1979 oil crisis
Based on Wikipedia: 1979 oil crisis
The Lines That Changed America
Picture this: Americans sitting in their cars, engines idling, burning through half a gallon of gasoline per hour while waiting in line to buy gasoline. The absurdity was almost poetic. By some estimates, drivers wasted 150,000 barrels of oil every single day just sitting in gas station queues during the summer of 1979.
This wasn't supposed to happen again.
Just six years earlier, the Arab oil embargo of 1973 had shocked Americans into realizing how dependent they'd become on foreign oil. Congress had passed fuel economy standards. Detroit had started building smaller cars. The country had learned its lesson.
Or so everyone thought.
Revolution in Tehran
The crisis began not in the oil fields but in the streets of Iran. In November 1978, thirty-seven thousand workers at Iran's nationalized oil refineries walked off the job. Production plummeted from six million barrels per day to just one and a half million. Iran's government managed to patch things together temporarily by bringing in navy personnel to run the crude oil operations, and by the end of November, output had nearly returned to normal.
But the political situation was spiraling beyond anyone's control.
On January 16, 1979, the Shah of Iran—Mohammad Reza Pahlavi—fled his country along with his wife, Farah. The Shah had ruled Iran for decades with American backing, and his departure marked the end of an era. Into the power vacuum stepped Ayatollah Khomeini, a religious leader who had spent years in exile and now returned to transform Iran into an Islamic republic.
The new government eventually allowed oil exports to resume, but production remained erratic and lower than before. The global oil market, which operates on remarkably thin margins, went into panic mode.
Four Percent That Shook the World
Here's what's remarkable about the 1979 crisis: the actual drop in global oil supply was only about four percent. That's it. The world didn't suddenly run out of oil. Saudi Arabia and other members of the Organization of Petroleum-Exporting Countries—commonly known as OPEC—ramped up their production to compensate for most of Iran's decline.
But oil markets don't respond to reality. They respond to fear.
Over the following twelve months, the price of crude oil more than doubled, jumping from about sixteen dollars per barrel to nearly forty dollars. Adjusted for inflation, that forty-dollar price in 1980 wouldn't be matched again until March 2008—almost three decades later.
The psychology of oil markets amplifies every disruption. When buyers worry about future shortages, they rush to secure supplies now, driving prices higher. Those higher prices convince other buyers that shortages must be imminent, triggering more panic buying. It becomes a self-fulfilling prophecy where fear creates the very crisis that people feared.
Then Came the War
Just when it seemed things couldn't get worse, they did.
In September 1980, Iraq invaded Iran, launching what would become one of the longest and bloodiest conflicts of the twentieth century. The Iran-Iraq War would grind on for eight years, killing hundreds of thousands and devastating both countries' economies.
For the oil market, the immediate impact was another seven percent drop in global production. Two of OPEC's major producers were now at war with each other, their oil facilities under attack, their exports disrupted.
Oil prices wouldn't return to pre-crisis levels until the mid-1980s.
America's Strange Paralysis
The United States found itself in a peculiar situation. After the 1973 crisis, President Richard Nixon had imposed price controls on domestic oil, keeping American crude artificially cheap. Gasoline price controls had been lifted, but the controls on the oil itself remained.
This created a bizarre economic distortion. The regulated price of domestic oil was held at six dollars per barrel while the world market price hit thirty dollars. American oil producers had little incentive to drill new wells or expand production when they could only charge a fraction of the global price.
President Jimmy Carter began dismantling these controls in April 1979, but the process was gradual. Full deregulation wouldn't come until 1981, under President Ronald Reagan. Carter also proposed a windfall profit tax on oil companies to capture some of the gains they'd reap from higher prices—a politically popular move given how much Americans blamed oil companies for their pain at the pump.
Did Anyone Actually Believe It?
Perhaps the most telling detail from 1979 comes from a telephone poll conducted by the Associated Press and NBC News that May. They asked sixteen hundred American adults whether they thought the energy shortages were real.
Only thirty-seven percent said yes.
Nine percent weren't sure.
And fifty-four percent—a clear majority—believed the whole thing was a hoax.
Think about that for a moment. People were waiting in lines for hours to buy gasoline, watching prices climb week after week, and more than half of them thought it was all some kind of elaborate scam. The oil companies, they figured, must be manipulating supplies to drive up profits.
This suspicion wasn't entirely baseless. The actual amount of oil sold in the United States in 1979 was only three and a half percent less than the previous year's record. The shortages felt much worse than that modest decline would suggest. Part of this was the panic buying itself—when everyone rushes to fill their tanks at once, even abundant supplies can't keep up with demand.
Odd-Even and Other Desperate Measures
State governments scrambled to manage the chaos. Several states—including California, Pennsylvania, New York, New Jersey, Oregon, and Texas—implemented what was called odd-even rationing. The concept was simple: if your license plate ended in an odd number, you could only buy gas on odd-numbered days. Even plates meant even days.
Maryland's governor, Harry Hughes, was among the most vocal proponents of this approach, which had been used during the 1973 crisis. The federal government even printed gasoline rationing coupons, ready to implement a more formal system if things got truly desperate.
They never used those coupons. The crisis eventually eased without requiring that level of intervention. But the fact that they were printed and ready tells you how close officials thought America was to a complete breakdown of fuel distribution.
The Malaise Speech
On July 15, 1979, President Carter delivered one of the most unusual addresses in presidential history. He had retreated to Camp David for more than a week, consulting with advisors and ordinary citizens, trying to understand why America seemed so paralyzed.
The speech he gave that night became known as the "Crisis of Confidence" address, though critics quickly dubbed it the "malaise speech"—even though Carter never actually used that word. He spoke about a national spiritual crisis, a loss of faith in American institutions and in the future itself. He urged Americans to conserve energy, to sacrifice for the common good.
Carter had already tried to lead by example. He'd installed solar panels on the White House roof to heat water and put a wood-burning stove in the living quarters. These weren't just symbolic gestures—they were meant to demonstrate that conservation was patriotic, not a sign of weakness.
Reagan removed those solar panels in 1986. The official reason was roof maintenance. The symbolic message was clear.
The Carter Doctrine
The crisis pushed American foreign policy in a new direction. In November 1979, Iranian revolutionaries seized the American Embassy in Tehran, taking fifty-two Americans hostage. Carter immediately imposed an embargo on Iranian oil.
Two months later, in January 1980, Carter announced what became known as the Carter Doctrine. The key line was blunt: "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."
This was a dramatic expansion of American security commitments. The United States was now explicitly pledging to use military force, if necessary, to protect access to Middle Eastern oil. Earlier that year, Carter had established the Rapid Deployment Joint Task Force—the predecessor to what would become U.S. Central Command—specifically to project American military power into the Gulf region.
The 1979 oil crisis didn't just affect gas prices. It reshaped American grand strategy for decades to come.
Boom Towns
Not everyone suffered during the crisis. When the price of West Texas Intermediate crude—the benchmark for American oil—increased two hundred fifty percent between 1978 and 1980, oil-producing regions experienced something like a gold rush.
Texas, Oklahoma, Louisiana, Colorado, Wyoming, and Alaska saw population booms as workers flooded in to take advantage of high-paying jobs in the oil patch. Drilling rigs that had sat idle for years suddenly made economic sense. Production from Alaska's massive Prudhoe Bay field, which had come online just a year before the crisis, ramped up dramatically.
The federal government even created something called the Synthetic Fuels Corporation in 1980, with the goal of producing alternatives to imported oil. The idea was to develop ways to extract liquid fuels from coal, oil shale, and other domestic resources that had been too expensive to exploit when oil was cheap.
It didn't work out. By the mid-1980s, oil prices had collapsed, and the Synthetic Fuels Corporation was disbanded as an expensive failure. But at the time, with oil prices seemingly headed only upward, it felt like a reasonable bet.
Detroit's Reckoning
The American automobile industry faced an existential crisis. For decades, Detroit's Big Three—General Motors, Ford, and Chrysler—had built their empires on big cars. Full-sized sedans, station wagons, and increasingly, pickup trucks. These vehicles were comfortable, powerful, and thirsty.
The 1978 Corporate Average Fuel Economy standards, known as CAFE, had pushed the automakers to build smaller, more efficient vehicles. But they hadn't moved fast enough. When gas prices doubled, American consumers suddenly wanted cars that sipped fuel rather than guzzled it.
Japanese manufacturers had exactly what buyers wanted. The Toyota Corolla and the Honda Civic got excellent mileage. They were reliable. And they were available—Japanese factories had been churning out fuel-efficient small cars for years.
Detroit scrambled to respond. GM introduced the Chevrolet Citation. Ford built the Fairmont and then the Escort. Chrysler, teetering on the edge of bankruptcy, launched the Dodge Aries K. Some of these cars were decent. Others were hasty, poorly designed attempts to compete with imports that had been refined over many model years.
The numbers told the story. Japanese automakers' share of American car purchases rose from nine percent in 1976 to twenty-one percent in 1980. By the anniversary of the Iranian Revolution, Japanese manufacturers had surpassed Detroit's production totals for the first time in history.
Technology Matters
Part of Japan's advantage was technological. Many imported cars used fuel injection—a system that precisely meters the amount of gasoline entering the engine—while most American cars still relied on carburetors, a much cruder technology dating back to the early days of automobiles.
Japanese manufacturers also pioneered multi-valve engines, which could burn fuel more efficiently than the traditional two-valve designs common in American cars. These weren't revolutionary breakthroughs, but incremental improvements that added up to significantly better fuel economy.
The overall fuel efficiency of cars sold in the United States improved from about fifteen miles per gallon in 1979 to eighteen miles per gallon by 1985 and twenty miles per gallon by 1990. That thirty-three percent improvement over a decade came partly from better technology and partly from Americans simply buying smaller vehicles.
The European Casualties
It wasn't just American automakers who suffered. The Japanese imports also displaced European brands that had once dominated the small-car market in America.
Renault, Fiat, Peugeot, Citroën—these companies had sold vehicles to Americans who wanted something smaller and more distinctive than Detroit's offerings. But the rising value of the German mark and British pound made European imports increasingly expensive, while Japanese manufacturers benefited from a weaker yen.
Some European brands simply couldn't compete. Triumph went bankrupt. Simca disappeared. Others withdrew from the American market entirely, unable to meet increasingly stringent emissions and safety regulations or unwilling to invest in the modifications necessary to comply.
The 1979 oil crisis reshaped the global automobile industry in ways that persist today. Japan's dominance of the fuel-efficient car market, established during the crisis years, continued for decades.
The Long-Term Response
The crisis eventually produced exactly the response that economic theory would predict. High prices encouraged conservation and spurred development of alternative supplies.
Electric utilities around the world switched from oil to coal, natural gas, or nuclear power. National governments poured billions into research programs seeking alternatives to petroleum. Commercial exploration developed major new oil fields outside OPEC's control—in Siberia, Alaska, the North Sea, and the Gulf of Mexico.
By 1986, daily worldwide demand for oil had dropped by five million barrels compared to the pre-crisis peak. Non-OPEC production had increased by an even larger amount. OPEC's share of the global oil market fell from fifty percent in 1979 to just twenty-nine percent in 1985.
The Soviet Union, America's Cold War adversary, became the world's largest oil producer during this period. Mexico, Nigeria, and Venezuela expanded their production. Oil from Britain's North Sea fields flooded the market.
Saudi Arabia tried to maintain high prices by cutting its own production, acting as what economists call a "swing producer." But eventually, in 1985, the Saudis gave up. They opened the taps, trying to regain market share rather than defend prices.
Oil prices collapsed. The crisis was over.
The Lessons Learned—and Forgotten
One academic study found something poignant about the long-term effects of the 1979 crisis. Researchers discovered that people who were teenagers during the crisis—between fifteen and eighteen years old when they experienced those gas lines and price spikes—were substantially less likely to drive cars when they reached their mid-thirties compared to people who came of age before or after the crisis.
Formative experiences shape behavior for decades. The generation that learned to drive during the oil crisis never fully trusted that gasoline would be cheap and abundant.
But collective memory is short. Oil prices remained low through most of the 1990s, rarely spiking except briefly during the Gulf War. Americans went back to buying bigger vehicles—the SUV boom of the late 1990s and 2000s would have seemed incomprehensible to someone standing in a gas line in 1979.
When oil prices rose sharply again during the 2000s, many of the same patterns repeated. Panic buying. Political accusations. Searches for alternatives. Promises that this time, America would finally wean itself from foreign oil.
The 1979 crisis didn't teach permanent lessons. It taught lessons that lasted about as long as prices stayed high. Once the pain faded, so did the urgency for change.
A Father, a Daughter, and a Full Tank
There's something intimate about the 1979 oil crisis that gets lost in the statistics and the policy debates. It played out in families, in the small frustrations and anxieties of daily life.
Parents worried about getting to work. Teenagers couldn't borrow the car because there wasn't enough gas. Family road trips got cancelled. The simple freedom of American automobility—the ability to go anywhere, anytime, with a turn of the key—suddenly felt precarious.
For many Americans, especially those old enough to remember it, 1979 wasn't about OPEC market share or Iranian politics or fuel economy standards. It was about sitting in the car with a parent, watching the needle creep toward empty, wondering if you'd make it to the front of the line before the station ran dry.
Those memories, more than any policy analysis, explain why the 1979 oil crisis still resonates. It was personal. It came home.