GenXers may only know of the gas lines through history books, but anyone over the age of 40 has likely experienced the crisis first-hand. During the seventies, OPEC flexed its collective muscles and reduced the supply of oil. Prices spiraled, the U.S. enacted strict quotas on fuel, and inflation erupted. Another energy crisis was experienced, albeit of lesser magnitude, during the Gulf War. Gasoline prices spiked sharply during the conflict.
Overseas producers satisfy fifty-six percent of the America's appetite for oil.
Surprisingly, the U.S. is more dependent on oil now than ever. Yes, because though the U.S. is using more oil, and in particular more imported oil than it ever has, it is using it more efficiently. The amount of oil it takes to produce one dollar of GDP has fallen markedly since the seventies, see Chart 1.2 below . Further, the U.S. has grown in wealth markedly since the seventies. Energy prices are rising, but financially, the U.S. is in good shape to cope with these increases.