1979 oil crisis

1979 oil crisis
	Graph of top oil-producing countries, showing drop in Iran's production[1]
Date	1979–1980
Also known as	Second oil crisis

The 1979 Oil Crisis, also known as the 1979 Oil Shock or Second Oil Crisis, was an energy crisis caused by a drop in oil production in the wake of the Iranian Revolution. Although the global oil supply only decreased by approximately four percent,[2] the oil markets reaction raised the price of crude oil drastically over the next 12 months, more than doubling it to $39.50 per barrel. The spike in price caused fuel shortages and long lines at gas stations similar to the 1973 oil crisis.[3]

In 1980, following the onset of the Iran–Iraq War, oil production in Iran fell drastically. Iraq's oil production also dropped significantly, triggering economic recessions worldwide. Oil prices did not return to pre-crisis levels until the mid-1980s.[4]

Oil prices after 1980 began a steady decline over the next 20 years, except for a brief uptick during the Gulf War, which then reached a 60% fall-off in the 1990s. Mexico, Nigeria, and Venezuela's major oil exporters expanded their production during this time. The Soviet Union became the largest oil producer in the world, and oil from the North Sea and Alaska flooded the market.

Iran

In November 1978, a strike consisting of 37,000 workers at Iran's nationalized oil refineries reduced production from 6 million barrels (950,000 m³) per day to about 1.5 million barrels (240,000 m³).[5] Foreign workers left the country.

On January 16, 1979, the Shah of Iran, Mohammad Reza Pahlavi, and his wife, Farah Pahlavi, left Iran at the behest of Prime Minister Shapour Bakhtiar, who sought to calm the situation.[6] After the departure of the Shah, Ayatollah Khomeini became the new leader of Iran.

Effects

Other OPEC members

Fluctuations of OPEC net oil export revenues since 1972[7][8]

The rise in oil prices benefited a few members of the Organization of Petroleum-Exporting Countries (OPEC), who made record-numbers in profits. Under the new Iranian government, oil exports later resumed but production was inconsistent and at a lower volume, further raising prices. Saudi Arabia and other OPEC nations, under the presidency of Mana Al Otaiba, increased production to offset most of the decline, and by early 1979 the overall loss in worldwide production was roughly four percent.[2]

The war between Iran and Iraq in 1980 caused a further 10 percent drop in worldwide production and OPEC production was surpassed by other exporters such as the United States as its member nations were divided amongst themselves. Saudi Arabia, a "swing producer", tried to gain back the market share after 1985, increasing production and causing downward pressure on prices, making high-cost oil production facilities less profitable.

United States

Line at a gas station in Maryland, United States, June 15, 1979.

The oil crisis had a mixed impact on the United States. Some regions of the country are oil-producing regions, and other regions are oil-consuming. Richard Nixon imposed price controls on domestic oil. Gasoline controls were repealed, but controls on domestic US oil remained.

The Jimmy Carter administration began a phased deregulation of oil prices on April 5, 1979, when the average price of crude oil was US$15.85 per barrel (42 US gallons (160 L)). Starting with the Iranian revolution, the price of crude oil rose to $39.50 per barrel over the next 12 months (it is all-time highest real price until March 3, 2008.)[9] Deregulating domestic oil price controls allowed U.S. oil output to rise sharply from the large Prudhoe Bay fields, while oil imports fell sharply.

Although not directly related, the near-disaster at Three Mile Island on March 28, 1979, also increased anxiety about energy policy and availability.[10] Due to memories of the oil shortage in 1973, motorists soon began panic buying, and long lines appeared at gas stations, as they had six years earlier.[11] The average vehicle of the time consumed between two and three liters (about 0.5–0.8 gallons) of gasoline an hour while idling, and it was estimated that Americans wasted up to 150,000 barrels (24,000 m³) of oil per day idling their engines in the lines at gas stations.[12]

Gas coupon printed but not issued during the 1979 energy crisis

The amount of oil sold in the United States in 1979 was only 3.5 percent less than the record set for oil sold the previous year.[13] A telephone poll of 1,600 American adults conducted by the Associated Press and NBC News and released in early May 1979 found that only 37 percent of Americans thought the energy shortages were real, nine percent were not sure, and 54 percent thought the energy shortages were a hoax.[14]

Many politicians proposed gas rationing. One such proponent was Harry Hughes, Governor of Maryland, who proposed odd-even rationing (only people with an odd-numbered license plate could purchase gas on an odd-numbered day), as was used during the 1973 Oil Crisis. Several states implemented odd-even gas rationing, including California, Pennsylvania, New York, New Jersey, Oregon, and Texas. Coupons for gasoline rationing were printed but were never actually used during the 1979 crisis.[15]

On July 15, 1979, President Carter outlined his plans to reduce oil imports and improve energy efficiency in his "Crisis of Confidence" speech (sometimes known as the "malaise" speech).[16] In the speech, Carter encouraged citizens to do what they could to reduce their use of energy. He had already installed water tank heating solar panels on the roof of the White House and a wood-burning stove in the living quarters. However, the panels were removed in 1986, reportedly for roof maintenance, during the administration of his successor, Ronald Reagan.[17]

Carter's speech argued the oil crisis was "the moral equivalent of war". In November 1979, Iranian revolutionaries seized the American Embassy, and Carter imposed an embargo on Iranian oil.[18] In January 1980, he issued the Carter Doctrine, declaring: "An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States."[19] Additionally, as part of his administration's efforts at deregulation, Carter proposed removing price controls that had been imposed by the Richard Nixon administration before the 1973 crisis. Carter agreed to remove price controls in phases. They were finally dismantled in 1981 under Reagan.[20] Carter also said he would impose a windfall profit tax on oil companies.[21] While the regulated price of domestic oil was kept to $6 a barrel, the world market price was $30.[21]

In 1980, the U.S. Government established the Synthetic Fuels Corporation to produce an alternative to imported fossil fuels.

When the price of West Texas Intermediate crude oil increased 250 percent between 1978 and 1980, the oil-producing areas of Texas, Oklahoma, Louisiana, Colorado, Wyoming, and Alaska began experiencing an economic boom and population inflows.[22]

According to one study, individuals who were between the ages of 15 and 18 during the 1979 oil crisis were substantially less likely to use cars once they were in their mid-30s.[23]

Other oil-consuming nations

In response to the high oil prices of the 1970s, industrial nations took steps to reduce their dependence on the Organization of Petroleum-Exporting Countries (OPEC) oil.[9] Electric utilities worldwide switched from oil to coal, natural gas, or nuclear power.[24] National governments initiated multibillion-dollar research programs to develop alternatives to oil[25][26] and commercial exploration developed major non-OPEC oilfields in Siberia, Alaska, North Sea, and the Gulf of Mexico.[27] By 1986, daily worldwide demand for oil dropped by 5 million barrels but, non-OPEC production rose by an even-larger amount.[28] Consequently, OPEC's market share reduced from 50 percent in 1979 to 29 percent in 1985.[29]

Automobile fuel economy

At the time, Detroit's "Big Three" automakers (Ford, Chrysler, GM) were marketing downsized full-sized automobiles like the Chevrolet Caprice, the Ford LTD Crown Victoria and the Dodge St. Regis which met the CAFE fuel economy mandates passed in 1978. Detroit's response to the growing popularity of imported compacts like the Toyota Corolla and the Volkswagen Rabbit was the Chevrolet Citation and the Ford Fairmont. Ford replaced the Ford Pinto with the Ford Escort and Chrysler, on the verge of bankruptcy, introduced the Dodge Aries K. GM was having unfavorable market reactions to the citation and introduced the Chevrolet Corsica and Chevrolet Beretta in 1987 which did sell better. GM also replaced the Chevrolet Monza, introducing the 1982 Chevrolet Cavalier which was better received. Ford experienced a similar market rejection of the Fairmont and introduced the front-wheel-drive Ford Tempo in 1984.[30]

Detroit was not well prepared for the sudden rise in fuel prices, and imported brands (primarily the Asian models, which were mass-marketed and had a lower manufacturing cost as opposed to British and West German brands. Moreover, the rising value of the Deutsche Mark and English Pound resulted in the transition to the rise of Japanese manufacturers as they were able to export their product from Japan at a lower cost, resulting in profitable gains despite accusations of price dumping) were now more widely available in North America and developing a loyal customer base.

A year after the 1979 Iranian Revolution, Japanese manufacturers surpassed Detroit's production totals, becoming first in the world. Japanese exports would later displace the automotive market once dominated by lower-tier European manufacturers (Renault, Fiat, Opel, Peugeot, MG, Triumph, Citroen). Some would declare bankruptcy (e.g. Triumph, Simca) or withdraw from the U.S. market, especially in the wake of grey market automobiles or the inability of the vehicle to meet DOT requirements (from emission requirements to automotive lighting). Many imported brands utilized fuel-saving technologies such as fuel injection and multi-valve engines over the common use of carburetors. [31] Nonetheless, overall fuel economy increased, which was one factor leading to the subsequent 1980s oil glut.

References

"Monthly Energy Review" (PDF). U.S. Energy Information Administration. November 2015.
"Oil Squeeze". Time. February 5, 1979. Archived from the original on March 7, 2008. Retrieved January 27, 2008.
"1970s: Education". National Association of Convenience Stores.
"The History of Global Oil Production: 1980's Oil Production". Retrieved August 29, 2020.
"Another Crisis for the Shah". Time. November 13, 1978. Retrieved December 5, 2009.
"1979: Shah of Iran flees into exile". BBC. January 16, 1979. Archived from the original on October 29, 2009. Retrieved December 5, 2009.
"OPEC Revenues Fact Sheet". US Energy Information Administration. January 10, 2006. Archived from the original on January 7, 2008.
"OPEC Revenues Fact Sheet". U.S. Energy Information Administration. June 14, 2016. Retrieved August 25, 2016.
Mouawad, Jad (March 3, 2008). "Oil Prices Pass Record Set in the '80s, but Then Recede". New York Times. Retrieved April 20, 2010.
Timeline of the accident at Three Mile Island, The Patriot-News [Central Pennsylvania], March 22, 2009. This is only indirectly related but is an additional source of anxiety about energy policy.
Powell, Robert E. (May 4, 2005). "The Oil Shocks of the 70s".
Leggett, Jeremy (2005). Half Gone: Oil, Gas, Hot Air, and the Global Energy Crisis. p. 150.
Sowell, Thomas (November 5, 2002). "Mondale's "experience"". Jewish World Review. Archived from the original on October 6, 2008. Retrieved November 7, 2008.
Witt, Evans (May 4, 1979). "Energy crisis still doubted by public". Associated Press.
"Rationing Coupons Shredded". New York Times. June 2, 1984. Retrieved January 27, 2008.
Carter, Jimmy (July 15, 1979). "Crisis of Confidence". The Carter Center. Retrieved July 27, 2008.
Wihbey, John (November 11, 2008). "Jimmy Carter's Solar Panels: A Lost History that Haunts Today". The Yale Forum on Climate Change & the Media. Retrieved November 1, 2009.
"Carter Imposes Oil Embargo During Hostage Crisis". The History Channel. Retrieved December 10, 2016.
Carter, Jimmy (January 23, 1980). "Third State of the Union Address". Jimmy Carter Presidential Library. Archived from the original on August 7, 2008. Retrieved July 27, 2008.
"Executive Order 12287 – Decontrol of Crude Oil and Refined Petroleum Products". January 28, 1981. Retrieved January 27, 2008.
Thorndike, Joseph J. (November 10, 2005). "Historical Perspective: The Windfall Profit Tax – Career of a Concept". TaxHistory.org. Retrieved November 6, 2008.
"FDIC: U.S. Home Prices: Does Bust Always Follow Boom?". Archived from the original on April 30, 2010. Retrieved December 16, 2007.
Severen, Christopher; van Benthem, Arthur (2019). "Formative Experiences and the Price of Gasoline". doi:10.3386/w26091. Cite journal requires |journal= (help)
Toth, Ferenc L.; Rogner, Hans-Holger (January 2006). "Oil and nuclear power: Past, present, and future" (PDF). Energy Economics. 28 (1): 1–25. doi:10.1016/j.eneco.2005.03.004.
"Renewables in Global Energy Supply: An IEA Fact Sheet" (PDF). International Energy Agency. January 2007.
"Renewable Energy: World Invests $244 billion in 2012, Geographic Shift to Developing Countries" (Press release). United Nations Environment Programme. June 12, 2013. Archived from the original on March 4, 2016.
Bromley, Simon (2013). American Power and the Prospects for International Order. John Wiley & Sons. p. 95. ISBN 9780745658414.
Robert, Paul (2004). The End of Oil: The Decline of the Petroleum Economy and the Rise of a New Energy Order. New York: Houghton Mifflin Company. pp. 103–04. ISBN 978-0-618-23977-1.
Boussena, Sadek (1994). "OPEC's Learning Process". Energy Studies Review. 6 (1): 61–72. doi:10.15173/esr.v6i1.322.
"1979 oil shock meant recession for U.S., depression for autos". Automotive News. 2013. Retrieved August 29, 2020.
Truett, Richard (2006). "Smooth Transition". AutoWeek. Retrieved May 28, 2007.

History of the United States
Timeline	Prehistory Pre-Columbian Colonial 1776–1789 1789–1849 1849–1865 1865–1918 1918–1945 1945–1964 1964–1980 1980–1991 1991–2008 2008–present
Topics	Agriculture American Century African Americans Cities The Constitution Demography Economy Banking Education Higher education Flag Foreign policy Diplomacy Immigration Labor LGBT Lumber Medicine Merchant Marine Military Army Marine Corps Navy Air Force Space Force Coast Guard Music Native Americans Postal service Railway Religion Slavery Sexual slavery Sports Technology and industry Territorial evolution Historic regions Voting rights Women
By Region	New England The South The West The West Coast
Category Portal

Financial crises
Banking panic Bear market Commodity price shocks Credit crunch Credit cycle Currency crisis Debt crisis Energy crisis Flash crash Hyperinflation Liquidity crisis Minsky moment Stock market crash
Pre-1000	Crisis of the Third Century (235–284 CE)
1000–1760	Great Bullion Famine (c. 1400–c. 1500) The Great Debasement (1544–1551) Dutch Republic stock market crashes (c. 1600–1760) Kipper und Wipper (1621–1623) Tulip mania crash (1637) South Sea bubble crash (1720) Mississippi bubble crash (1720)
1760–1840	Amsterdam banking crisis of 1763 Bengal bubble crash (1769–1784) Crisis of 1772 Dutch Republic financial collapse (c. 1780–1795) Panic of 1785 Copper Panic of 1789 Panic of 1792 Panic of 1796–1797 Danish state bankruptcy of 1813 Post-Napoleonic Irish grain price and land use shocks (1815–1816) Panic of 1819 Panic of 1825 Panic of 1837
1840–1870	European Potato Failure (1845–1856) Great Irish Famine Highland Potato Famine Panic of 1847 Panic of 1857 Panic of 1866 Black Friday (1869)
1870–1914	Panic of 1873 Paris Bourse crash of 1882 Panic of 1884 Arendal crash (1886) Baring crisis (1890) Encilhamento (1890–1893) Panic of 1893 Australian banking crisis of 1893 Black Monday (1894) Panic of 1896 Panic of 1901 Panic of 1907 Shanghai rubber stock market crisis (1910) Panic of 1910–11
1918–1939	Early Soviet hyperinflation (1917–1924) Weimar Republic hyperinflation (1921–1923) Shōwa financial crisis (1927) Wall Street Crash of 1929 Panic of 1930
1945–1973	Kennedy Slide of 1962
1973–1982	1970s energy crisis (1973–1980) 1973 oil crisis 1973–1974 stock market crash Secondary banking crisis of 1973–1975 Steel crisis (1973–1982) Latin American debt crisis (1975–1982) 1976 IMF crisis 1979 oil crisis Brazilian hyperinflation (1980–1982)
1982–2007	Steel crisis (1982–1988) Brazilian hyperinflation (1982–1994) Souk Al-Manakh stock market crash (1982) Chilean crisis of 1982 1983 Israel bank stock crisis Black Saturday (1983) Savings and loan crisis (1986–1995) Black Monday (1987) 1988–1992 Norwegian banking crisis Friday the 13th mini-crash (1989) Japanese asset price bubble crash (1990–1992) 1990 oil price shock Rhode Island banking crisis (1990–1992) 1991 Indian economic crisis 1990s Swedish banking crisis (1991–1992) 1990s Finnish banking crisis (1991–1993) 1990s Armenian energy crisis (1991–1995) Cuban Special Period (1991–2000) Black Wednesday (1992) Yugoslav hyperinflation (1992–1994) 1992 Colombian energy crisis 1994 bond market crisis Venezuelan banking crisis of 1994 Mexican peso crisis (1994–1996) 1997 Asian financial crisis October 27, 1997 mini-crash 1998 Russian financial crisis 1998–99 Ecuador financial crisis Samba effect (1999) California electricity crisis (2000–2001) Dot-com bubble crash (2000–2004) 2001 Turkish economic crisis 9/11 stock market crash (2001) Stock market downturn of 2002 South American economic crisis of 2002 2002 Uruguay banking crisis 2003 Myanmar banking crisis 2000s energy crisis (2003–2008) 2004 Argentine energy crisis Nigerian energy supply crisis (2005–) U.S. housing market correction (2006–2007) 2007 Chinese stock bubble crash Zimbabwean hyperinflation (2007–)
2007–2009	Financial crisis of 2007–2008 Subprime mortgage crisis U.S. bear market of 2007–2009 Global financial crisis in September 2008 Global financial crisis in October 2008 Global financial crisis in November 2008 Global financial crisis in December 2008 2008 Bulgarian energy crisis 2008 Central Asia energy crisis 2008 Latvian financial crisis 2008–2009 Belgian financial crisis 2008–09 Russian financial crisis 2008–2009 Ukrainian financial crisis 2008–2011 Icelandic financial crisis 2008–2011 Irish banking crisis 2008–2014 Spanish financial crisis Global financial crisis in 2009 Blue Monday Crash 2009 European debt crisis Greek government-debt crisis
2009–2020	2009 Ecuador electricity crisis 2009 Dubai debt standstill Venezuelan banking crisis of 2009–2010 2010 flash crash 2010–2014 Portuguese financial crisis Energy crisis in Venezuela (2010–) 2011 Tōhoku earthquake and tsunami stock market crash August 2011 stock markets fall Black Monday 2011 Bangladesh share market scam 2012–2013 Cypriot financial crisis 2013 Chinese banking liquidity crisis Venezuela economic crisis (2013–) Gaza electricity crisis (2013–) 2014–2016 Brazilian economic crisis Puerto Rican government-debt crisis (2014–) 2014–2017 Russian financial crisis 2015–2016 Chinese stock market turbulence 2015–2016 stock market selloff Zulia energy collapse (2015–) Brexit stock market crash (2016) 2016 Southeastern U.S. gas shortage Venezuelan hyperinflation (2016–) 2017 Sri Lankan fuel crisis Ghana banking crisis (2017–2018) 2018 cryptocurrency crash 2018 Turkish currency and debt crisis 2019 California power shutoffs Lebanese liquidity crisis (2019–)
2020–present	2020 stock market crash 2020 Russia–Saudi Arabia oil price war
List of banking crises List of economic crises List of sovereign debt crises List of stock market crashes and bear markets

Jimmy Carter
39th President of the United States (1977–1981) 76th Governor of Georgia (1971–1975)
Presidency	Transition Inauguration Timeline 1977 1978 1979 1980 1981 Federal judicial appointments controversies Executive Actions Executive Order 12036 Executive Order 12086 Executive Order 12148 Executive Order 12170 Executive Order 12172 Carter bonds Rabbit incident Carter Doctrine Camp David Accords Egypt–Israel peace treaty Torrijos–Carter Treaties Iran hostage crisis Operation Eagle Claw Canadian Caper Engagement with Ruhollah Khomeini 1979 oil crisis Support for Iraq during the Iran-Iraq War Diplomatic relations with China Goldwater v. Carter Civil Service Reform Act of 1978 Senior Executive Service Strategic Arms Limitation Talks 1980 Summer Olympics boycott
Speeches	Island of Stability Moral Equivalent of War State of the Union Addresses 1978 1979 1980 1981
Life and activities	UFO incident Carter Center Presidential Library and Museum Habitat for Humanity Jimmy & Rosalynn Carter Work Project The Elders Jimmy Carter National Historic Site Nairobi Agreement, 1999 One America Appeal
Elections	Georgia gubernatorial elections (1966 1970) Democratic presidential primaries (1976 1980) Democratic National Convention (1972 1976 1980) Presidential election (1976 1980)
Books	The Hornet's Nest: A Novel of the Revolutionary War (2003) Our Endangered Values (2006) Palestine: Peace Not Apartheid (2006) reaction and commentary Beyond the White House (2007) We Can Have Peace in the Holy Land (2009) White House Diary (2010) A Call to Action: Women, Religion, Violence, and Power (2014) A Full Life: Reflections at 90 (2015)
Honors	Nobel Peace Prize Presidential Medal of Freedom Freedom of the City Silver Buffalo Award Philadelphia Liberty Medal United Nations Prize in the Field of Human Rights Hoover Medal Christopher Award Carter–Menil Human Rights Prize Grammy Award
Legacy	Jimmy Carter Peanut Statue (1976) USS Jimmy Carter Georgia State Capitol statue (1994)
Related	Mary Prince (nanny) Jimmy Carter (2002 television documentary) Man from Plains (2007 documentary)
Family	Rosalynn Carter (wife) Jack Carter (son) Amy Carter (daughter) James Earl Carter Sr. (father) Lillian Gordy Carter (mother) Gloria Carter Spann (sister) Ruth Carter Stapleton (sister) Billy Carter (brother) Jason Carter (grandson) Emily Dolvin (aunt) Hugh Carter (cousin)
← Gerald Ford Ronald Reagan → Category