June 28, 2011 • Current Events, Electricity, Energy's Lighter Side

The early ’70s: OPEC, AAA, SPR and Corinthian leather

by Chad Holder

Recently, Summit Energy commodity analyst Matt Smith appeared on CNBC’s Squawk Box to field questions on how the release of 30 million barrels of oil from the U.S. Strategic Petroleum Reserve (SPR) affects the crude oil market. Matt’s appearance led me to do a little digging on the history of the SPR, which uncovered five fascinating historical footnotes, some awesome ’70s-era YouTube video clips and 62 underground salt caverns that hold more than 700 million barrels of crude oil.

When I was young, my interest in strategic petroleum reserves was limited to, “Does my neighborhood gas station have enough unleaded 87 in reserve to fill up my VW?” The answer during my driving years has always been “yes.” My parents, on the other hand, haven’t always been so lucky. In fact, they were part of a fundamental shift in American culture that happened when the country arrived unceremoniously at the bottom of the nation’s perceived bottomless gasoline supply in 1974 and the idea for the SPR as an energy risk management strategy was born.

The infamous – or “more than famous”oil crisis in October 1973 was created by an OPEC-initiated oil embargo, the effects of which were felt almost immediately stateside. The American Automobile Association (AAA) reported that by the last week of February 1974, “20% of American gasoline stations had no fuel at all.”

Historical Footnote 1) In the U.S., odd/even gas rationing was implemented. In parts of the country, drivers could buy gas on odd days or even days, based on the last digit of their license plates. (I can’t usually remember which side my gas door is on let alone the last digit on my license plate. I think it’s a Z.)

In addition to rationing the supply of gas to many American drivers, other attempts at energy cost reduction were made by way of government-imposed demand reduction.

Historical Footnote 2) In 1974, a national maximum speed limit was imposed at a blazing 55 mph! Ten years later, Sammy Hagar gave the American disdain for Sunday driving a catchy tune and a riveting video.

Historical Footnote 3) From January 1974 to February 1975, year-round daylight saving time (nope, that’s not a typo) was implemented and accompanied by significant criticism. By April of ‘76, things were back to normal but a chunk of Indiana apparently never got that memo. Paging Leslie Knope.

The effects of the oil embargo were especially profound in the auto industry. To say our roads were congested with “gas guzzlers” with their soft Corinthian leather would be a colossal understatement.  Higher prices at the pump created a desire for smaller, more fuel-efficient vehicles and foreign car manufacturers helped quench that thirst. (Oh yeah!)

Historical Footnote 4) In 1970, the average American vehicle got 13.5 mpg. The Lincoln Mark V got 7. Yes, 7 mpg. Without much concern for greenhouse gas emissions, the Mark V was built “just ten inches short of being 20 feet long.” These days we’d call that a limousine.

Historical Footnote 5) In 1976, the average Toyota weighed in at a dainty 2,100 lbs. The average Cadillac: 5,000 lbs. Not surprisingly, Toyotas outsold Cadillacs in the U.S. that year and nearly every year since.

Yes, the early ’70s saw Americans’ behaviors and buying habits change as a result of the oil crisis. For their part, the energy professionals in the federal government made a run at true energy management by minimizing the short-term effects of future oil embargoes. In 1975 Congress enacted the Energy Policy and Conservation Act (EPCA), which called for the creation of the SPR, and on July 21, 1977, approximately 412,000 barrels of Saudi Arabian light crude were delivered to the Strategic Petroleum Reserve. As you’re aware thanks to Summit’s Mr. Smith, today all four sites are filled to capacity with 727 million barrels of oil. Well, actually 697 million barrels, or roughly enough to produce enough gasoline to drive a ’77 Lincoln Mark V around town during prom season.

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