Power, Lost and Found: America At Century’s End 507floated their currencies too and began printing more money, which led to
inflation, a lessening of the value of the dollar. This had an effect on the oil
market as well. Petroleum sales were conducted in dollars, so the inflation
meant that oil producers were receiving less valuable money for the same
price [a similar situation took place in the summer of 2008, when the price
of oil soared to about $150 a barrel. In large measure this was because the
dollar was so weak, and oil sales were still conducted in dollars. That summer,
the euro was worth $1.60. Had the euro and dollar been worth the same, oil
would have been around $100 a barrel, but the difference in currencies added
another 50 percent to the price simply because the dollar was weak and worth
less]. OPEC then responded by pricing oil against gold, not the dollar. This
new conversion along with the embargo caused the “Oil Shock” of 1973-1974
and an energy crisis that has come and gone repeatedly since then.
From World War II until the 1967 Six Day War, oil had only gone up by
1-2 percent a year, but given huge increases in consumption and the volatile
nature of Israel’s wars in the Middle East, it began to rise tremendously, as we
have seen. With oil, the most important commodity in the world, now in flux,
if not chaos, the entire economy was in trouble. Inflation rose in all econom-
ic areas and the increases in oil, and thus gas and industry, meant that many
Americans would start buying smaller and more fuel-efficient cars. This in
turn dealt a blow to the American auto industry, which was still making big
gas-guzzlers for the most part. Japanese auto companies like Honda, Toyota
and Datsun [which became Nissan] began to get much bigger sales in the U.S.
market, costing American auto worker jobs. It would lead to eventually to a
shocking situation where General Motors would go bankrupt and Toyota
would become the largest automaker in the world by the early 2000s. Along
with the huge economic costs of the Vietnam War, the oil crisis and end of
Bretton Woods caused massive financial problems for Americans and led to a
major decline in American power and influence, while Watergate made many
Americans lose their sense that the U.S. was “exceptional,” that it was moral
and acted differently than all other countries. Never since 1945 had Americans
observed the limits of power like they did in the mid-1970s. That feeling
would not last long, however. In the aftermath of Watergate, America would
suffer a “malaise,” as President Jimmy Carter described it, a psychological and
emotional letdown, but it would not last long. A Hollywood actor was head-