Oil market changed since 1973 embargo

Since the 1973 Arab oil embargo disrupted world energy markets, per capita use of petroleum in the U.S. has dropped, but oil imports have risen to record levels, well above those seen 25 years ago. The U.S. Energy Information Administration noted that and other major energy trends in a recent 25th anniversary report on energy markets since the start of the Arab embargo in October 1973, which prompted sharp increases in oil prices, energy shortages, and long lines at gasoline stations.

Sept. 21, 1998

3 min read

Since the 1973 Arab oil embargo disrupted world energy markets, per capita use of petroleum in the U.S. has dropped, but oil imports have risen to record levels, well above those seen 25 years ago.

The U.S. Energy Information Administration noted that and other major energy trends in a recent 25th anniversary report on energy markets since the start of the Arab embargo in October 1973, which prompted sharp increases in oil prices, energy shortages, and long lines at gasoline stations.

EIA said,"A doubling of automobile efficiency over the last quarter century has made a major contribution to the 11% reduction in per capita use of petroleum, even as new-vehicle horsepower rose 15% over the same period."

It said the world has diversified its sources of oil, with the share supplied by the Organization of Petroleum Exporting Countries (OPEC) dropping to 43% from 55%.

"Part of the resilience of non-OPEC production stems from improved technologies for oil exploration and drilling, which have reduced finding costs," EIA noted.

It said that, after the decontrol of oil and gas markets, the creation of energy futures and options markets helped alert energy suppliers and consumers to anticipated future energy balances.

EIA observed that the U.S. has built a Strategic Petroleum Reserve for use in energy emergencies, and it currently holds 563 million bbl of crude, about 57 days of net U.S. petroleum imports.

The paper said U.S. energy consumption of all fuels per dollar of gross domestic product (commonly referred to as energy intensity) has dropped by a third.

"These signs of progress have been offset by the trend of greater U.S. dependence on foreign oil, rising from 28% in the early 1970s to 48% in 1997, and by changes in trends after the collapse of oil prices in the mid-1980s.

"Since then, energy efficiency gains slowed substantially, total energy use climbed, and OPEC began to regain much of its previous share of world oil markets."

EIA said retail prices for electricity and gasoline are returning to the range that existed before the 1973 embargo. Gasoline prices have dropped 44% since their peak in 1981, and electricity prices have fallen 30% since their peak in 1982. (all numbers adjusted for inflation).

It said that the national average price for regular gasoline was $1.013/gal in late August, the lowest end-of-summer price (in nominal as well as real terms) this decade.