October 16 marks the 40th Anniversary of the OPEC oil embargo, a trying event in American history that revealed the inherent danger of relying too greatly on foreign energy resources. In October 1973, the Organization of Petroleum Exporting Countries used their oil exports as an “oil weapon,” raising crude oil prices 70 percent and placing an embargo against the United States and other Israeli allies for supplying Israel with weapons during the Yom Kippur War. Although the war ended in late October, the embargo continued, and by January of 1974, world oil prices had quadrupled.
Although prices stabilized soon afterward, the OPEC embargo left its mark on the international economy. Increasing oil prices both slowed economic growth and nurtured inflation, a combination that became known as “stagflation.” Drivers during the oil embargo may also recall the implementation of policies to reduce oil consumption, such as a national speed limit of 55 mph and gas rationing. Long lines would form at gas stations, with drivers sometimes running out of gas while waiting to refuel. Panic, anger and desperation led to incidents of violence, particularly during a two-day nationwide strike by truck drivers protesting the rationing. Oil scarcity did not only impact drivers: families who depended on heating oil, particularly in New England, were also hard hit – just as winter was beginning.
Today, the OPEC embargo stands as an illustration of the consequences of relying too heavily on imported energy sources. In response, the United States has experienced rapid growth in the renewable energy and energy efficiency sectors since 1973, with an accompanying plateau of fossil fuel use and decrease in nuclear power use (since 1991). But the United States continues to import almost $1 billion of oil per day , money which often finds its way to foreign governments that do not have America's best interests at heart. This money could be better used domestically, to invest in our economy and clean energy. America's continued dependence on oil also makes it and our allies vulnerable to instability in the Middle East, and has led it to war.
Increasing domestic production would not have a significant impact on prices in the United States. The United States is already the second largest producer of oil, after Saudi Arabia, but has very little pricing power over the international market. The fact is, the petroleum market is highly globalized, and the price of domestic oil follows the price of the global oil markets. Therefore, as long as the United States depends on oil at all (domestic or imported), U.S. consumers will be exposed to potential disruptions to global supplies, price volatility, and rapidly rising competing demand from the developing world (primarily China and India). As long as the United States stays hooked on petroleum, the nation's well-being will be shaped by events, crises, and actions far beyond its shores and far beyond its control.
Several steps were taken following the oil embargo to address America's dependence on oil. Of these, energy efficiency has perhaps been the most important advance over the last 40 years. If energy intensity levels, measured as energy use per unit of GDP, had continued at 1973 levels, today’s energy use would be over 40 percent greater than its current level. In a way, that makes energy efficiency the largest single energy “source” in the United States. Renewable energy (biomass, wind, solar, and biofuels) has become the fastest growing energy source, from supplying next to none of U.S. energy in 1973 to supplying 7 percent today (hydropower's share has remained somewhat stable, at 3 percent). The rapid growth in these industries holds promise for a future in which diverse, homegrown, and sustainable energy resources make crises like the OPEC embargo next to impossible.
Following the crisis and the Powerplant and Industrial Fuel Use Act of 1978 , oil's share in the production of electricity fell dramatically, and now hovers around 1 percent in the United States (oil was initially replaced by coal, then by nuclear power and increasingly by natural gas). But oil remains critical in the transportation sector, which uses about 71 percent of U.S. petroleum supplies. Therefore, oil imports are a third greater than in 1973. Fortunately, the United States has diversified its sources of oil in the last 40 years, and imports have been decreasing since the early 2000s. The quantity of oil consumed in the United States (including domestic oil) is roughly the same as the amount consumed in 1973, but that quantity makes up a smaller share of overall U.S. energy consumption (from half of total consumption in 1973 to a third now). Meanwhile, natural gas use in the electricity sector has increased by roughly 20 percent from 1973 levels, while coal’s market share has been declining to its current level of under 40 percent of total U.S. electrical generation. Nuclear power peaked in 1991 when 112 reactors were in operation; currently, 104 nuclear reactors provide 19-20 percent of total U.S. electricity.
Today, 71 percent of all oil consumed in the United States is for transportation – and the U.S. transportation sector is still 93 percent dependent on petroleum. Several trends are underway in the transportation sector which may help reduce our dependence on oil. First of all, vehicles are becoming much more energy-efficient, thanks to federal CAFE (Corporate average fuel economy) standards. These have just been raised by the administration, and will double to 54.5 miles per gallon (MPG) by 2025. The rise of environmentally sustainable, advanced biofuels is also promising. Native perennial grasses and other plants can be grown domestically and converted into fuel, which could provide as much as 30 percent of total U.S. transportation fuel by 2037 – compared to roughly four percent today. The Renewable Fuel Standard (RFS), enacted by Congress in 2007 as part of the Energy Independence and Security Act , helps create a market for such biofuels, accelerating their deployment and leading to lower prices at the pump. The electrification of the transportation sector is also picking up, with record sales of electric vehicles and hybrids. Last but not least, rising urbanization, accompanied by better mass transit and more pedestrian and bike-friendly cities, helps take cars off the road. Consequently, there has been a decrease in 'vehicle miles traveled' – an important measure.
All of these market trends have implications not only for U.S. national security, but also for the country's climate change mitigation and adaptation efforts. Ramping up clean energy and energy efficiency helps reduce emissions of carbon dioxide and Short-Lived Climate Pollutants (black carbon, methane, tropospheric ozone and hydrofluorocarbons/HFCs), the major greenhouse gas emissions causing climate change, in addition to protecting the U.S. economy from foreign supply disruptions. Reducing our consumption of oil and other fossil fuels also has substantial health benefits: burning oil and coal releases harmful particulates into the atmosphere, which cause an array of health issues, including premature deaths.
Author: Laura Small
For more information:
- Petroleum FAQ , Energy Information Administration
- EESI Briefing: EERE Transportation Energy Futures Study: Deep Reductions in Petroleum Use and Carbon Emissions
- EESI Issue Brief: Renewable Biomass Can Help Reduce U.S. Petroleum Dependence
- EESI Fact Sheet: Plug-in Electric Vehicles
- EESI Fact Sheet: Plug-in Electric Vehicle Deployment
- "Fuel Economy Standards to Reach 54.5 MPG by 2025," EESI
40 Years After the Oil Embargo: Infographic
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