1979 Energy Crisis

1979 Energy Crisis

The 1979 (or second) oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil sector, with production being greatly curtailed and exports suspended. When oil exports were later resumed under the new regime, they were inconsistent and at a lower volume, which pushed prices up. Saudi Arabia and other OPEC nations, under the presidency of Dr. Mana Alotaiba increased production to offset the decline, and the overall loss in production was about 4 percent. However, a widespread panic resulted, added to by the decision of U.S. President Jimmy Carter to order the cessation of Iranian imports, driving the price far higher than would be expected under normal circumstances. In April of the same year, President Carter began a phased deregulation of oil prices. At the time, the average price of crude oil was $15.85 per barrel (42 US gallons (160 L)). Deregulating domestic oil price controls allowed U.S. oil output to rise sharply from the Prudhoe Bay fields, although oil imports fell sharply. Long lines once again appeared at gas stations and convenience stores, just as they did in 1973.

In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well.

After 1980, oil prices began a 20-year decline down to a 60 percent price drop in the 1990s. Oil exporters such as Mexico, Nigeria, and Venezuela expanded production ; USSR became the first world producer, and North Sea and Alaskan oil flooded onto the market.