American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.
The Arab embargo of oil shipments to the United States in 1973 as a result of the United States' support of Israel in the Arab-Israeli Yom Kippur war, and the subsequent formation of OPEC (Organization of Petroleum Exporting Countries), who instituted a worldwide increase in oil prices, triggered a reaction in the Unite States that is still far from settled.
The year 1974 was confusing at best—high interest rates, tight money supply, materials shortages and all-out production, rapidly accelerating inflation after price controls, and lifting of the oil embargo—all occurring more or less simultaneously. Then some cooling of economic growth became apparent; real GNP declined for four successive quarters.
Consumers, who lost buying power to inflated prices, decreased their purchases. Appliances, textiles, furniture, and housing construction moved into a deep recession. U.S. automotive production for the model year was off 30 percent, and sales curves show no real recovery yet in 1975 despite high-powered promotional campaigns. promotional campaigns. In the early months of 1974, the capital goods market seemed immune to growing recessionary signs. There existed a pent-up demand for increased plant capacity in many sectors after price controls expired. Environmental price controls expired. Environmental considerations had forced the shutdown of many facilities that could not operate profitably, and unprecedented activity began to increase electrical generating capacity and fossil fuels supply. Accelerating escalation rates and lengthening materials lead times continued into September.
Then signs of some decline in the rate of those increases began to appear. Nevertheless, in continuing short supply were: steel, forgings, castings, ferroalloys, pig iron, motors, coal, coke, bearings, fasteners, pipe, and pipe fittings. All of these items were needed for energy projects.
To counteract the implications of U.S. dependence on imported oil, The Federal Energy Administration in its "Project Independence Blueprint" started an all-out domestic energy search.
In the U.S., rising oil and gas prices touched off the biggest oilfield rush since the 1950's. It became apparent quickly that the industry was geared to drill more wells than there were pumps, piping, and associated equipment available to bring products to the surface.
