If it didn't, holders of the excess dollars could demand gold from Treasury's holdings at the agreed upon price. When the price of gold began to fall from that official rate, even by pennies, the Fed was obliged to add liquidity. Under that kind of monetary discipline, the price of oil fluctuated with all other prices around the gold dollar, rising and falling in narrower ranges within business cycles and national and international expansions and contractions. Prices in the Great Depression fell not because of insufficient monetary liquidity, for example, but because the Smoot-Hawley Tariff Act of 1930 and the Hoover tax increase of 1932 caused a worldwide decline in economic activity and surplus of oil and gas. Gold is of course obsolete as a medium of exchange.
Nobody wants to go back to using gold coins or gold dust to buy horses or houses.
Nixon did so thinking the Fed's ability to increase the money supply would help the economy and his re-election chances. Americans blamed the sheiks when they should have blamed President Nixon and the economists who advised him. Other commodities have followed in train, causing similar problems to farmers and miners. This also means that unless the Fed supplies more liquidity than the market is demanding in the future, neither gold nor oil will recover and prices of all other goods and services as well as the nominal price of wages and real property will come down as well. The Commodity Research Bureau index of prices has been following gold down almost in lockstep over the past year.