1979 energy crisis

Line at a gas station in Maryland, USA, June 15, 1979.

The 1979 (or second) oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979, allowing Ayatollah Khomeini to gain control. The protests shattered the Iranian oil sector. While the new regime resumed oil exports, it was inconsistent and at a lower volume, forcing prices to go up. Saudi Arabia and other OPEC nations, under the presidency of Dr. Mana Alotaiba increased production to offset the decline, and the overall loss in production was about 4%. However, a widespread panic resulted, driving the price far higher than would be expected under normal circumstances. In the United States, the Carter administration instituted price controls.^[1] In 1980, following the Iraqi invasion of Iran, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. After 1980, Oil prices began a six-year decline that culminated with a 46 percent price drop in 1986. This was due to reduced demand and over-production produced the 1980's Oil Glut on the world market. This caused OPEC to lose its unity. Oil exporters such as Mexico, Nigeria, and Venezuela had expanded. The US and Europe got oil from Prudhoe Bay and the North Sea.

Effect on the United States

The Carter Administration began a phased decontrol of oil prices on 5 April when the average price of crude oil was US$15.85. Over the next 12 months the price of crude oil rose to $39.50 (its all time highest real price until early 2006 ). During this period domestic U.S. oil output rose sharply from the large Prudhoe Bay fields while oil imports fell sharply. However, since there were no price controls on imported oil, this had no impact on boosting the supply of gasoline in 1979. Hence, long lines appeared at gas stations, as they had six years earlier during the 1973 oil crisis. As the average vehicle of the time consumed between 2-3 liters (about 0.5-0.8 gallons) of gasoline (petrol) an hour while idling, it was estimated that Americans wasted up to 150,000 barrels of oil per day idling their engines in the lines at gas stations.^[2] During the period, many people believed the oil companies artificially created oil shortages to drive up prices, rather than simply high prices caused by natural factors beyond any human influence or control. Many politicians proposed gas rationing, such as the Governor of Maryland, Harry Hughes, who proposed odd-even rationing (only people with an odd-numbered license plate could purchase gas on an odd-numbered day), as was used during the 1973 crisis. Coupons for gasoline rationing were printed but were never actually used during the 1979 crisis. President Jimmy Carter made symbolic efforts to encourage energy conservation, such as urging citizens in a famous July 15, 1979, 'malaise' speech to turn down their thermostats. He also installed solar power panels on the roof of the White House and a wood-burning stove in the living quarters. However, the panels were removed during the administration of his successor, Ronald Reagan, after a leak. The panels were never replaced. Carter's fire-side speech argued the oil crisis was "the moral equivalent of war". More importantly, Carter, as part of his administration's efforts at deregulation, proposed removing price controls that had been imposed in the administration of Richard Nixon during the 1973 crisis. Congress agreed to remove price controls in phases; they were finally dismantled in 1981 under Reagan.

Oil Patch

When West Texas intermediate crude oil increased 250 percent between 1978 and 1980, the oil-producing areas of Texas, Oklahoma, Louisiana, Colorado, Wyoming, and Alaska began experiencing an economic boom and population inflows.^[3]

Automobile fuel economy

At the same time, Detroit's then-Big Three automakers (Ford, Chrysler, GM) were marketing downsized automobiles which met the CAFE fuel economy mandates passed in 1978; by the mid-1980s, a majority of rear wheel drive (RWD) family sedans and station wagons sold poorly despite government mandates from CAFE; vehicles like the Ford Fairmont and Dodge St. Regis were short-lived in response to second energy crisis. GM's Cadillac division experimented with their V8-6-4 powerplant (the ancestor of the modern-day Active Fuel Management and/or variable displacement), which was a market failure.^[4] When RWD family sedans were marketed during this era, this is where Japanese imports were building inroads; by the start of the 1980s, every automaker was making the transition to front-wheel drive.

See also

Energy Portal

• Energy crisis
• Iran hostage crisis
• 1973 oil crisis
• 1980's Oil Glut
• 1990 spike in the price of oil
• Oil price increases of 2004-2007
• Hubbert peak theory
• Jimmy Carter

References