Oil Embargo: Impact On US Economy

Impact of the OPEC Oil Embargo on U.S. Economy

On the 17th of October 1973, the oil crisis began as members of the Organization of Arab Petroleum Exporting Countries announced that as a result of the Yom Kippur War, OPEC members would no longer ship petroleum to nations that supported Israel. OPEC members decided to take advantage of their power over the world price for oil in order to raise prices for oil all over the world. So many nations depended on oil and because of the important role of OPEC as the national supplier, prices for oil increased. The oil embargo act shrunk the US economy, increased inflation and unemployment and put the economy into a severe recession.

The United States depended greatly on foreign oil consumption

The US Strategic Petroleum allocation act, approve by Nixon, was developed as well, which gave federal controls over the price as well as the production n and marketing of oil and gas. “As a result of these efforts, the U.S. economy grew 27 percent, even as oil use fell 17 percent and imports of oil fell 50 percent according to the Rocky Mountain institute (RMI), a non profit energy research center.” (Mark Lallanilla)

President Nixon created a price control program in hopes of lessoning America’s dependency on foreign sources of oil and gas. He advised homeowners to save energy by turning down their thermostats and conserving water. He asked for companies to cut work hours. Gas stations were also asked to hold their sales to only ten gallons per customer and an extension of daylight savings was created as well as a ban on the sale of gasoline on Sundays. On November 13th, Congress approved the largest initiative, which is known as the Trans-Alaskan oil pipeline, which was designed to supply two million barrels of oil a

Unemployment peak during this time because workers lacked skills, education, experience, and proximity to jobs. Soaring Oil prices shifted the United States to a more service-based economy. Steel industries, automobile industries, and electronic industries declined, as a result of the high-energy costs and foreign competition. “Increases in foreign industrial efficiency allowed Europe, Asia and Latin America to effectively compete by producing quality goods for a lower cost. Many American companies began outsourcing labor to foreign countries to remain competitive.” (American History) The transfer of wealth to powerful oil producing nations provided income as well as new opportunities for oil rich countries. “As oil prices skyrocketed in the 1970’s, producers were willing to travel to more remote and difficult places to drill, including Alaska, the North Sea, and the Gulf of Mexico and the Canadian oil sands.” (Greg