Oil Crisis Triggers Recession In The US In The 1970s

In 1973, the major oil-exporting nations of the world (OPEC) raised the price of oil dramatically. As oil reserves at the time were depleted ( it was predicted in 1975 that only a twenty year supply of US oil reserves remained at the current rate of use), the nation became increasingly dependent upon foreign producers.

An even greater trade deficit resulted as billions of dollars a year flowed out to pay for the ever more expensive oil from abroad.

The government of Libya, recognizing the deteriorating American economic situation, would not accept dollars for it’s oil. The dollar had lost all it’s value, the Libyans insisted, and they wanted a currency that was convertible to gold.

The skyrocketing cost of oil endangered the whole American economy, especially agriculture. 5 million farmers fed 200 million American and exported food to the rest of the world. The use of gasoline on farms had quadrupled between 1940 and 1970. Fertilizer, which also needed oil to manufacture increased 8 times in price. These increased costs inevitably meant rising food prices.