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1979 Energy Crisis

1979 Energy Crisis

What Was the 1979 Energy Crisis?

The 1979 energy crisis, the second of two oil price shocks during the '70s, brought about a boundless panic about potential gasoline shortages, and far higher prices for both crude oil and refined products. Oil output declined by just 7% or less, yet the short-term supply disruption prompted a spike in prices, panic buying, and long lines at gas stations.

Figuring out the 1979 Energy Crisis

The 1979 energy crisis happened in the aftermath of the Iranian Revolution, what began in mid 1978 and ended in mid 1979 with the fall of Shah Mohammad Reza Pahlavi, the state's ruler. Turmoil in Iran, a major petroleum exporting country, caused the global supply of crude oil to decline essentially, triggering vital shortages, and a flood in panic buying — in something like 12 months, the price per barrel of this widely utilized resource nearly multiplied to $39.50.

Short-run disruptions in the global supply of gasoline and diesel fuel were particularly intense in the spring and late-spring of 1979. Several states answered by rationing gasoline, including California, New York, Pennsylvania, Texas, and New Jersey. In these populous states, consumers could buy gas each and every other day, in view of whether the last digit of their license plate numbers was even or odd.

The gasoline shortage additionally prompted fears that heating oil may be in short supply through the 1979-1980 winter. This prospect was especially unsettling for New England states, where demand for home heating oil was the highest.

Special Considerations

Accusing the crisis exclusively on the fall of the Shah would be erroneous. Outstandingly, the U.S. confronted more-intense pain from the crisis than other developed countries in Europe, which likewise depended on oil from Iran and other Middle East countries. Part of the purpose for the crisis had to do with fiscal policy decisions in the U.S.

U.S. Fiscal Policy Also to Blame

In mid 1979, the U.S. government regulated oil prices. Regulators requested purifiers to confine the supply of gasoline in the beginning of the crisis to build inventories, straightforwardly adding to higher prices at the pump.

One more factor was unintended supply restriction after the Department of Energy (DOE) chose to make a modest bunch of large U.S. [refiners](/oil-treatment facility) sell crude to more modest purifiers who couldn't track down a ready supply of oil. Since more modest purifiers had limited production capacities, the decision further delayed gasoline supply.

Monetary policy leading up to the crisis likewise apparently assumed a part to a degree. The Federal Open Market Committee (FOMC) was hesitant to raise target interest rates too rapidly and this dithering contributed to rising inflation late in the decade. The leap in inflation was joined by higher prices for energy and a scope of other consumer products and services.

Benefits of the 1979 Energy Crisis

In the midst of the crisis, lawmakers actively urged consumers to monitor energy and limit pointless travel. In subsequent years, the 1979 crisis prompted the sale of more compact and subcompact vehicles in the U.S. These more modest vehicles had more modest motors and gave better fuel economy.

Likewise, the crisis incited utility companies worldwide to search out alternatives to crude oil generators, including nuclear power plants, and governments to spend billions on the research and development (R&D) of other fuel sources.

Combined, these efforts brought about daily worldwide oil consumption declining in the six years following the crisis. In the mean time, the Organization of Petroleum Exporting Countries (OPEC) global market share tumbled to 29% in 1985, down from half in 1979.


  • The energy crisis of 1979 prompted the development of more modest, more fuel-proficient vehicles.
  • The energy crisis of 1979 was one of two oil price shocks during the 1970s — the other was in 1973.
  • OPEC's market share fell forcefully and utility companies pushed toward alternative energy sources.
  • Crude oil prices almost multiplied to nearly $40 per barrel in twelve months.
  • Higher prices and worries about supplies prompted panic buying in the gasoline market.