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  Chapter Fourteen:
 
BUSINESS
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  Gross Domestic Product
  Business Cycles
  Business Revenues
  Trading Volume
  Dow Jones Average
  Stockholders
  Crude Oil
  Energy Consumption
  Patents
  Imports and Exports
  Foreign Investment

  

 

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BUSINESS

Crude Oil

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Domestic petroleum production grew until 1970, when a steady decline ensued. Per capita consumption of petroleum peaked a decade later and declined moderately thereafter.
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Coal was the principal fossil fuel of the nineteenth century. In the twentieth century, petroleum became the critical energy source. Unlike its adversaries in World War II, the United States was essentially self-supporting in petroleum. But thereafter, imports increased, reaching 20 percent of consumption in the early 1970s and exceeding half, for the first time, in 1994 (see upper chart). By 1998, imports constituted 58 percent of U.S. petroleum consumption. 

In 1973, the Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and Iran, took advantage of U.S. (and European and Japanese) dependence on Persian Gulf oil to raise the price of crude oil from about $3 a barrel to more than $12. Later that year, some oil-exporting countries declared an embargo on oil shipments to the United States. The oil embargo and its effects temporarily disrupted daily life in the United States. Gasoline and heating oil became scarce. A national speed limit was imposed to save fuel. A scheme of odd-even days of gasoline buying was imposed. The U.S. government established a “Strategic Petroleum Reserve” to stockpile oil. Further OPEC price increases brought the price to $32 in 1980. 

But the high price could not be sustained. In the 1980s, the elevated price of oil led to the discovery of new fields, as well as increased availability from fields in Mexico, Russia, Alaska, and the North Sea. High prices also brought sharp increases in energy efficiency, especially in automobiles. As the lower chart shows, U.S. consumption of petroleum, which peaked at 1,214 gallons per capita in 1980, declined to an annual average of 1,062 gallons per capita during the 1990s. Contrary to all expectations, the real price of oil in the 1990s dropped to near pre-OPEC levels. In 1999, however, the price began to rise again, exceeding $35 per barrel by September 2000.


Chapter 14 chart 7

Source Notes
Source Abbreviations

HS series M 138–142; SA 1988, table 925; SA 1998, table 1177; SA 1999, table 1178; and NYT 1999, page 365. For the importance of petroleum in the twentieth century, see Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon and Schuster, 1991).

 

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