Oil Crises

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OIL CRISES. In 1973–1974 and 1979, the United States experienced shortages of gasoline and other petroleum products because of reduced domestic oil production, greater dependence on imported oil, and political developments in the oil-rich Middle East. Historically, the United States had supplied most of its own oil, but in 1970 U.S. oil production reached full capacity. Imported oil, especially from the Middle East, rose from 19 percent of national consumption in 1967 to 36 percent in 1973. The Arab-Israeli War of 1973 contributed to the first oil crisis. After Egypt and Syria attacked Israel in October and the United States came to Israel's aid, oil ministers from the five Persian Gulf states and Iran banned oil exports to the United States. World oil prices jumped from $5.40 per barrel to more than $17. Retail gasoline prices in the United States increased 40 percent, and consumers often faced long lines at service stations. To conserve gasoline and oil, President Richard M. Nixon reduced the speed limit on national highways to fifty-five miles per hour and encouraged people to carpool and to lower their house thermostats. It was Israeli victories and U.S. arrangement of Arab-Israeli negotiations and not domestic programs, however, that helped end the embargo in March 1974.

The Organization of Petroleum Exporting Countries (OPEC) continued to keep world oil prices high, which slowed the world economy. In 1973–1975, the U.S. gross national product declined by 6 percent and unemployment doubled to 9 percent, but the developing countries that lacked money to pay for expensive oil suffered most. In 1975 Congress established fuel-efficiency standards for U.S. automobiles to reduce energy costs and dependency on foreign oil. President Jimmy Carter urged additional steps. By the late 1970s the United States was exploring both old sources of energy, such as coal, and new ones, including solar, thermal, and wind power, although the new alternatives commanded far fewer resources, public or private, than the former.

A second oil crisis followed the collapse of the government of the shah of Iran and suspension of Iran's oil exports in December 1978. If buyers, including oil companies, manufacturers, and national governments had not panicked, however, this second oil shortage would not have been so severe. Gasoline prices rose, and people again waited in lines at service stations. The worst of the second crisis was over by 1980. In late 1985, a substantial drop in world oil prices gave American consumers a sense that the crisis had ended, but concerns about the increasing U.S. dependence on foreign oil remained in the 1990s.

These worries only increased at the turn of the twenty-first century in response to heightened tensions between Israelis and Palestinians and the American invasion of Afghanistan in retaliation for the terrorist attacks on the United States on 11 September 2001. President George W. Bush pointed to the events of 11 September as evidence to support his claim that the United States needed to develop domestic sources of fossil fuels, especially by drilling for oil in Alaska's Arctic National Wildlife Refuge, in a time of political uncertainty in the Middle East. Although the plan was defeated in Congress the following year, it had revitalized the debate between the petroleum industry and environmentalists over how to reduce dependence on foreign oil: exploration for new deposits of fossil fuel or conservation vs. the increased development of alternative energy sources.


Bruno, Michael, and Jeffrey D. Sachs. Economics of Worldwide Stagflation. Cambridge, Mass.: Harvard University Press, 1985.

Hemmer, Christopher M. Which Lessons Matter? American Foreign Policy Decision Making in the Middle East, 1979–1987. Albany: State University of New York Press, 2000.

Ikenberry, G. John. Reasons of State: Oil Politics and the Capacities of American Government. Ithaca, N.Y.: Cornell University Press, 1988.

Skeet, Ian. OPEC: Twenty-Five Years of Prices and Politics. Cambridge, U.K.: Cambridge University Press, 1988.

Kenneth B.Moss/a. e.

See alsoArab Nations, Relations with ; Automobile ; Automobile Industry ; Energy Research and Development Administration ; Offshore Oil ; Petroleum Industry ; Stagflation ; andvol. 9:Address on Energy Crisis .