Baylor University Medical Center Proceedings January 2014, Volume 27, Number 1 | Page 69

From the Editor

Facts and ideas from anywhere

BLACK GOLD
Most physicians, nurses, and
administrators are able to get to
work every day because of petroleum. Most of us in the USA and
indeed in the Western world are
at the mercy of petroleum. I became conscious of its importance
40 years ago, as did so many others, when the world experienced its
William C. Roberts, MD.
first “oil shock” as Arab exporters
declared an embargo on shipments
to Western countries on October 17, 1973. The embargo of the
Organization of the Petroleum Exporting Countries (OPEC)
was prompted by US military support for Israel, which was
repelling a coordinated surprise attack by Arab countries that
had begun on October 6, the sacred Jewish holiday Yom Kippur.
The prices of gasoline quadrupled over the next few months.
The crisis challenged the US’s position in the world, polarized its politics at home, and shook the country’s confidence. I
remember reading a number of articles at the time indicating
that the world’s supply of oil would be depleted within 30 years,
which meant of course 2003. But instead, the crisis produced
the birth of the modern era of energy.
Although the OPEC embargo seemed to provide proof that
the world was running short of oil reserves, the move by Arab
exporters did the opposite: it provided massive incentive to
develop new oil fields outside the Middle East—what became
known as “non-OPEC”—led by drilling in the North Sea and
Alaska. Although the Prudhoe Bay oil field was discovered in
Alaska 5 years before the crisis, environmentalists had prevented
approval for a pipeline to bring the oil down from the North
Slope. Only in the immediate aftermath of the embargo did
a shaken Congress approve a pipeline that eventually added,
at its peak, as much as 2 million barrels a day to the domestic
supply.
The push to find alternatives to oil boosted nuclear power
and coal as secure domestic sources of electric power. The 1973
crisis spawned the modern wind and solar industries also. The
same year Congress passed the first Corporate Average Fuel
Economy Standards, which required automakers to double fuel
efficiency—from 13.5 miles per gallon to 27 miles per gallon—
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ultimately saving 2 million barrels of oil per day. (In 2012 the
standards were raised to 54.5 miles per gallon by 2025.)
The crisis also set the stage for the emergence of new importers. In 1973, most oil was consumed in the developed economies
of North America, Western Europe, and Japan. These regions
consumed two thirds of the oil as recently as 2000, but now oil
consumption is flat or falling in those economies and virtually
all growth and demand is in developing economies, now better known as “emerging markets.” They represent half of world
oil consumption today, and their consumption and share will
continue to increase. In October 2013, China overtook the US
as the world’s largest net importer of oil!
The 1970s also were years of natural gas shortages,
which turned into a bitter political issue. What has solved
the shortages were not more controls but their elimination,
which resulted in an oversupply that became known as the
“gas bubble.” Today, natural gas is the default fuel for new
electricity generation.
The oil crisis of 1973 resulted later in major political shifts
for the US in political friends. In 1973, Iran was one of the
US’s strongest allies in the Middle East. Indeed, Tehran did
not participate in the embargo and pushed oil into the market. Since the 1979 Islamic Revolution, however, Washington
and Tehran have been adversaries. Meanwhile, Saudi Arabia,
which was at the center of the 1973 embargo, is now the US’s
strongest Arab ally.
The real lesson of the shock of 1973, and the second oil
shock set off by the overthrow of Iran’s shah in 1979, is that
they provided incentives and imperatives to develop new resources. Today, total world oil production is 50% greater than
in 1973! Exploration in the North Sea and Alaska was only the
beginning. In the early 1990s, offshore production expanded
into the Gulf of Mexico, opening up deep water as a new oil
frontier. In the late 1990s, the Canadian oil sands embarked
on an era of growth, and today it is a larger source of oil than
Libya before its 2011 civil war.
Most recent is the development of “tight oil,” the spinoff
from shale gas which has increased US oil output by more than
50% since 2008. This boom in domestic output has increased
the energy supply, and combined with shale gas has had a much
wider economic impact on jobs, investments, and household
income. As these tight oil supplies increase, and as the US auto
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