OPEC OIL EMBARGO

On October 17, 1973, Arab oil producers declared an embargo that drastically limited the shipment of oil to the United States. These producers, members of a cartel known as the Organization of Petroleum Exporting Countries (OPEC), enforced the embargo in response to the Yom Kippur War between Egypt and Israel. In a gesture of support for Egypt OPEC curtailed oil exportation to countries that supported the Israelis. The cartel later extended the embargo to other countries and oil prices soared worldwide. Accustomed to the influx of ample, inexpensive petroleum from OPEC member countries such as Saudi Arabia, Iraq, Iran, and Kuwait, many nations remained at the mercy of these producers of the valuable natural resource.

In the United States the embargo brought on a crisis of unequaled proportions. Daily shipments of oil from the Middle East dropped from 1.2 million barrels to a scant 19,000 barrels. Motor vehicle owners faced long lines at the service stations, and were forced to pay dearly for gasoline when they finally took their turn at the pump. Between May 1973 and June 1974 the average price of gasoline increased by 43 percent. Perhaps the most dangerous effect of the embargo however was the fear and panic it aroused. U.S. citizens were suddenly faced with the shortage of a resource indispensable to every industrialized nation. The shortage was mainly a matter of perception, since OPEC simply withheld oil and had not run out of it. In fact at the time the United States imported only about a third of the oil it used, relying on domestic production for the majority of its supply. But the embargo proved that every drop counted and that a powerful cartel could bring the world to its knees. Daily hardships such as rising oil prices and rates of inflation made the perceived scarcity of the resource seem very real.

Indeed the United States was consuming resources faster and more voraciously than most other countries. Although it represented only six percent of the world's population in 1973, the United States regularly consumed 33 percent of the world's energy supply. Station wagons and other gas-guzzlers were enjoying their heyday. A positive effect of the embargo was that it prompted conservation efforts throughout the country. President Jimmy Carter (1977–1981) declared a national speed limit of 55 miles per hour in order to cut back on gasoline consumption (meanwhile, the number of traffic-related deaths dropped considerably during that period). Between September 1973 and February 1974 the average daily use of petroleum dropped by more than six percent. The U.S. government adopted an energy conservation policy that remained in effect until President Ronald Reagan's (1981–1989) administration discarded it two decades later. The embargo served as a reminder that the world's oil supply was finite and encouraged consumers to use it responsibly, at least for the time being.

OPEC exercised an enormous amount of power during the embargo, which lasted well into 1974. But eventually the crisis hurt the cartel as much as the countries outside of it. The skyrocketing prices and the perceived shortage led to a drop in the overall demand for oil. Countries looked to alternative energy sources such as natural gas, nuclear energy, and coal. Oilproducing countries outside of the Middle East stepped up their pace of production and relied more heavily on their domestic supply.

Unfortunately many of the positive effects of the 1973 crisis, the attempts at energy conservation and the move toward relying more heavily on domestic resources, did not last long enough after the embargo was lifted. Conservation efforts dropped off as memories of long waits at the gas station and inflated prices faded. A new breed of larger, less gas-efficient cars took to the roads in the 1990s when sport-utility vehicles and small trucks gained popularity. In the 20 years following the crisis U.S. dependence on imported oil increased rather than decreased, reaching the 50 percent mark in 1993. In 1998 on the twenty-fifth anniversary of the embargo many analysts pointed to such statistics as indications that a crisis like that of 1973 could happen again. They claimed that the low, stable price of oil was misleading people in the United States into believing that the world's supply of the natural resource was unlimited. Meanwhile the nation continues to consume energy at an extraordinary rate. Whether or not it will take another economic crisis to change such ingrained behavior remains to be seen.

OPEC OIL EMBARGO

Topic overview

FURTHER READING