1973 Oil Crisis - Price Controls and Rationing

Price Controls and Rationing

Government price controls further exacerbated the crisis in the United States, which limited the price of "old oil" (that already discovered) while allowing newly discovered oil to be sold at a higher price, resulting in a withdrawal of old oil from the market and the creation of artificial scarcity. The rule also discouraged alternative energies or more efficient fuels or technologies from being developed. The rule had been intended to promote oil exploration. This scarcity was dealt with by rationing of gasoline (which occurred in many countries), with motorists facing long lines at gas stations beginning in summer 1972 and increasing by summer 1973.

In 1973, U.S. President Richard Nixon named William E. Simon as the first Administrator of the Federal Energy Office, or the "Energy Czar". Simon allocated states the same amount of domestic oil for 1974 that each consumed in 1972, which worked well for states whose populations were not increasing. In states with increased populations, lines at gasoline stations were common. The American Automobile Association reported that in the last week of February 1974, 20% of American gasoline stations had no fuel at all.

In the United States, odd-even rationing was implemented; drivers of vehicles with license plates having an odd number as the last digit (or a vanity license plate) were allowed to purchase gasoline for their cars only on odd-numbered days of the month, while drivers of vehicles with even-numbered license plates were allowed to purchase fuel only on even-numbered days. The rule did not apply on 31st day of those months containing 31 days, or on February 29 in leap years— the latter never came into play, since the restrictions had been abolished by 1976.

In some U.S. states, a three-color flag system was used to denote gasoline availability at service stations—a green flag denoted unrationed sale of gasoline, a yellow flag denoted restricted and rationed sales, and a red flag denoted that no gasoline was available but the service station was open for other services. Additionally, coupons for gasoline rationing were ordered in 1974 and 1975 for Federal Energy Administration, but were never actually used for this crisis or the 1979 energy crisis.

The rationing led to incidents of violence, after truck drivers nationwide chose to strike for two days in December 1973 because they objected to the supplies Simon had rationed for their industry. In Pennsylvania and Ohio, non-striking truckers were shot at by striking truckers, and in Arkansas, trucks of non-strikers were attacked with bombs.

America had controlled the price of natural gas since the 1950s, and with the inflation of the 1970s, the market price of natural gas was not encouraging the search for new reserves. America's natural gas reserves dwindled from 237 trillion in 1974 to 203 trillion in 1978, and the price controls were not changed despite President Gerald Ford's repeated requests to Congress.