1979 energy crisis

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The 1979 (or second) oil crisis occurred in the wake of the Iranian Revolution. In the wake of protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979, allowing Ayatollah Khomeini to gain control. The protests shattered the Iranian oil sector. While the new regime resumed oil exports, it was inconsistent and at a lower volume, forcing up prices. Saudi Arabia and other OPEC nations increased production to offset the decline, and the total loss in production was just about 4%. However, a widespread panic resulted, driving the price far higher than would be expected under normal circumstances. In the United States, the Carter administration instituted price controls. This resulted in long lines appearing at the gas stations as they had six years earlier. As the average vehicle of the time consumed between 2-3 liters of gas an hour while idling, it was estimated at the time that Americans wasted up to 150,000 barrels of oil per day idling their engines in the lines at gas stations.

During the period, many people believed the oil shortages were artificially created by the oil companies to drive up prices, rather than created by natural factors beyond any human control or influence. Further, while in a market economy, shortages would be expected to drive up prices, causing a contraction in demand, of themselves they would be unlikely to result in lines at the gas pump but for artificial regulations and price controls. Many politicians proposed gas rationing, such as the Governor of Maryland, who proposed odd-even rationing (only people with an odd-numbered license plate could purchase gas on an odd-numbered day). This did not last long.

President Jimmy Carter made symbolic efforts to encourage energy conservation, such as urging citizens not to turn up their thermostats, and installing solar power panels on the roof of the White House and a wood stove in the living quarters. However, his successor Ronald Reagan ordered the solar panels removed and the wood stove was dismantled. Carter made a speech arguing the oil crisis was "the moral equivalent of war." More importantly, Carter, as part of his administration's efforts at deregulation, proposed removing price controls that had been imposed in the administration of Richard Nixon during the 1973 energy crisis. Congress agreed to remove price controls in phases; they were finally dismantled in 1981 under Ronald Reagan.

In 1980, following Saddam Hussein's Iraqi invasion of Iran, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. Yet oil lines did not reappear in the United States other than a few isolated incidents.

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