OPEC’s Price Hike Spotlights Renewable Energy
On October 16, 1973, OPEC announced its decision to raise the posted price of oil by 70%, to $5.11 a barrel. The resulting oil embargo was “in response to the U.S. decision to re-supply the Israeli military” during the Yom Kippur war; it lasted until March 1974. The Arab oil producers had also linked the end of the embargo with successful U.S. efforts to create peace in the Middle East, which complicated the situation. The embargo reduced shipments of Arab oil to the U.S. down to zero and opened many American eyes to just how much the country was dependent on foreign oil. Energy conservation and the use of alternative energy took on new meaning and experienced a surge in popularity. Unfortunately, after the embargo was lifted and the long lines at the gas pump were a distant memory, the drive to build a renewable energy infrastructure also faded.
Besides, dramatically reducing the supply of oil to the U.S. the embargo also had a devastating effect inflation, which climbed to more than 10 percent that year. Additionally, an enormous trade deficit developed and interest rates climbed to the high teens. Elsewhere, a global recession began. By the time the embargo ended in March 1974, oil prices had climbed to nearly $12 a barrel, an increase of 330 percent. Gasoline prices had also begun to climb, reaching 57% a gallon by 1975, 86¢ a gallon by 1979, and $1.19 a gallon by 1980.
The embargo caused developed nations to rethink their dependence on fossil fuels. Research on alternative energy such as solar, wind, tides, and geothermal suddenly attained a new importance. The United States government responded to the new era of expensive energy by formulating the Energy Policy and Conservation Act of 1976, the Energy Conservation and Production Act of 1976, the Energy Reorganization Act of Energy Reorganization Act of 1974, and the National Energy Act of 1978.
To end the embargo, the Nixon Administration began parallel negotiations with both Arab oil producers, and with Egypt, Syria, and Israel to arrange an Israeli pull back from the Sinai and the Golan Heights after the fighting stopped. By January 18, 1974, Secretary of State Henry Kissinger had negotiated an Israeli troop withdrawal from parts of the Sinai. The promise of a negotiated settlement between Israel and Syria was sufficient to convince Arab oil producers to lift the embargo in March 1974. By May, Israel agreed to withdraw from the Golan Heights.
