The 1973 OIL Embargo
By the 1970s, the developed world, and especially the US, were becoming increasingly dependent on oil. American production could not keep pace with American consumption; a disparity that would soon be used against them.
Many oil producing nations were members of OPEC, founded in 1960. When the Yom Kippur War began on the 6th of October, 1973, Arab members of OPEC sought to punish countries who supported Israel in the conflict. They were very specific in their embargoes against the US, UK, Netherlands and Japan, and also implemented a price raise for the rest of the world, hoping to force Israel to withdraw from the occupied territory.
Though Arab-Israeli hostilities ended on Oct 22, the embargo continued until March 1974. Prices rose quickly from $3 to $12 a barrel within three months of the embargo. Prices at the pump doubled, forcing outrage and protests from truck drivers, and nation-wide restrictions in the US, across Europe, and Japan.
Fuel was rationed, line-ups persisted at the pumps, and in some cases, drivers could only fill-up on certain days. In Britain, the public was encouraged to heat only one room in the house. In the US, Oregon banned Christmas lights, daylight savings came into effect, and the national speed limit was reduced to 55 mph to avoid excess consumption.
Consumers had never conceived of oil as a weapon, it was always a commodity; the basis of the global economy. Everyone needed affordable oil to keep the economy going. So this was quite a shock. The impact of surging oil prices forced a major downturn in the US economy. The US dollar plummeted, which meant overseas producers, who had set their price in US dollars, were faced with diminishing returns.
America’s automobile industry, which had been heedlessly producing very large cars that relied on a lot of fuel, suffered market share as Japan’s smaller, more efficient vehicles found favor. The oil crisis established a new power center for oil pricing and control of supply. Its immediate effect was to drive up prices. Its long term effects have been far more diverse.
It was the first big slip the American automobile manufacturers took, in terms of market share, in what was then by far the worlds largest car market, such that it never really recovered after the Japanese gained a foothold in the US.
In response to the oil shock, Congress passed more stringent fuel economy standards. The 1975 law required automakers to raise mileage from an average of 13.5 miles per gallon to 27 mpg. In 2012, the standards were again doubled, and vehicles must average 54 mpg by 2025. As a result, Americans are driving more without increasing the amount of gas they are using.
Soaring oil prices remade the global energy industry. As oil prices skyrocketed in the 1970s, producers were willing to travel to more remote and difficult places to drill, including Alaska, the North Sea, the Gulf of Mexico and the Canadian oil sands. World oil production today is 50% higher than it was in 1973.
Although much of the world had been caught by surprise and had realized their vulnerability, the 1973 oil crisis drove investment into renewable energy sources and paved the way for today’s environmental conservatism. It prompted efforts to find and develop other power sources, from natural gas to wind to solar. For the first time in US history, the environmental movement was in synch with national security requirements.
The U.S. now imports more oil from Canada than anywhere else. Saudi Arabia is the only Middle Eastern nation among the top five nations sending oil to America. By limiting supply, OPEC was able to cause oil price spikes in the 1970s and '80s. But it has much less power today, and a number of top producers, such as Saudi Arabia, work to stabilize prices rather than disrupt the market.
Sources: Wikipedia, Greg Myre NPR