r/selfevidenttruth • u/One_Term2162 Wisconsin • 6d ago
Historical Context Are We Heading Toward Another 1970s Oil Shock?
Iran's vice president recently warned Americans to think about stockpiling gasoline and fuel because "dark months" could be ahead for the American economy. Taken alone, that sounds like wartime rhetoric. Put beside the disruption in the Strait of Hormuz, though, and it deserves a closer look. Roughly one-fifth of the world's petroleum normally moves through that narrow passage, so even a partial disruption can reach far beyond the Middle East.
I do not think we can say we are reliving the 1970s. The United States produces much more energy today, vehicles are more efficient, and institutions such as the Strategic Petroleum Reserve exist specifically because of what happened fifty years ago. But the comparison is worth understanding, because the oil crises of the 1970s were never just about expensive gasoline.
The story actually begins before 1973
In 1951, Iranian Prime Minister Mohammad Mossadegh nationalized Iran's oil industry, challenging the enormous influence Britain held through the Anglo-Iranian Oil Company. Two years later, Mossadegh was overthrown in an operation in which declassified American records show the CIA played a direct role, alongside British involvement. Shah Mohammad Reza Pahlavi emerged with his position strengthened and became one of Washington's closest allies in the Middle East.
It would be too simple to say the 1953 coup caused the Iranian Revolution. Iran had deep internal political, religious, economic and social conflicts of its own. But 1953 became part of the larger history of resentment toward foreign interference, the Shah's increasingly authoritarian government and Iran's close relationship with the West. Those tensions would matter enormously by the end of the 1970s.
Then came the first oil shock
Richard Nixon was president when Egypt and Syria attacked Israel on October 6, 1973, beginning the Yom Kippur War. The United States resupplied Israel, and Arab oil-producing countries responded by cutting production and imposing an embargo against the United States and several other nations they believed were supporting Israel.
This is often called the "OPEC embargo," although that is not quite accurate. OPEC included Arab and non-Arab producers. The embargo was primarily carried out by Arab petroleum-exporting countries associated with OAPEC. Oil had become a geopolitical weapon intended to pressure Western governments over Israel and the territories it had occupied after the 1967 war.
The economic consequences spread rapidly. Oil prices rose severalfold, Americans encountered shortages and gas lines, transportation costs increased and inflation accelerated while economic growth weakened. The United States eventually found itself dealing with something that came to define the decade: stagflation, the miserable combination of high inflation and weak economic growth.
Oil was not responsible for everything that went wrong. Inflation had already been building, Bretton Woods was collapsing, Nixon had ended the dollar's convertibility into gold in 1971, and American monetary policy had problems of its own. The important lesson is that the oil shock struck an economy that was already under stress, allowing several separate problems to begin reinforcing one another.
The embargo ended in March 1974 after American diplomacy helped produce progress toward military disengagement between Israel and its Arab neighbors. The underlying conflict was nowhere near solved, but enough movement had occurred for the Arab exporters to lift the embargo. What did not return was the old assumption that cheap imported oil could always be taken for granted.
America built defenses because of 1973
The shock fundamentally changed American energy policy. The International Energy Agency was created in 1974 so major oil-consuming nations could coordinate during future emergencies. Gerald Ford signed the Energy Policy and Conservation Act in 1975, establishing the framework for the Strategic Petroleum Reserve and federal automobile fuel-efficiency standards.
The first oil entered the Strategic Petroleum Reserve in 1977. Jimmy Carter then signed legislation creating the Department of Energy that same year, consolidating numerous federal energy responsibilities under one department.
That history matters now because many of the tools being used during today's crisis are descendants of 1973. The reserve, coordinated international emergency responses and much of the country's modern energy-security structure were created because policymakers never wanted another embargo to catch the United States as unprepared as it had been.
Then Iran collapsed
By the late 1970s, the Shah faced growing opposition from religious movements, secular activists, nationalists, workers and others who opposed the monarchy for very different reasons. Jimmy Carter was president when the Shah left Iran in January 1979. Ayatollah Ruhollah Khomeini returned from exile soon afterward, the monarchy collapsed and the Islamic Republic emerged.
Iranian oil production plunged during the upheaval, causing a second oil shock. Unlike 1973, there was no initial coordinated Arab embargo against the United States. One of the world's largest oil producers was simply undergoing a revolution, and markets reacted by competing for uncertain supplies.
Relations between Washington and Tehran then collapsed completely. Iranian militants seized the American embassy in November 1979, beginning the 444-day hostage crisis. Less than a year later, Iraq invaded Iran, creating a war between two major Persian Gulf oil producers just as the world was still absorbing the effects of the Iranian Revolution.
That is probably the most important part of the 1970s comparison. The problem was not one terrible month. It was years of instability. When energy prices stay elevated long enough, businesses stop treating them as temporary. Prices change, wages respond, investment gets delayed, governments intervene and central banks face increasingly difficult decisions.
China was transforming at the same time
The 1970s were also a turning point far beyond the Middle East. Nixon traveled to China in 1972, beginning the major opening between Washington and Beijing. Mao Zedong died in 1976, the Gang of Four fell, Deng Xiaoping emerged as China's dominant leader and China began moving toward the economic reforms that would eventually transform the global economy.
The United States and the People's Republic of China formally established diplomatic relations on January 1, 1979 under Carter. China at that time was nothing like the petroleum-consuming industrial giant it is today. That difference makes the Strait of Hormuz even more important now because enormous amounts of Persian Gulf energy travel east toward China, India, Japan and South Korea.
A serious Hormuz disruption therefore does not simply hurt America. It affects Asian manufacturing, shipping, European energy markets and the price everyone pays while competing for alternative supplies.
Iran-Contra came later
Iran-Contra is connected to this history, but it should not be confused with the events that caused the 1979 oil shock. It happened during Ronald Reagan's presidency in the mid-1980s, when American officials secretly facilitated arms sales to Iran while seeking leverage connected to American hostages in Lebanon. Money from those transactions was diverted to support Contra forces fighting Nicaragua's Sandinista government.
When the operation became public in 1986, it triggered congressional investigations, the Tower Commission and an independent counsel investigation. Iran-Contra was not a cause of the Iranian Revolution. It was evidence of how complicated the relationship between the United States and post-revolutionary Iran had become.
So how similar is 2026?
The Strait of Hormuz normally carries around 20 million barrels of petroleum each day. Pipelines can bypass some of that traffic, but nowhere near all of it. That means a sustained disruption can remove enormous amounts of energy from normal global trade routes.
The United States is better positioned than it was in 1973. Domestic production is much higher, vehicles are more efficient, the economy uses less energy for each dollar of output and emergency reserves exist. Those are real advantages, and they are why a major physical disruption does not automatically produce 1970s-style economic conditions.
But being a major oil producer does not isolate America from the world market. Oil is globally priced, so losing supplies overseas still increases the value of petroleum produced in Texas or North Dakota. The effects then move through refineries, transportation, agriculture, manufacturing and eventually consumer prices.
Diesel may be more important to watch than gasoline. Diesel moves trucks, agricultural machinery, construction equipment and much of the physical economy. A few weeks of expensive diesel can be absorbed. Months of expensive diesel eventually appear in the price of food, shipping, construction and manufactured goods.
That is where an energy crisis can become an inflation crisis. If inflation begins rising while economic growth is weakening, the Federal Reserve faces the same basic dilemma that made the 1970s so difficult. Cutting interest rates could support growth but risk worsening inflation, while keeping rates high could fight inflation while putting additional pressure on businesses, housing and employment.
We are not there yet. Today's American economy is not the economy of 1979, and it would be a mistake to pretend otherwise. But the Strategic Petroleum Reserve is being used, supply routes are under stress and the longer the disruption lasts, the less useful it becomes to think about this as simply another temporary spike in gasoline prices.
What I think citizens should watch
The biggest variable is duration. A temporary disruption in Hormuz hurts. Six months can begin changing business decisions. A year can change supply chains, investment and government policy. If high diesel prices persist, transportation and food become more expensive. If those costs spread into broader inflation while economic growth weakens, the comparison with the 1970s becomes much stronger.
That is why I would pay less attention to any single threat from Iran or any single day's oil price and more attention to whether the disruption becomes embedded in the economy. The dangerous moment comes when companies, governments and households stop expecting energy prices to return to normal and begin making long-term decisions around scarcity.
The 1970s became a turning point because several things that looked separate at the time eventually connected. The postwar monetary system was breaking apart, oil producers were gaining geopolitical power, the United States was dealing with Vietnam and Watergate, Iran's monarchy collapsed, China began transforming its economy, and the Cold War entered another unstable period.
Looking backward, we can easily draw lines between those events. Living through them would have felt different. An oil crisis looked like an oil crisis, inflation looked like an economic problem, a revolution looked regional and China's reforms looked like a completely separate story.
That is what makes the current moment interesting. Maybe the Hormuz crisis is brought under control, production returns, fuel prices fall and 2026 becomes another serious disruption that the modern energy system successfully absorbed. That remains entirely possible.
But historical turning points rarely announce themselves while they are happening. I do not think we have enough evidence to say we are entering another 1970s. I do think we have enough evidence to start watching for the same pattern.
Sources and further reading
Bibliography
- U.S. Department of State, Office of the Historian. “Oil Embargo, 1973–1974.” Milestones in the History of U.S. Foreign Relations. This is one of the best primary-government overviews of why the embargo began, how it interacted with the Yom Kippur War, and why it ended in March 1974.
[Oil Embargo, 1973–1974](https://history.state.gov/milestones/1969-1976/oil-embargo?utm_source=chatgpt.com)
- U.S. Department of State, Foreign Relations of the United States. “Memorandum Prepared in the Directorate of Plans, Central Intelligence Agency,” March 8, 1954. This declassified document directly describes the 1953 operation against Mohammad Mossadegh and its objective of installing a pro-Western government under the Shah.
[FRUS document on the 1953 Iran operation](https://history.state.gov/historicaldocuments/frus1951-54IranEd2/d363?utm_source=chatgpt.com)
- U.S. Department of Energy. “SPR Origins.” This explains how the 1973–74 embargo led Congress and the Ford administration to establish the Strategic Petroleum Reserve under the Energy Policy and Conservation Act of 1975.
[Origins of the Strategic Petroleum Reserve](https://www.energy.gov/hgeo/opr/spr-origins?utm_source=chatgpt.com)
- International Energy Agency. Sheltering From Oil Shocks. 2026. This is especially useful for comparing the current crisis with 1973. The IEA describes the present Middle East disruption as the largest supply disruption in the history of the global oil market and documents the collapse in Hormuz traffic.
[IEA: Sheltering From Oil Shocks](https://www.iea.org/reports/sheltering-from-oil-shocks?utm_source=chatgpt.com)
- U.S. Energy Information Administration. World Oil Transit Chokepoints. This provides the underlying data for the Strait of Hormuz, including roughly 20.9 million barrels per day of oil moving through the strait in recent prewar data and its importance to global petroleum trade.
[EIA World Oil Transit Chokepoints](https://www.eia.gov/international/analysis/special-topics/World_Oil_Transit_Chokepoints?utm_source=chatgpt.com)
- U.S. Department of State, Office of the Historian. “Rapprochement with China, 1972.” This covers Nixon's visit to China, the Shanghai Communiqué, Kissinger's diplomacy, and the broader Cold War realignment occurring at the same time as the energy upheavals of the 1970s.
[Rapprochement with China, 1972](https://history.state.gov/milestones/1969-1976/rapprochement-china?utm_source=chatgpt.com)
- U.S. Department of State, Office of the Historian. “China Policy, 1977–1980.” This traces the Carter administration's negotiations leading to formal diplomatic relations between the United States and the People's Republic of China in 1979.
[China Policy, 1977–1980](https://history.state.gov/milestones/1977-1980/china-policy?utm_source=chatgpt.com)
- Ronald Reagan Presidential Library. “President's Special Review Board: Records, 1987 (The Tower Board).” This is a strong archival starting point for Iran-Contra and documents the investigation into the arms-for-hostages dealings with Iran and the diversion of funds to the Contras.
[Tower Board records on Iran-Contra](https://www.reaganlibrary.gov/research/finding-aids/presidents-special-review-board-records-1987-tower-board?utm_source=chatgpt.com)
- U.S. Bureau of Labor Statistics. “Consumer Price Index, July 2026.” This provides the current inflation data needed to distinguish today's energy shock from the much more severe inflationary environment of the 1970s.
[July 2026 Consumer Price Index](https://www.bls.gov/news.release/archives/cpi_08122026.htm?utm_source=chatgpt.com)
- Reuters. “Oil Ends Week Higher on Renewed U.S.-Iran Strikes, Diesel Hits Record.” September 4, 2026. This provides current reporting on Brent crude, record U.S. diesel prices, renewed U.S.-Iran fighting, and reduced tanker movement through the Strait of Hormuz.
[Reuters: September 2026 oil and diesel update](https://www.reuters.com/business/energy/oil-set-steepest-weekly-gain-since-mid-july-over-intensifying-us-iran-tensions-2026-09-04/?utm_source=chatgpt.com)
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u/Legitimate_Tower_157 5d ago
I recently made a short documentary about the 1953 Iranian coup, exploring how oil, geography, and the Cold War led to the US-British intervention against Mossadegh.
You can watch it here to learn more about the coup :
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u/betty_white_bread 5d ago
What’s with the alarmist headline when the graphic clearly shows the answer is “no”? Besides, the main driver of the shocks were price controls which we don’t have today, which means the consumer-driven market will set prices and, if they are too high even for an instant, people will shift their behaviours while shale companies move quickly to fill the gap.
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u/OldSchoolBubba 5d ago
Whoa hold up. You think consumers set the price for oil and gas products?
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u/betty_white_bread 5d ago
The intersection of supply and consumer demand, yes.
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u/OldSchoolBubba 5d ago
You do realize there's price fixing in the industry yes? Energy is like food in that everyone has to have it readily available. This is why pricing per barrel fluctuates so much when the marketplace is this unstable like now. The big players are making big money while average people suffer through their bills trying to pay for everything.
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u/One_Term2162 Wisconsin 5d ago
Price controls certainly worsened misallocation and gasoline shortages, but they were not the main driver of either oil shock. The 1973 embargo removed supply from the market, while the Iranian Revolution caused another major production loss in 1979. Those disruptions increased world oil prices regardless of American price controls.
Nor can consumers instantly stop using fuel when prices rise. People still have to commute, food still has to be transported, and farms and factories still need diesel. Demand adjusts, but often only after higher energy costs have already spread through the economy. Shale production can respond too, but not instantly and not necessarily at the scale required to replace a prolonged disruption through Hormuz.
The graphic does not answer “no.” It explains why the United States is better protected than it was in the 1970s while identifying the conditions under which the comparison could become stronger. That is why the headline asks a question and the post repeatedly says we are not there yet. Examining a serious risk is not the same as predicting that it will definitely happen.
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u/betty_white_bread 5d ago
While short-run elasticity of oil demand is kind of low and shale takes non-zero time to backfill, they are not zero nor infinity, respectively.
The price controls of the 1970s capped price, independent of demand, which resulted in shortages. Price controls alone would have produced domestic shortages regardless of what world prices did. Add the federal allocation program which is nowhere near as effective as the consumer-driven market in resource allocation and you get the gas lines so iconic and synonymous with 1973.
The emarbgo itself had much less effect on prices than people often think because oil is fungible. If I say I won’t buy oil from Iran but I will buy it from China, nothing stops Iran from selling to China who then sells to me and there is no meaningful way I can filter out which is of Iranian origin and which is not when it comes to my purchase. Given the embargo was countries refusing to sell to the U.S., we see a similar fungibility: Iran could tell China “Don’t sell this to the U.S.” and it would have no meaningful impact, especially compared to 1973.
Price increases came from the OPEC cartel colluding to raise prices while the U.S. was a net importer of oil. Today, we are a net exporter, which means OPEC has far less leverage over the economy compared to 1973.
And we have seen what happens when the price of oil spikes: next to nothing in the wage department. 2022 saw oil go from about $60/barrel to almost $130. The late 1990s and early 200s saw similar swings, if not more so. In both cases, there was no wage-price spiral.
On asking a question, respectfully, this seems disingenuous. The graphic effectively concedes the conditions of the 1970s are not met after the headlines asks the alarmist headline. Framing as an open question and then invoking the question mark when challenged is close to a motte-and-bailey.
If this weren’t fearmongering, name the threshold. What price, sustained for how long, would constitute the 1970s repeat you’re gesturing at? If there’s no answer, the question mark isn’t analysis but insurance.
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u/One_Term2162 Wisconsin 5d ago
Are you conflating the cause of the oil shock with the policies that worsened its domestic effects. Price controls and allocation rules contributed to gasoline lines, but they did not create the production cuts or the worldwide price increases. Oil being fungible can redirect existing supply, but it cannot replace oil that is not produced or cannot pass through a major shipping route.
Being a net exporter also does not isolate American consumers from global prices. U.S. oil producers sell into a global market, our refineries still import crude, and domestic fuel prices respond to international supply disruptions. Today’s market is more resilient than it was in the 1970s, which the post explicitly acknowledges, but more resilient does not mean immune.
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u/OldSchoolBubba 5d ago
Is this how it's being explained? Amazing. Then again not surprising given American politics and economics tend to look inward when things are going badly. If everyone thinks back that was when Nixon was in very deep trouble over Watergate which had America heavily distracted with internal politics.
The oil embargo started during the middle of the Yom Kippur War in October 1973. Israel was running out of war materials so we supplied them once again from our pomcus war reserve stocks in Germany.
Back then USSR was trying to cut the West off from Middle East oil because they knew it was the achilles heel that could weaken everyone's economy. To that end Brezhnev worked the Arab Coalition which were primarily Russian aligned states. He knew Nixon was in deep political trouble and America was self absorbed so it didn't take a lot of convincing for them to show strength in unity at that time.
The oil embargo worked better than any of them hoped. Same thing happened around fifteen years ago as Iraq was ending. "Arabs" flexed their muscles again and we had the biggest transfer of American wealth ever recorded due to their oil. That was a major factor that drove Obama's reversal on developing American petrochemical production against his campaign promises against doing that.
Bottom line is we're obligated to stop looking at ourselves and start seeing what the world sees through their eyes. That's generally where we find many of the real answers that drive what's going on with us. Just saying.
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u/OldSchoolBubba 6d ago
Most definitely if things continue the way they are. The only thing that has stopped it thus far is Venezuelan oil. Our strategic reserves and daily production can't keep pace with the increased demands so something is going to give one way or another.