40 years after OPEC oil embargo – and the problem hasn’t been solved yet

Octo­ber 17th saw the 40th anniver­sary of the oil embar­go by the Orga­ni­za­tion of the Petro­le­um Export­ing Coun­tries (OPEC) – a six month embar­go that cut the sup­ply of oil to the US and sky­rock­et­ed gaso­line prices. The days of 25 cents per gal­lon gaso­line were over and the com­ing years would see des­per­ate attempts to solve the prob­lem. The 1973 embar­go start­ed right after the Yom Kip­pur war was launched, and was spurred by US sup­port for Israel; the sec­ond gaso­line cri­sis in 1979, again dri­ving up pump prices and forc­ing dri­vers to wait in long lines to fill their tanks, was trig­gered by anoth­er Mid­dle East cri­sis – the takeover of the US embassy in Iran.

For Kei­th Crain, edi­tor-in-chief of Auto­mo­tive News, it was the end of inno­cence – when automak­ers had been com­pet­ing to pro­vide the biggest and best cars to dri­vers and mileage didn’t real­ly mat­ter at all. The OPEC oil embar­go changed all of that; Gen­er­al Motors pres­i­dent Ed Cole vowed to raise the automak­ers cor­po­rate aver­age fuel econ­o­my (CAFE) by 50% from 12 mpg to 18 mpg with­in a decade. The US Con­gress thought it was very good idea and raised the bar even high­er – CAFE was to be 27.5 mpg by the 1985 mod­el year, though that did not hap­pen. For Peter Ward, then with the Cal­i­for­nia Ener­gy Com­mis­sion, the 1973 oil embar­go was the water­shed, defin­ing moment illus­trat­ing the pow­er of the oil car­tel on glob­al eco­nom­ics and clar­i­fy­ing the neces­si­ty for alter­na­tive fuels.

There were oth­er water­shed moments tak­ing place after the ini­tial OPEC embar­go….

• “Non-OPEC” oil field drilling start­ed to break depen­dence on OPEC sup­ply, led by drilling in the North Sea and Alas­ka.
• The Key­stone XL pipeline fight had a pre­de­ces­sor with Alaska’s Prud­hoe Bay oil field. It had been stopped by envi­ron­men­tal­ists in the late 1960s, but Con­gress approved the pipeline that would even­tu­al­ly add up two mil­lion bar­rels a day to the US sup­ply.
• Alter­na­tives to oil took off – nuclear pow­er and coal became impor­tant in elec­tric pow­er sta­tions. Solar ener­gy saw a start­up phase that didn’t take hold until very recent­ly.
• Import cars stat­ed being tak­en seri­ous­ly in the Detroit 3-dom­i­nat­ed US mar­ket. Japan­ese small cars pro­vid­ed the fuel econ­o­my, and own­ers start­ed expect­ing their cars to be more reli­able and long last­ing from their expe­ri­ence with these cars.
• In 2008, the US (and the rest of the world) once again expe­ri­enced the pow­er of oil on the econ­o­my. Oil and trans­porta­tion fuel prices sky­rock­et­ed in August 2008; with­in a month, the Lehman Broth­ers deba­cle spurred the Great Reces­sion, and the dra­mat­ic oil price increase from the pre­vi­ous month was thought to be instru­men­tal in the recession’s tip­ping point being passed in Sep­tem­ber.
• There’s a still a long ways to go, but oil sup­ply dis­rup­tion and sky­rock­et­ing pump prices con­tin­ue to be a very moti­vat­ing force.

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