• Matthew Crist


The aphorism that those ignorant of history are doomed to repeat it has become too obvious to point out. I regularly find myself several miles down a rabbit hole of history through the conduits of case law, and I find these holes fascinating. Thus, a new aphorism seems to be forming that those who study history are doomed to sit by and watch those ignorant of it to repeat it.

One particularly alarming historical note, that seems to be repeated today, relates to the impact that the US Government had on the oil industry in the 1960’s and early 1970’s. One particularly salient case that brings the historical rhyme to light is Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 429 (S.D. Fla. 1975).

The important legal jargon and precedents may be fun for lawyers to dig into and argue, but I doubt most people would find them very interesting. In brief:

Eastern Air Lines contracted with Gulf Oil on a requirements contract, that is, Gulf agreed to supply such quantity of jet fuel as Eastern required at a particular station (Gainesville Florida, in this case).

The primary issue of fact from Gulf’s perspective was that Eastern was filling up its planes with more fuel than it needed in the cheaper areas and “fuel freighting” or carrying that fuel so it can be used when flying through more expensive areas. Underlying the whole case, however, is the far more important issue: the skyrocketing price of fuel.

The contract in dispute in the Eastern v. Gulf case was entered into just shortly before the 1973 oil embargoes and the price controls the US Government implemented on domestic oil.

In 1973, and shortly thereafter, prices on oil skyrocketed and practically every American was harmed by it. Go ask an old fogey, he’ll be able to spin all sorts of yarn about pushing a lawnmower to the gas station to fill up, odd house numbers being able to get gas on certain days, and some gas stations simply having no gas for weeks.

As the US Government implemented price controls and foreign oil was manipulated by foreign governments, the markets in the US were shaken to their core.

The ultimate result of the Eastern v. Gulf case was not particularly impactful on a global scale; however, it demonstrated a symptom of the 1970’s energy crisis, the skyrocketing cost of petroleum products, and the sharp decline in supply of petroleum products.

Not necessarily caused directly by the Court’s order in the Eastern v. Gulf case, wherein the Court found that Eastern had not breached the contract and that Gulf must continue supplying as agreed, but, Gulf, which saw record profits in 1970, was practically shuttered by 1980 and ultimately crumbled and was raided by 1985 causing collateral harm to the city of Pittsburg.

Unfortunately, these lessons of government intervention in the oil industries, and any other industry, are typically ignored. I fear the next 3-5 years will see similar shortages, price spikes, and lawsuits that will also be promptly ignored.

There will probably be calls for a limitation on profits, price controls, embargoes, and meanwhile, a continued constriction of domestic markets (keep in mind, this applies to any industry and is not restricted to the petroleum-green debate).

Let’s hope some history and its lessons can see the light of day so we can avoid the same pitfalls. In the meantime, I’m buying solar panels.

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