Sales policy displayed on a flag at a gas station in Oregon in the winter of 1973/74. (Source: NARA/Wikipedia) The 1950s and 1960s were an era of cheap and abundant oil, thanks (mainly) to Middle Eastern oil. Between 1948 and 1972, global crude oil production increased from 8.7 MMbop to 42 MMbop; Production in the Middle East increased from 1.1 MMbop to 18.2 MMbop. During the same period, global crude oil reserves increased from 62 to 534 Bbo; Reserves in the Middle East increased from 28 to 367 Bbo – in other words, seven out of 10 barrels added to global reserves came from the Middle East. During all these years, oil prices have remained relatively stable between $1.8 and $2.0 per barrel, while the petrochemical and automotive industries have prospered rapidly. Low oil prices were mainly made possible by increased production from international oil consortia in the Middle East to catch up with rising global oil demand. It is interesting to note that the United States, the world`s largest oil producer and consumer, had decided to rely more on its own domestic resources than on foreign oil. Taking into account domestic security measures, the United States developed a « voluntary program » in 1954 to reduce its oil imports from outside the Western Hemisphere. But it didn`t work.
In 1959, U.S. President Eisenhower announced the mandatory oil import quota program that limited U.S. imports of crude and refined oil to less than 9% of domestic demand (in 1962, the rate changed to 12.2% of domestic production). Independent oil companies in the United States (which had always committed to it) were pleased, while large international companies were disappointed. From 1948 to 1971, U.S. oil reserves increased from 21 to 38 Bbo and production from 5.5 to 9.5 MMbop; However, the U.S. share of world crude oil production increased from 64% to 22%. In fact, Dr. King Hubbert (1903-1989), a brilliant oil researcher who worked for Shell, had made predictions (dating back to 1956) that oil production in the 48 United States would peak in the late 1960s or 1970s.
Surprisingly, its forecasts came true: U.S. conventional crude oil production peaked at Bbo 3.5 in 1970. The decline in U.S. production not only moved the large oil supply away from the global oil market, but also was followed by a rapid increase in U.S. oil imports. In 1973, when President Nixon officially ended the mandatory oil import program, the United States imported 6.2 MMbopd, up from 3.2 MMbopd in 1970. Iran has sought to stage and illustrate its new political capital by taking advantage of the abundance of income and regional influence. With the desire to celebrate the founding of the Persian Empire 2,500 years earlier, as well as the capital, Persepolis, the Shah in October 1971, put on « one of the greatest Bashes in history » at a price of 100-200 million dollars. Many heads of state were invited and 25,000 bottles of wine were imported from France for the occasion. The Shah was not happy when neither Queen Elizabeth nor Prince Charles could participate, but he later warmed up for the British after a visit to the United Kingdom. In reality, the great celebration was to establish a historical link between the Shah and Kyrus the Great.