1979 energy crisis
The
1979 (or
second)
oil crisis occurred in the wake of the
Iranian Revolution. In the wake of protests, the
Shah of Iran,
Mohammad Reza Pahlavi, fled his country in early
1979, allowing
Ayatollah Khomeini to gain control. The protests shattered the Iranian oil sector. While the new regime resumed oil exports, it was inconsistent and at a lower volume, forcing up prices. Saudi Arabia and other
OPEC nations increased production to offset the decline, and the overall loss in production was about 4%. However, a widespread panic resulted, driving the price far higher than would be expected under normal circumstances. In the
United States, the Carter administration instituted price controls.The Carter Administration began a phased decontrol of oil prices on 5 April when the average price of crude oil was US$15.85. Over the next 12 months the price of crude oil rose to $39.50 (its all time highest real price until early 2006). During this period domestic oil output rose sharply from the large Prudhoe Bay fields while oil imports fell sharply. However, since there were no price controls on imported oil, this had no impact on boosting the supply of gasoline in 1979. Hence, long lines appeared at gas stations, as they had six years earlier during the
1973 oil crisis. As the average vehicle of the time consumed between 2-3 liters of gas (petrol) an hour while idling, it was estimated that Americans wasted up to 150,000 barrels of oil per day idling their engines in the lines at
gas stations.
During the period, many people believed the oil shortages were artificially created by the oil companies to drive up prices, rather than created by natural factors beyond any human control or influence. Further, while in a market economy, shortages would be expected to drive up prices, causing a contraction in demand, of themselves they would be unlikely to result in lines at the gas pump but for artificial regulations and price controls. Many politicians proposed gas
rationing, such as the
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 crisis. Coupons for gasoline rationing were printed but were never actually used during the 1979 crisis.
President
Jimmy Carter made symbolic efforts to encourage energy conservation, such as urging citizens in a famous
July 15, 1979,
'malaise' speechto turn down their thermostats. He also installed
solar power panels on the roof of the
White House and a
wood-burning stove in the living quarters. However, his successor
Ronald Reagan, ordered the solar panels removed and the wood stove dismantled. Carter's fire-side speech argued the oil crisis was "the moral equivalent of war." More importantly, Carter, as part of his administration's efforts at
deregulation, proposed removing price controls that had been imposed in the administration of
Richard Nixon during the 1973 crisis. Congress agreed to remove price controls in phases; they were finally dismantled in
1981 under Reagan.
In 1990, following
Saddam Hussein's
Iraqi invasion of
Iran, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. Yet oil lines did not reappear in the
United States, other than in a few isolated incidents.
*
energy crisis*
Iran hostage crisis*
1973 oil crisis*
1990 spike in the price of oil*
Oil price increases of 2004 and 2005*
55 mph national speed limit
