which results in increased supply at a given price, which results in lower prices, which leads to a new price cycle. This seems to happen every 15 to 20 years, which makes sense given that it takes about eight to 10 years to bring a new oil field online.


At one end of the price cycle, when prices are high and supply expansion is slow, there are plenty of predictions like Carter’s. Eight or 10 years later, those predictions are forgotten. Another eight or 10 years later, new dire predictions are made, with no memory of previous cycles and their accompanying forecasts of doom.


Instead of ridiculing Carter’s speech, let’s hope people learn from it. It shows the power of markets to deal with resource constraints, and the flawed thinking of politicians–even well-intentioned, thoughtful ones. Most of all, it shows the importance of humility in the face of the latest faddish belief that the end is nigh and only government can save us.