Four decades after the Arab oil embargo, the United States is less reliant on foreign oil and better prepared for global disruption, industry leaders say.
“That could affect prices temporarily, but any disruption would be replaced fairly quickly,” said Harold Hamm, CEO of Oklahoma City-based Continental Resources Inc. “We're not going to fall back into the situation of 1973.”
The energy industry changed overnight on October 17, 1973, when the Organization of Petroleum Exporting Countries (OPEC) asserted its control of energy pricing by halting all shipments of oil to the United States.
The effect was immediate.
Refineries and gas stations ran out of product. Prices surged. Consumers waited in lines that wrapped around the block just to fill up their tanks with gasoline.
“I was just getting out of college and into the banking industry,” said Mike Terry, president of the Oklahoma Independent Petroleum Association. “We all saw the long lines at the gas pumps. I just thought, ‘How can this happen? How can foreign countries hold us hostage?'”
In response to the embargo, the country developed the Strategic Petroleum Reserve as a storage bank in case of a similar crisis. The 727-million-barrel storage holds about 40 days worth of domestic usage.
The embargo also led to lower speed limits and growing demand for smaller, more fuel-efficient vehicles.
Still, the country's dependence on foreign oil grew for decades.
In 1973, the United States was about 30 percent dependent on foreign oil. By 2005, more than 60 percent of the country's oil was imported.
The United States imported about 6 million barrels of oil per day in 1973. That number more than doubled to 12.5 million barrels per day by 2005.
Industry changes equation
The shale oil and natural gas boom over the past eight years, however, has sharply reversed the trends.
Horizontal drilling combined with hydraulic fracturing, or fracking, has allowed producers to tap vast amounts of oil and natural gas that previously could not be recovered economically.
Today, imports represent less than 40 percent of the country's oil usage, and much of that is from Canada and Mexico. Total net imports dropped to about 6.3 million in July and is steadily headed downward.
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Forty years later, we are not at the whim of OPEC. It's remarkable how quickly that's happened. We're set to become the world's largest producer of oil this year. That's mainly due to shale oil and gas.”
President of the Mid-Continent Oil and Gas Association of Oklahoma