Saturday, November 15, 2008

Oil Crisis of 1973 (a look back)

About the only time I look at history is when I know that we are repeating it in ways that I rather we didn't. Today, I would like to have a look back at the not so distant past of 1973. Interestingly, one of my current favorite TV shows, Life on Mars, is set in this year. This is the year of the famous oil crisis that saw long lines and rationing at US gasoline pumps.

So what happened in 1973? In a nutshell, some of the oil producing countries who had banded together as OPEC decided to slow production AND impose embargoes on certain countries. The United States, by virtue of her assistance to Israel during the Yom Kippur War ensured that she would not get oil from OPEC. To be thorough, we need to go back to 1971 and see where the US (President Nixon) eschewed the Britton Woods Treaty/System in favor of a floating dollar. The Britton Woods system tied the value of US dollars to the value of gold, i.e., a "gold standard". Once abandoned, the US dollar (now a relatively worthless paper note) was valued solely by what the market would allow. This is arguably one of the worst days in US financial history. The worst occurred when Woodrow Wilson signed the Federal Reserve Act in 1913.

I digress. When the dollar started "floating" and becoming inflated and less valuable, the OPEC nations realized they were not getting their monies worth for their product. The Yom Kippur war then provided them with an opportunity to take the world hostage and get their prices up, which they successfully accomplished. What is interesting to me is that in 1973, we imported roughly 25% of our oil and today we import 75% or so. Can you imagine an oil embargo today? Our nation would simply come to a halt, literally and figuratively. This is why we need to get off oil.

What were the results of the oil crisis?
- More fuel efficient vehicles (less boat sized cars and more compacts)
- CAFE standards were implemented
- more domestic oil production (not near enough to keep up with demand though)
- a cute little electric car from Sebring/Vanguard called the CitiCar/CommutaCar

These cars are still around and their owners are enthusiasts. Designed for urban transport, they will travel up to 40 mph for about 30 miles, all without a drop of gasoline. The only downside is that they were built like golf carts and ride about the same. Nevertheless, thousands were built and bought. It is too bad the trend didn't catch on and the Big Three didn't follow suit.

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