When Eisenhower Took on Big Oil
Republicans weren’t always opposed to big government intervention, and one of the party’s icons wasn’t afraid to do it against the wishes of the oil industry.
In a presidential campaign pivoting on the assumption that corporate America rules America, we should remember that the perceptions and reality of corporate control have fluctuated wildly over the years. William Jennings Bryan’s supporters cried “Let the People Rule!” in 1908. Franklin Roosevelt bashed “economic royalists” in 1936. Surprisingly, the president remembered as a placid, golf-playing, aging, Republican corporate shill, Dwight Eisenhower, fought Big Oil in the 1950s—and won.
Eisenhower’s showdown with the oilmen was particularly surprising because some of his best friends were petro-millionaires. Like Ronald Reagan, Bill Clinton, Barack Obama, and other poor boys who became Commander-in-chief, Eisenhower enjoyed hobnobbing with rich people. Not only could these friends invite him to pop down to Georgia for 36 hours of quail hunting on 3,000 acre plantations, there was also something both humbling and exhilarating about hanging out with with men who had succeeded in the one realm he never mastered, business.
Still, Eisenhower’s friends boasted that they never asked their friend for favors. And Eisenhower, a proud American patriot, did what was best for the country.
As a desk jockey soldier whose genius lay in supply and logistics not battlefield heroics, Eisenhower appreciated more than most that ensuring a healthy oil supply—and storehouse—was essential to national security. Oil was cheap and plentiful. But, like a careful general planning the next campaign, Eisenhower feared America’s becoming addicted to foreign oil. From 1951 to 1958, the percent of imported crude oil jumped from 6 percent of the domestic supply to more than 12.6 percent. Worried about an America held hostage to its foreign oil suppliers, Eisenhower said “national security requires the maintenance of some reasonable balance between imports and domestic production.”
While some small domestic oil wildcatters lobbied for tariffs and quotas, fearing foreign oil lowered prices and profits, the Big Oil companies wanted more oil flowing in. President Harry Truman resisted the independent oil lobby, snapping: “Something must be radically wrong with the reasoning of the people who would like to cut off our foreign trade for the benefit of the oil crowd.”
Big Oil wanted to sell oil from all over the world to the world’s biggest customer, the United States. A vice president of Gulf Oil warned that the “period of surplus” in twenty years could end with a “world-wide oil shortage. If we do not now establish firm, long-range commitments for crude oil with other nations, we will be not only a ‘have not’ but a ‘can’t get’ nation. Such a catastrophe might well relegate us to the category of a ‘has been.’”
Eisenhower shared Truman’s distaste for “protectionism,” prices propped up artificially with a turf-oriented tariff. But, in 1957 Ike endorsed voluntary limits to keep imported oil to 12 percent of domestic crude oil production, except for the West Coast. This voluntary program reflected Eisenhower’s placid patriotism and the 1950s’ consensus values, with many World War II veterans warily watching the Cold War clouds form.
But the fifties were also boom times. Petroleum fueled the great postwar miracle, the emergence of the world’s first, mass, middle-class civilization. Buying more cars burned more oil. Moving to the suburbs burned more oil. Selling new plastic and Styrofoam products in homes, offices and factories used more oil. And the profit motive for the big oil companies to refine cheap oil overseas and ship it to America lured more oil. By 1958, demand for oil had grown 216.8 percent in four years, but domestic crude oil production had only grown by 5.8 percent. From 1948 to 1972, America’s oil consumption would triple in what Daniel Yergin calls the Age of Hydrocarbon Man.
By March 1958, Eisenhower was furious that “Some of these oilmen are coming into my office, and saying, ‘Gosh, man, my third Cadillac is two years old.” At other times, the man who would retire by warning about America’s growing “military-industrial conflict,” denounced the “tendencies of special interests” to “press almost irresistibly for special programs.”
On March 21, 1958, Eisenhower discussed mandatory quotas with his Cabinet. The patrician Secretary of State John Foster Dulles was one of the few Cabinet Secretaries comfortable confronting his intimidating boss. Dulles suggested the voluntary quotas “worked very well.” Dulles feared “socializing the whole industry. Besides,” he added, “it violates six or eight treaties.”
Eisenhower disagreed, saying “voluntary doesn’t work.” Dulles replied: “It has worked.” His Commander in Chief responded “Not as far as I’m concerned,” ending the argument.
By February, 1959, Leo Hoegh, Eisenhower’s Director of Defense Mobilization, concluded that America was now importing crude oil and its derivatives in quantities sufficient “to impair the national security.” Eisenhower responded with his Mandatory Oil Import Program, demanding import licenses on foreign oil to keep new quotas limiting imports to nine percent of domestic production (except in the West, Canadian and Mexican oil enjoyed special exceptions). The angry ex-general blamed “the actions of some in refusing to comply.”
Experts consider this move in March 1959, “the single most important energy policy in the postwar era.” Like Eisenhower’s 1956 Interstate Highway Act, establishing what became the Oil Import Administration demonstrates how statist, how interventionist, even conservative Republicans were after World War II.
Alas the mandatory quotas created what one Lyndon Johnson administration official would call “an administrative nightmare.” A back market developed in rights circumventing the quotas. The “Mexican Merry-Go-Round” or “Brownsville U-Turn” had oil companies shipping foreign oil to Brownsville, Texas, driving it across into Mexico, circling around a traffic circle and then returning to Texas for shipping nationwide.
Beyond those shenanigans, beyond the torpor that lured bureaucrats into believing the problem was “solved,” Eisenhower’s quotas infuriated Venezuela, Saudi Arabia, Kuwait, Iraq, and Iran. In September 1960, they established the Organization of Petroleum Exporting Countries which eventually organized the oil embargo and oil price hike that triggered the Great Inflation. And so, the Eisenhower-triggered OPEC would by 1973 create the national security oil crisis and “can’t get nation” the Eisenhower-imposed quotas hoped to avoid.
Hillary Clinton and Bernie Sanders beware: government taming of corporations doesn’t always tame corporations as the government tamers imagine. And Donald Trump beware too. When provoked, even small nations can respond—sometimes causing huge harm.