Reduced Demand
OPEC had relied on the price elasticity of demand of oil to maintain high consumption, but underestimated the extent to which other sources of supply would become profitable as prices increased. Electricity generation from nuclear power and natural gas; home heating from natural gas; and ethanol blended gasoline all reduced the demand for oil. New passenger car fuel economy rose from 17 mpg in 1978 to more than 22 mpg in 1982, an increase of more than 30 percent.
Read more about this topic: 1980s Oil Glut
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