The immediate effect of the 1973 oil embargo was a decrease in the amount of crude oil and petroleum products available to American businesses. The long-term effects were large increases in the price of oil that motivated the United States and other nations to begin developing large-scale conservation efforts to reduce their dependence on oil, as well as increased domestic exploration to reduce the dependence on foreign oil.
Following World War II, two series of events shaped the Middle East. Politically, the creation of the state of
In the fall of 1973, the
The cut in oil production by the Arab states represented only about 7 percent of the petroleum available to the United States. The psychological impact of the embargo, however, was strong. American oil consumption dropped in response to the embargo, but there were still extensive areas of the country that experienced gasoline shortages. By the time gas prices stabilized, they had increased by about 45 percent. The entire country was affected, and businesses either passed on their increased costs to their customers or went out of business. Prices increased across the economy. The threat of another oil embargo gave the government an incentive to encourage more domestic oil production and exploration. The OPEC embargo was thus the first step toward the creation of the global free market in crude oil.
One long-term effect of the embargo was to encourage the government, businesses, and individuals to seek ways to conserve energy. The government would eventually pass a law mandating fuel efficiency standards in automobiles and provide incentives to companies seeking alternative sources of energy. The U.S. industry most affected by the crisis and its aftermath was the
Pelletiere, Stephen. America’s Oil Wars. Westport, Conn.: Praeger, 2004. Zalloum, Abdulhay Yahya. Oil Crusades: America Through Arab Eyes. London: Pluto Press, 2007.
Chrysler bailout of 1979
Energy crisis of 1979
International economics and trade
Organization of Petroleum Exporting Countries