There is a particular kind of economic vertigo that comes from watching history rhyme too closely for comfort. Diesel, the unglamorous fuel that moves nearly everything Americans buy from the port to the shelf, has recently reached record highs above $6.50 per gallon. At the same time, manufacturers, auto suppliers, retailers, and truckers are describing conditions as "awful," squeezed simultaneously by tariffs, soaring fuel costs, and higher interest rates. Anyone who studied the 1970s should feel a chill of recognition. This is not identical to that decade, but the underlying mechanics—a supply shock colliding with tightening credit while growth stalls—are uncomfortably familiar.

The Ghost of 1973

Stagflation, the toxic combination of high inflation, stagnant growth, and elevated unemployment, entered the popular vocabulary not in America but in Britain, where politician Iain Macleod coined the term in the 1960s during a period of economic distress. It became a global phenomenon after the 1973 oil crisis, when the Yom Kippur War triggered an Arab oil embargo that quadrupled prices almost overnight, and again after the 1979 crisis following the Iranian Revolution. Both episodes shared a common structure: an external shock to energy prices rippled through every sector of the economy, from manufacturing to transportation to food distribution, because energy is not merely one input among many. It is the input that makes all the others possible.

Diesel today plays precisely that role. It is the fuel that trucks freight, powers agricultural equipment, and runs the generators and machinery behind much of American industry. When its price sets records, the effect is not confined to trucking companies' balance sheets. It becomes a tax on every good that touches a supply chain, which in a modern economy means nearly everything.

Gerald Ford's Unwinnable Hand

The presidency of Gerald Ford offers a sobering case study in how little control policymakers actually have once a stagflationary spiral takes hold. Ford inherited the aftermath of the 1973 oil shock: gasoline prices had risen 50 percent, and unemployment climbed sharply through 1975. His response, a mix of vetoes aimed at blocking job creation and social welfare spending, reflected the orthodox belief that restraint would eventually tame inflation. It did not work quickly, and Ford's political capital, already spent on the deeply unpopular pardon of Richard Nixon, never recovered. Republican seats in the House fell to their lowest level in almost forty years in the 1974 midterms, a verdict less on any single policy than on public exhaustion with an economy that seemed to be punishing ordinary Americans for problems occurring far outside their control.

The parallel to today is not that any particular administration is repeating Ford's exact mistakes, but that the position itself—presiding over simultaneous fuel shocks and stagnation—tends to strip leaders of good options. Raise rates to fight inflation, and you choke off the growth needed to absorb rising unemployment. Cut rates to stimulate growth, and you risk pouring fuel on an inflation fire already burning from the supply side. This is precisely the trap the Phillips Curve, the assumed inverse relationship between inflation and unemployment, could not explain in the 1970s and cannot explain now. When both inflation and stagnation are being driven by the same underlying constraint (in 1973 it was oil; in 2024 it is diesel and tariffs), monetary policy alone becomes a blunt and sometimes counterproductive instrument.

Tariffs as a Self-Inflicted Oil Shock

What makes the current moment distinct from the 1970s, and arguably more concerning, is that part of today's supply shock is voluntary. The 1973 and 1979 oil crises were imposed on the United States by foreign actors and geopolitical events beyond Washington's control. Tariffs are a policy choice. When American companies across manufacturing, auto supply, and retail describe being squeezed by tariffs alongside fuel costs and interest rates, they are describing a compounding of externally driven and internally chosen pressures. It is one thing to be a passenger during a storm; it is another to add ballast to the ship while the waves are already rising.

This is not a partisan observation, since tariffs have been embraced across administrations of both parties in recent years as tools of industrial policy and geopolitical leverage. But the historical record on stacking supply-side shocks is not encouraging. During the 1970s, the Suez Canal closure between 1967 and 1975 compounded the disruption caused by the oil embargo, and the layered effect of multiple simultaneous supply constraints made the resulting inflation far harder to unwind than either shock would have been alone. Layering tariffs onto an already fragile energy and credit environment risks a similar compounding effect today.

What History Does Not Repeat

Intellectual honesty requires acknowledging where the analogy breaks down. The American economy of the 2020s is far more services-oriented and less energy-intensive per unit of output than it was in 1973. The rise of electric vehicles, still a small but growing share of the transportation fleet, offers a long-term hedge against diesel and gasoline price shocks that simply did not exist fifty years ago. Labor markets are also structured differently, with private-sector union density far below its 1970s peak, which changes how wage-price spirals propagate, or fail to propagate, through the economy.

There is also a lesson from a very different kind of stagnation worth remembering: the Soviet economy under Gorbachev. By 1990, national income was falling, and it dropped roughly 15 percent in 1991, with basic goods like soap and food in short supply and a quarter of the population living below the poverty line. That collapse was not caused by an oil shock but by a broken system's inability to convert reform into functioning output, as factories under the Law on State Enterprises chased expensive goods rather than raising overall production. The lesson generalizes beyond communism: stagnation compounds when the policy response fails to address the actual bottleneck. The American diesel and tariff squeeze needs a response aimed at the bottleneck—energy supply and trade friction—not merely at interest rates, or it risks the same kind of mismatched medicine that prolonged the pain in both the 1970s West and the collapsing Soviet economy.

The Choice Ahead

None of this means collapse is inevitable. The Algeciras Conference of 1906, called to resolve the First Moroccan Crisis, is a reminder that moments of apparent crisis can also produce clarifying realignments; Germany's attempt to divide Britain and France instead drove them closer together into military cooperation. Economic stress, handled with clarity rather than denial, can similarly force overdue reckonings, in this case perhaps a serious national conversation about energy diversification and the true cost-benefit of tariff policy, rather than treating each as an isolated grievance.

But that requires policymakers to name the pattern honestly. Record diesel prices are not just a trucking story. Tariff-driven cost pressure is not just a manufacturing complaint. Together with rising interest rates, they form the same triad that defined the worst economic decade of the postwar era. The 1970s taught a painful lesson that inflation driven by supply shocks cannot be solved by demand-side tools alone, and that political patience for half-measures runs out fast, as Gerald Ford discovered in the 1974 midterms. Whether today's leaders have absorbed that lesson, or are doomed to relearn it in real time, may be the most consequential economic question of the next two years.