Oil Crisis of 1973 Its Term Paper

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This was good for those that felt OPEC was getting too strong because these changes would have been very difficult to make had the embargo and the oil prices not become such an issue (Reid, 2004).

Many countries begin to look for alternatives to the supplies that they were getting from Arab nations and in the years immediately following the embargo many efforts would be directed at the promotion of production and exploration in areas such as Alaska and the North Sea (Reid, 2004). The energy information administration indicated that the world oil production share that was generally provided by OPEC declined by approximately 25% between the years 1973 and 1985 (Reid, 2004). In the United States, the consumption of gasoline increased between 1970 and 1973 by 15.2 billion gallons (Reid, 2004). One estimate indicated that over 90% of Americans were taking vacations in their cars and averaging over 2100 miles per each vacation trip and using, therefore, 150 gallons of gasoline (Reid, 2004). The era involved Detroit iron and the muscle car but that very quickly changed (Reid, 2004). Horsepower used to be an important selling point but fuel efficiency rapidly replaced that and many of the fuel economy standards were regulated in addition to the demands placed by consumers (Reid, 2004).

The speed limit designated at 55 mph was also set throughout the country and this helped reduce the consumption further (Reid, 2004). Many power plants also switched from cheap oil to nuclear power, natural gas, or clean coal (Reid, 2004). There were many conservation efforts where energy was concerned ranging from campaigns which indicated to set the thermostat higher in summer and lower in winter to stronger campaigns which pushed for appliances that were much more energy-efficient (Reid, 2004). In 1979 there was another oil crunch that was considered very significant, and this was caused by the Iranian revolution (Reid, 2004). In 1991 the first Gulf War also had focused attention on reducing oil consumption (Reid, 2004). It seemed at times that the focus level had been wondering and weak but it is unlikely in the future that consumer markets will be seen where oil is used as a political weapon (Reid, 2004).

Even though the tensions were very high following the second Gulf War there was no serious expectation of another embargo as long as many of the political dynamics that are in place now remain relatively stable among those that belong to OPEC (Reid, 2004). The oil crisis that occurred 1973 showed the industrial world that it had a lot of dependence on countries that produce oil (Reid, 2004). However, it also indicated to those that produce oil that their comes a point where demand shifts and markets adjust when enough pressure is placed (Reid, 2004).

The embargo that OPEC declared on oil occurred on the 17th of October of 1973 (OPEC, 1991). This embargo was only to the countries that had offered support to Israel in the conflict that it had with Egypt (OPEC, 1991). The industrialized world had so much dependence on oil that the embargo created a lot of painful difficulties for many countries, including the United States (OPEC, 1991). Barbados was also affected very strongly (OPEC, 1991). Much of the oil that the industrialized world used was beneath the sand in the Arab countries (OPEC, 1991). Before the embargo occurred, much of the industrialized area in the West had taken plentiful and inexpensive petroleum largely for granted (OPEC, 1991). In the United States, oil consumption doubled between 1950 in 1974 (OPEC, 1991). The United States had approximately 6% of the population of the world but was actually consuming 33% of the energy that the world was providing (OPEC, 1991).

The embargo effects that were seen were immediate (OPEC, 1991). A gallon of gasoline rose in the United States from 38.5 cents in May of 1973 to 55.1 cents in June of 1974 (OPEC, 1991). This may seem very inexpensive when compared with today's prices, but it was a very large jump to take in slightly over one year (OPEC, 1991). Originally, the United States was importing oil from various Arab countries at 1.2 million barrels per day (OPEC, 1991). The embargo caused this to drop to only 19,000 barrels per day (OPEC, 1991). From September to February of the 1973-1974 embargo, consumption went down 6.1% (OPEC, 1991). By the time 1974 had reached its summer months, this consumption was down 7% (OPEC, 1991).

With this the United States government knew that it had to respond to the embargo very quickly, and this was not only to protect its interest but to protect the interests of Barbados and other countries that were utilizing oil as well (OPEC, 1991). However, what the United States attempted to do to lessen the embargo was only effective on a small scale (OPEC, 1991). The 55-mile per hour speed limit that was imposed did help to reduce consumption, and it had another effect as well (OPEC, 1991). Between 1973 and 1974 fatalities from traffic incidents went down 23% (OPEC, 1991). Richard Nixon was the president at that time and he named a man called William Simon as the energy czar (OPEC, 1991). In 1977 a department of energy was created at the cabinet level in order to help with the problem (OPEC, 1991). There are still, however, long-term effects that are being felt from the embargo of 1973 (OPEC, 1991).

Oil companies still have a lot of public suspicion because it was believed that they were profiting from the embargo or even working in a collaborative effort with OPEC (OPEC, 1991). This opinion still continues even today (OPEC, 1991). Of the 15 top companies in the Fortune 500 in 1974, seven of them were oil companies (OPEC, 1991). These company's assets totaled over $100 billion (OPEC, 1991). The changes that the United States and other countries made toward the efficiency of automobiles and the alternate sources for energy ultimately ended as oil prices begin to fall and the memories of long lines for gasoline ultimately faded (OPEC, 1991).

Overall, very little actually changed (OPEC, 1991). Many countries continued to utilize energy in amounts that were well out of proportion to the number of people that they contained and automakers continued to fight any type of legislation that would require them to increase the efficient running of their vehicles (OPEC, 1991). The United States still sees any type of threat to the supply of oil as being a threat to national security and also understands the problems and difficulties that other countries may face if another oil crisis were to occur.

Whether or not the world is vulnerable to another crisis in oil is debatable (Miller, 1998). In 1998, on the 25th anniversary of the embargo that was placed on oil, there are still disturbing trends in this area that concern many people (Miller, 1998). The energy environment is seen to be different but there are still worries and problems (Miller, 1998). To many managers today, the 1973 oil embargo was an event that was considered to be very distant (Miller, 1998). It was something that many of them had only read about and either had not lived through or were too young to remember (Miller, 1998). This could be likened to the stock market crash that took place in 1929, the steel industry seizure that took place in 1951, or the standard oil company breakup that took place in 1911 (Miller, 1998).

To managers that had been on their jobs a long time and had experienced the 1973 oil crisis and embargo, however, much of the memories that they have seemed very real and very recent (Miller, 1998). Many times during the 1973-1974 oil embargo many countries were unable to purchase gasoline on specific days (Miller, 1998). Often the lines that they had to wait in went for blocks and then some of these individuals paid so much for gasoline that it would work out to approximately 4 dollars per gallon if today's dollars were looked back (Miller, 1998). Many companies had to limit the production that they provided or they even had to shut down at certain times because they were unable to get enough fuel (Miller, 1998).

The federal government had hastily created a price control and allocation system to provide these individuals with fuel but it did not always work well (Miller, 1998). When it failed they lagged behind and the lack of fuel caused so many problems that shutdowns were inevitable (Miller, 1998). OPEC is not as powerful today as it was then but because it was so powerful at that particular time it was able to control much of the oil supply (Miller, 1998). The embargo itself lasted a mere 5 months (Miller, 1998). Despite…

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