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On October 19, 1973, the Organization of Arab Oil Exporting Countries (OAPEC) proclaimed an embargo of oil exports to the United States, in response to U.S. support for Israel in the 1973 Arab-Israeli War. The embargo, which was accompanied by cuts in overall production by OAPEC countries, lasted until March 1974.
Oil prices shot up from $3 to $12 per barrel. U.S. gasoline prices spiked. “Odd-even” rationing was implemented where gasoline could be purchased on alternating days depending on the last number of a vehicle’s license plate. In spite of rationing and high prices, long lines of cars stretching down the street were common sights at gas stations across the country. After the embargo ended, oil prices stabilized , but never returned to previous levels.
What’s Changed in 40 Years?
Following a peak in U.S. crude oil production in 1970, oil imports began to rise sharply, but at the time of the embargo, the United States imported less than 4 million barrels per day (mbd), out of a total consumption of approximately 17 mbd. Today, the United States imports approximately 8 mbd of crude oil, down from peak levels in the 10 mbd range that had persisted before the recent increase in U.S. oil production. Total consumption meanwhile stands around 18 million mbd.
Oil prices, meanwhile, are significantly higher today in nominal dollars. But adjusted for inflation, crude oil prices were in the $50-60 per barrel range (2013 dollars) at the time of the embargo. Excepting spikes in 1979 and 2008, inflation-adjusted oil prices have remained remarkably low since then. That is, until recent years, when oil prices have persisted in the $100 range.
Are We More or Less Secure?
The numbers would suggest no. The United States imports more and pays more for oil compared to 1973-74. Imports are trending downward but still account for approximately 50 percent of consumption. The U.S. transportation sector still relies on oil for more than 95 percent of its energy needs. Fuel costs, as a percentage of GDP, as well as household and business expenses are rising. The economic risks of America’s oil dependence–a function of cost, not volume or source–appear to be more significant than ever.
Understanding what “energy security” really means and whether we are actually advancing or regressing is a paramount question for the nation. Our friends at Securing America’s Future Energy (SAFE) recently introduced an Oil Security Index, an important tool for moving the national discussion forward. ASPO-USA will be examining SAFE’s work on the index more closely , and we invite you to do the same.
Most critically, what can and should America be doing to enhance its energy security? Next week we will be releasing a new paper regarding a National Energy Program which provides insights into how such a program would be planned and implemented and what it might look like, based on experience with major national programs that have been successful in the past.
In the meantime, happy 40th America! To mark the occasion, please enjoy this now-classic video clip from the Daily Show.