The Adjustment of U.S. Oil Demand to the Price Increases of the 1970s

TLDR

The 1979‑80 oil price doubling triggered a ~20 % drop in U.S. oil consumption driven by price‑induced conservation, leading to a brief euphoria in early 1986 as prices and OPEC influence fell. The authors contend that this brief euphoria is likely to be short‑lived. Oil consumption is expected to rebound, potentially surpassing previous levels within five to ten years, and with falling domestic production this signals a troubling rise in dependence on imported oil.

Abstract

Since the 1979-80 oil price doubling, U.S. oil consumption has declined by about 20 percent, in part because of price-induced conservation. This has caused self-congratulatory euphoria, especially in the first few months of 1986, when both the oil price and OPEC were collapsing. We argue here that the euphoria could well be short-lived. U.S. oil consumption will resume its growth and, within five to ten years, could be higher than ever. Combining these results with the consensus projection of declining domestic production, the outlook for rapidly growing dependence on imported oil is disturbing. Plus ca change, plus c'est la meme chose.