Forty years ago this month, the Organization of the Petroleum Exporting Countries (OPEC) proclaimed an embargo on oil exports to the U.S. as retaliation for its support of Israel in the Yom Kippur War. It would last only five months, but it haunts U.S. energy policy to this day.
The modern global energy market bears scant resemblance to what existed 40 years ago. Today’s market is far more diversified and resilient. Thanks to the shale gas revolution and soaring domestic oil and gas production, the U.S. has reduced the cost of its energy and become a major exporter of refined products. Add in the political and economic tumult within many OPEC member countries, and it’s clear that, by almost any measure, OPEC is far weaker and the U.S. is far stronger than in 1973.
Nevertheless, the U.S. continues to mandate the use of corn ethanol — a farm subsidy that has been masquerading as an energy program since the 1970s. And the promoters of ethanol still hype the supposed danger of “our dependence on imported oil.” Every administration since President Richard Nixon’s has engaged in sloganeering about energy independence — including Barack Obama’s, just this past August — despite increasing global interdependence.
Looking back, it’s obvious that the OPEC embargo itself was largely a symbolic move. The main reason for gasoline shortages in the wake of the embargo was not a lack of crude oil, but rather federal price controls, Anas Alhajji of NGP Energy Capital Management and other economists have concluded. Indeed, America’s crude-oil imports in 1973 exceeded those in 1972 by 372 million barrels, data from the Energy Information Administration show.
In 1974, those imports jumped again by 85 million barrels.
Since then, although oil remains a critically important commodity, petroleum’s share of the global energy market has been in steady decline. In 1973, it accounted for 48 percent of all global energy use. Last year, its market share fell to 33 percent.