The 1973–74 Oil Embargo: U.S. Crude Oil Prices Before and After

Context

On October 19, 1973, the Organization of Arab Petroleum Exporting Countries instituted an oil embargo on the United States during the Yom Kippur War.^[2] The embargo banned petroleum exports to the targeted nations and cut oil production.^[1] It was officially lifted in March 1974, but the higher oil prices remained.^[2]

The embargo was not the only factor. Negotiations between producing countries and oil companies had already unsettled a decades-old pricing system; U.S. excess production capacity had eroded; and non-OPEC sources were a shrinking share of world supply.^[1][2] The early-1970s devaluation of the dollar, in which oil was priced, had reduced producers' revenues and was a central factor in the price increases.^[2] The State Department's historians conclude that the embargo's full impact “resulted from a complex set of factors beyond the proximate actions taken by the Arab members of OPEC.”^[1]

Accounts of the size of the world price increase differ: the Federal Reserve's history puts it at nearly fourfold, from $2.90 a barrel before the embargo to $11.65 in January 1974;^[2] the State Department's historians say the price first doubled, then quadrupled;^[1] and EIA's timeline describes a tripling.^[3] The U.S. price shown here is a different, price-controlled series; see the note below.

About this series

EIA's daily WTI and Brent spot prices begin in 1986 and 1987, so this page uses the U.S. crude oil first purchase price (EIA series F000000__3): the average price paid for domestic crude oil when it first changed hands after production, in dollars per barrel. It is not a spot benchmark and it is not directly comparable with the WTI and Brent prices elsewhere on this site. In these years U.S. crude oil prices were under federal price controls, including those of the Emergency Petroleum Allocation Act of 1973.^[3] Phased decontrol began on June 1, 1979,^[5] and Executive Order 12287 of January 28, 1981 exempted crude oil and refined products from the remaining controls.^[6] Because of those controls, the U.S. first purchase price is not a measure of world oil prices in these years.