Oil Shock

   There were a couple different factors that caused the first oil shock. The first was the Arab oil embargo. During the reign of Richard Nixon, an Arab-Israeli war broke out known as Yom kipper war. Nixon wanted to help fund the Israeli military with whatever they might have needed (guns etc.) and that’s where the problem starts. During that time the united states were doing business with The Petroleum Exporting Countries (OPEC) and in retaliation OPEC put an embargo or in other words banned the U.S. from doing business with them. As a result of the embargo oil inflation on oil rose about 8.7% in December 1973. This was tough on the U.S. because the domestic oil refineries were slowly being depleted which forced the U.S. to depend on the foreign oil imports. of that same year.  So, inflation plus the embargo and the high demand for oil Nixon decided to make efforts to remedy the issue.  In 1974 after a failed peace negotiation; Nixon finally found a way and struck a deal that lifted the embargo. Though the high prices per barrel did not change because OPEC was no longer making a profit because of the devaluation of the American dollar, which ultimately drove them to rise prices, and forced them to change pricing of the oil from dollar to gold. The inflation rate on gas as effect was at 11%. The oil crisis forced congress and companies to make a couple of changes. In 1975, congressed passed a law that forced automakers to raise the amount of mileage a vehicle was getting per gallon from 12.9 miles per gallon to 27.5 miles per gallon. This was called the Energy Policy and Conservation Act and was put in place to make the vehicles were more “fuel efficient.” This oil crisis also forced America to find oil and other energy sources elsewhere.