[ROCKMAN]

Since the MSM rush to highlight the event is underway I thought it would be a good time to put some facts. In 1973 when the Arab world got upset with the US for supporting Israel here’s what happened in the following years:

Middle East imports to the US dropped from 1.2 million bopd to 20k bopd. That represented a 20% drop in US oil imports. Domestic production at the time was 9.2 million bopd. Added to imports of 6.1 million bopd total US consumption was 15.3 million bopd. Thus the loss of ME oil represented a decline of 8% of US oil requirement. Not exactly the onslaught of a Mad Max world as some in the MSM would like to present.

But the MSM stories will be full of pictures of long lines at the gas stations and numerous sign saying “No Gas Today”. So how did a loss of only 8% of oil supplies create such an apparent shortage? Maybe there were hundreds of tankers sailing in circles out at sea just waiting for prices to rise high enough. Ole Geraldo Rivera flew out there looking but couldn’t find them. It was difficult to understand because the gas station lines began long before the full effect of the embargo kicked in.

In a few years they figured out what happened but it didn’t get the press coverage as the videos of folks getting into fistfights at the pumps. Turns out there was no shortage of gasoline in the country….just at the gas stations. There was just about as much fuel in the US during the embargo as there was before. The difference was where this entire inventory was being held. Instead of being at the tanks farms and in the underground storage at the stations all that extra fuel was being stored in the tanks of American vehicles. Easy to understand how that came about: before the panic most folks would wait until their tanks got down to a quarter full or less before refueling. After the panic many were filling up before they reached half empty. After the MSM hype had passed the govt estimated how much additional fuel was being carried by the many tens of millions of US vehicles. Turns out to have been almost a perfect match to how far fuel inventories had fallen. This phenomenon also explains why the gas station lines shrunk so quickly before the embargo ended: the panic eased off and folks stopped sitting in lines when they had more than half a tank of gas.

And I’ve personally seen this phenomenon first hand during hurricane panics in Texas. Many tens of thousands of folks were stranded on the highways out of Houston as one hurricane headed towards us. Very slow traffic jams emptied gas tanks and all the service stations along the way quickly ran out. One of my cohorts had his son drive from Dallas with 5 cans of fuel to his empty vehicle half way from Houston to Big D. The next day I drove to Austin and passed those thousands of empty cars. In another 100 miles all the stations were full of gas with no cars filing up: they were all down the road sitting dead. And when another storm blew into Houston I had filled up prior. And I then spent the next 4 days driving to work watching hundreds of cars sitting at stations waiting for fuel. By the 5th day or so folks finally figured out there wasn’t a shortage and the lines disappeared. And that’s when I filled up. Timing is everything. LOL.

It’s also interesting how the numbers played out shortly after the embargo ended: by 1978 US imports increased by 3.1 million bopd. But by 1982 they had decreased by twice as much, 4 million bopd, as during the embargo.

[Plantagenet]

Interesting post, Rockman. But it wasn't just drivers who paniced and caused gas lines----the government imposed nation-wide wage and price controls in 1971, and then when the oil embargo hit they reimposed them in 1973. The government paniced right along with the drivers. AND, As always, when government started messing with the private market, shortages and price hikes resulted

wage and price controls hurt supplies during Arab Oil Embargo

Perhaps most relevant to the PO or POD story, the Arab oil embargo not only produced gas lines, it also produced a big jump in gasoline prices----presaging the high gas prices of today.


Forty years ago the 1973 arab oil embargo and the Iran revolution took oil prices up to near modern levels

[ROCKMAN]

P - Good point. Maybe that was the beginning of the "new norm" resets that seem to be amongst us today. Or as some politician said a while back: never fail to take advantage of any crisis. Or something along those lines. LOL

[ROCKMAN]

Pstarr - "Any ideas?" Is it too soon to dig out my "Let a Yankee Freeze in the Dark" bumper sticker? Other than some crude humor I don't se us doing anything of substance until it's probably too late to do anything substantial.

[Tanada]

Pstarr - "Any ideas?" Is it too soon to dig out my "Let a Yankee Freeze in the Dark" bumper sticker? Other than some crude humor I don't see us doing anything of substance until it's probably too late to do anything substantial.

The political leadership in the USA has remained firmly committed to BAU for all of the last 40 years, until something drastic happens I don't see any prospect for that to change. As far as the average human goes, let us Eat Drink and Be Merry, for Tomorrow we may die!!! Or something like that.

[ROCKMAN]

pstarr - I suspect our politicians for those relatively simple days of us and the Jews against the Arab sheiks. There are a lot more different players in the mix now and it isn't as easy as zapping a bunch of Egyptian tanks sitting out in the open desert. I don't if the geopolitics were ever that much simpler than today. Fading memories perhaps just make it seem so. Just look how complicated Syria has become and they aren't even a big cog in the world of oil production.

And we got mountains in Texas, bub! But they're way down by the border and look more like Mexico than Texas.

[Graeme]

U.S. oil supply looks vulnerable 40 years after embargo

How different are we? While the nation's social and economic fiber has changed dramatically, including a recent surge in energy production, could the oil shock of 40 years ago happen again? Today's continuing dependence suggests, yes, unfortunately, it could.

On Oct. 20, 1973, as U.S. oil production stood near its 1970 peak, Arab countries banned oil exports to the United States in retaliation for its support of Israel during the Yom Kippur War. The five-month embargo quadrupled energy prices and pummeled the U.S. economy, causing consumers to wait hours in long lines at gas stations.

The embargo helped launch a U.S. energy revolution as President Nixon, and every successor since, called for "energy independence." Conservation measures ensued, including a doubling of vehicle fuel efficiency standards, a national 55 mile-per-hour speed limit, pleas for fewer Christmas lights and a "Don't be Fuelish" ad campaign. Renewable energy got a boost during President Carter's term, when solar panels were installed on the White House roof.

Some of these efforts petered out in the 1980s and 1990s, as Americans recovered from the oil shock, but others held. The Strategic Petroleum Reserve and the Department of Energy were established in the mid-1970s, when U.S. funding increased for alternate drilling techniques such as hydraulic fracturing (or fracking) that are expected soon to make the U.S. the world's largest energy producer.

"We've come a long way," Leon Panetta, President Obama's Defense secretary from July 2011 to February 2013, tells USA TODAY, citing a push to diversify the U.S. energy portfolio.

Henry Kissinger, who was President Nixon's secretary of State during the 1973 oil crisis, agrees. "We're better prepared now, by far," he told an energy conference last week in Washington, D.C. If Saudi Arabia cut its production and exports, he said the U.S. could buy elsewhere, adding: "They've lost the opportunity to blackmail us."

Yet not all has changed.

"We remain very vulnerable," Panetta says, adding it wouldn't take much for members of the Organization of Petroleum Exporting Countries (OPEC) - which launched the 1973 embargo - or terrorist groups like al-Qaeda to disrupt supplies. He says the U.S. is using less oil per capita than decades ago and relying on the Middle East for a smaller share of its imports, but those shifts almost don't matter.

World oil prices, which largely determine what Americans pay at the pump, remain high, because developing countries including China and India are driving up demand. With global oil supplies so tight as a result, even a small disruption rattles the markets and causes price spikes.

That's why, despite a 50% increase in U.S. oil production since 2008, the price for a regular gallon of gas remains so high. It costs, in inflation-adjusted dollars, twice as much as 40 years ago.

fdlreporter

[ROCKMAN]

"He says the U.S. is using less oil per capita than decades ago". Oil consumption per capita is about 15% less than 20 years ago. Gasoline consumption per capita is the same as it was 20 years ago. Also, adjusted for inflation, oil prices were as high during the short spike during the embargo as they are today. But the current spike has lasted longer and still continues.

And 20 years ago the US was importing 6 million bopd at a cost of $66 billion/year. Today we are importing 7.7 million bopd at a cost of $260 billion/year. And so Leon feels we are in much better shape today then we used to be with regards to oil imports. Interesting.

[Loki]

No worries Rockman, Scientific American assures us that we will soon be free of oil imports---fracking will save the day!

Unlike past attempts to get off foreign oil, the current push might actually succeed, according to Jack Rafuse, principal of Rafuse Consulting in Washington, D.C., who was the White House Energy Adviser to Nixon during the 1973 embargo. “We really are in a different position to finally break the cycle, because of the rapid increase in shale oil and shale gas.” That is, fracking unconventional deposits of both fossil fuels.

40 Years after OPEC Oil Embargo, U.S. May Finally Get Off Imported Crude

Oh, as for that drop in per capita use of oil? Apparently the result of something that hasn't even been put into effect yet:

Oil demand has decreased across the past five years because of the new wave of steep CAFÉ increases put into effect by the Obama Administration.

You'd think Scientific American would have higher factual standards than this, but I guess not.

The EIA says 29% of our net imports still come from Persian Gulf countries---the represents 11.5% of our total consumption. 55% of net imports come from OPEC, or 22% of consumption.

Seems to me that we're still quite vulnerable to another oil shock.

[ROCKMAN]

Loki - perhaps they should be rebranded as "Unscientific American". LOL. And then there's: "Oil demand has decreased across the past five years because of the new wave of steep CAFÉ increases put into effect by the Obama Administration." I was actually a bit surprised when I researched the actual metric. While CAFÉ standard may improved for new car sales the actual fuel economy of the vehicles on the road today has only increased by 1 mpg over last (and maybe 10) years. Since oil/gasoline prices shot up fuel economy has only increased a fraction of a mile per gallon. IOW improved fuel economy accounts for almost none of the reduction in consumption. I gather demand destruction must be an unknown concept by those unscientific Americans. LOL.

[Loki]

I was actually a bit surprised when I researched the actual metric. While CAFÉ standard may improved for new car sales the actual fuel economy of the vehicles on the road today has only increased by 1 mpg over last (and maybe 10) years.

Do you have a link for this? I did a brief search before I posted that ridiculous Scientific American piece, but could only find references to new cars, which isn't terribly useful when trying to gauge current passenger car fleet mileage. Particularly given the fact that the auto fleet is currently the oldest on record at 11.4 years.

The bit you posted above about Americans hoarding gas in their fuel tanks was interesting, I hadn't heard that before. A link to this would also be appreciated. I've been meaning to do more in-depth research on the 1970s oil shocks but haven't gotten to it yet. This kind of behavior makes perfect sense, though, and adds some really useful information as to how we'll react to future oil shocks. I was still on mother's milk in 1973, so my memory of the event is a bit hazy

The common prepper advice is to never let your tank get below half full, which I used to follow religiously, but I've gotten lazy lately. Only had ~5 gals in the tank when I refilled today.....

[sparky]

.
The oil shock was just a temporary hiccup in the supplies lines
the oil sheiks responded to the Arab armies recent revers by putting an embargo
on countries which had directly helped Israel , the U.S. and the Netherlands
the dutch government had organized a charter for Dutch Jews answering the call up

For the U.S. it was a question of re-routing some tankers , unfortunately
Rotterdam is a major world hub for oil processing ,
tankers owners were wary of getting banned from the Middle East terminals
the whole thing was sorted out in a few days but the disruption added to panic buying
it soon became a self fulfilling shortage , it took a few weeks to get back to normal

The economic collapse brought on by the new high prices was hard landing
the Opec oil price became an important news item

[Loki]

Here is the best info I could find on US fleet fuel economy. A little old, but Staniford's figures could easily be updated. It's just total vehicle miles traveled divided by the amount of gasoline consumed. Pretty much what you said Rockman, ~1 mpg improvement over the last decade.



http://earlywarn.blogspot.com/2011/05/u ... onomy.html

[dolanbaker]

Here is the best info I could find on US fleet fuel economy. A little old, but Staniford's figures could easily be updated. It's just total vehicle miles traveled divided by the amount of gasoline consumed. Pretty much what you said Rockman, ~1 mpg improvement over the last decade.



http://earlywarn.blogspot.com/2011/05/u ... onomy.html

From a "rest of the world prospective" those figures look appalling.


But then again, just think of where we would be if vehicle economy was still the same as in the 1970s, wide-scale fuel rationing I suspect!

[ROCKMAN]

Loki - Same mpg chart I found. Enlightening, eh? The reason for the slow change is the 10 year average lifetime of US vehicles.

For the embargo self-hoarding phenomenon it's difficult to come up with any "official" numbers. But there are reports such as this which document the dynamic rather well IMHO. From 2005
http://jeffmatthewsisnotmakingthisup.bl ... -math.html


Hurricane Katrina’s Sobering Math - Typically, car tanks are about one-quarter full. If buyers start keeping car tanks three-quarters full, the added demand would quickly drain the entire system of gasoline supplies.—Today’s WSJ

Shortly after I got my driver’s license—this is ancient history—an event occurred across the globe that severely altered world economies but made my own myopic world a little brighter. This was the Arab Oil Embargo, which quickly triggered long lines at those gasoline stations fortunate enough to get their share of supply. Having a father who worked for a Big Oil Company—the target of choice for Politicians With No Good Ideas of Their Own as well as Angry Consumers Who Never Conserved in Their Lives—I understood that the problem with the Arab Oil Embargo was not so much the embargo itself, but the consumer reaction to that embargo.

Consumers, fearing a shortage, reacted by hoarding gasoline. That, in and of itself, created the shortage of gasoline that otherwise would have been no true shortage at all, as I heard night after night while my father hurled invectives at Geraldo Rivera, then a cub TV reporter, who would show film of oil tankers waiting off the New York Coast “for prices to go up.” “They’re waiting to unload, you moron!” my father would yell at the TV. It did no good, of course—this was in the pre-blogging days, when the Mainstream Media could say pretty much whatever it wanted without being corrected. In time, the hoarding mentality dissipated and supplies became plentiful as demand responded to higher prices by going down, and soon my temporary job disappeared, as did Geraldo’s.

Yet today’s Wall Street Journal coverage of the aftermath of Hurricane Katrina took me back to that summer, and, I think, offers a sobering analysis of the situation we face today, in light of the tragedy—both human and economic—left behind in her wake: If the U.S. auto fleet of 220 million vehicles went up to three-quarters of a tank—or, say, 10 gallons more—it would be an additional 2.2 billion gallons of demand. Any figure with a “billion” in it sounds large, and in comparison to available inventory of gasoline, 2.2 billion is very large. Gasoline inventories were 195 million barrels on Aug. 19, and diesel an additional 77 million barrels, according to the latest government data, or a total of 8.19 billion gallons [of gasoline] and 3.23 billion gallons [of diesel], respectively. Of the 8.19 billion gallons of gasoline in inventory, much of that is not available—being part of the normal stock throughout the supply chain—refinery holding tanks, pipelines, bulk plants, barges and service station tanks.

Consequently, should the American consumer decide to top off the old Hummer, the supply chain could get strained very quickly. Let’s hope the oil industry gets those refineries back up and running quickly. I guarantee the so-called villains at Big Oil will do everything humanly possible to get it done.

[John_A]

Pstarr - "Any ideas?" Is it too soon to dig out my "Let a Yankee Freeze in the Dark" bumper sticker? Other than some crude humor I don't se us doing anything of substance until it's probably too late to do anything substantial.

Define substance. Define substantial. Your buddies have already done this, and more than a few consider it substantial. To late? It has already HAPPENED, and continue to this very day. Well done Rockman, well done. keep it up!

[Loki]

To late? It has already HAPPENED, and continue to this very day.

http://www.aei-ideas.org/wp-content/uploads/2013/02/usoil.jpg

I like how you always post this chart of US oil production that starts in 1992.

You've already agreed with me that the chance of the US exceeding its 1970 peak is slim at best (I believe ~5% probability is what I suggested and what you agreed with).

Back to the oil shock topic, despite the recent decline in imports, our net imports are still rather high from a long-term perspective. A fair bit higher than 1973:



And as I noted previously, 22% of our total consumption comes from OPEC sources, nearly 12% from the Gulf---regions that are less than rock solid when it comes to political stability. Rockman already pointed out that the disruption of oil supplies in 1973 was only ~8% of total supply. Another oil shock or two in my lifetime seems inevitable given the current volatility in major oil producing regions, and the outpacing of global demand compared to global supply.

Still, the oil shocks of the 1970s were transitory events. The price spike since 2008 seems to be a bit more permanent. You can read into that what you will.

[Loki]

From a "rest of the world prospective" those figures look appalling.

To be fair you'd have to compare current fleet fuel economy in the rest of the world, not new car standards. That was the mistake the senior editor at Scientific American made in my link above. Nevertheless, I'm sure it's much better in Europe and Japan. We Americans do love our big trucks.

Even with new car standards the devil is in the details. E.g., the difference between "car" and "truck" in past US standards.