How the Oil Embargo Changed Everything

Oil Embargo Changed

In the early 1970s, American petroleum consumption was increasing while domestic oil production was declining. The result was that Americans were becoming more and more dependent on foreign supplies of oil. In spite of this, though, few people seemed overly concerned. Domestic policy makers argued that America’s thirst for oil was immune from political, or any other type of disruption, because the Arab oil exporters couldn’t afford to lose any revenue, especially from the US market. They were wrong. In 1973, an oil embargo was imposed by members of the Organization of Petroleum Exporting Countries (OPEC) immediately led to country-wide fuel shortages and sky-rocketing prices. Some of the staff at Suburban of Garden City, a local Chrysler, Dodge, Ram, Jeep dealer in Garden City, MI, say they remember it well. It was a scary time for everyone, especially car dealers.

Background to the Energy Crisis:

In 1948, the Allied powers from WWII had sectioned off a section of the British-controlled territory of Palestine in order to create the state of Israel. Finally, disenfranchised Jews from around the world had a place to call home. However, much of the local Arab population refused to acknowledge the new Israeli state. The result was that local tensions escalated into full-scale wars. One of these Arab-Israeli wars, the Yom Kipper Conflict, began in early October 1973, when Egypt and Syria attacked Israel on the Jewish holy day of Yom Kippur. During the conflict, the Soviet Union began sending arms to Egypt and Syria, and the United States started to send arms to Israel. The result? Arabs around the world were furious.

The Embargo:

In response, members of the OPEC reduced their petroleum production and proclaimed an embargo on oil that was being shipped to the United States and the Netherlands, the main supporters of Israel. Though the Yom Kippur War ended in late October, the embargo and limitations on oil production continued for months, sparking an international energy crisis. Washington’s earlier assumption that an oil boycott would never happen were profoundly wrong.

Energy Crisis: Effects in the US:

In the three months after the embargo was announced, the price of oil quadrupled. After decades of abundant supply, Americans now faced price hikes and fuel shortages. State and national leaders called for measures to conserve energy, such as asking gas stations to close every other day and homeowners to turn down their thermostats. The United States was energy starved.

The Automotive Industry:

In addition to causing major problems in the lives of consumers, the energy crisis was a huge blow to the American automotive industry. For decades, Detroit had turned out bigger and bigger cars, and with cheap energy available, it seemed to be a permanent trend. But the oil embargo lead directly to the public’s immediate desire to drive more frugal vehicles, such as the ones that the Japanese and Europeans had been making. Thus began the small car revolution whereby little, fuel efficient sedans from and Japan and other countries drew immediate interest from the car buying public. Detroit did catch up eventually but it took several years. With a decades old “big car” mentality, it took a while for Detroit to embrace and adopt one for smaller vehicles. Maybe this was a good thing but small, highly efficient small cars are still being sold today and few consumers have any interest in the massive cars of the 1950s.