The sharp rise in prices after the Iranian Revolution, combined with the Iran-Iraq War and U.S. government actions that exacerbated the problem, produced gas lines, shortages, and dramatically higher energy prices for U.S. businesses and consumers.
World crude oil prices rose sharply after the Arab oil embargo of 1973 and continued a steady climb through the mid-1970’s, spurring government intervention in the form of price, allocation, and import controls. President Jimmy
President Carter’s efforts at reform were stalled by a series of events in the Middle East: In December, 1977, riots broke out in Iran; they were followed by the Iranian Revolution and the overthrow of the shah in January, 1978. In September, 1980, Iran was invaded by Iraq. Together, these events disrupted the world’s crude oil supply. Iran had provided approximately 15 percent of internationally traded crude oil and 9 percent of U.S. crude imports before the revolution. The loss of Iranian crude oil–which were particularly “light” (low in wax content) and “sweet” (low in sulfur content) and thus inexpensive to refine into gasoline–shifted the market toward heavier, more sour crude oils that were more expensive to refine. U.S. refineries were able to produce less gasoline per day from these crude oils, so the decrease in supply of gas was greater than the decrease in supply of crude oil.
The result of these events was soaring crude oil, gasoline, diesel, and home heating oil prices that led to a general economic decline in the United States.
Iranian and Iraqi oil production gradually recovered and partly eased the world crude shortage. However, most economists date the end of the energy crisis to President Ronald Reagan’s issuance of
Bradley, Robert L. Oil, Gas, and Government: The U.S. Experience. 2 vols. Washington, D.C.: Cato Institute, 1995. Katz, James Everett. Congress and National Energy Policy. Piscataway, N.J.: Transaction, 1983. Morriss, Andrew P., and Nathaniel Stewart. “Market Fragmenting Regulation: Why Gasoline Costs So Much (and Why It Is Going to Cost More).” Brooklyn Law Review 72, no. 3 (2007): 939-1060. Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Free Press, 1993.
Arab oil embargo of 1973
Organization of Petroleum Exporting Countries