Nine Percent Off the Market, Five Miles at the Pump

I grew up hearing about the 1970s gas lines the way people talk about a storm everyone remembers but nobody fully explains. The story always sounded exaggerated: how could losing a slice of oil turn into empty pumps and rationing flags? When Brent pushed back above $100 this October and headlines turned to Hormuz and midnight queues, I went back to 1973. The numbers are smaller than the fear. That gap is the whole lesson.

▶ Watch the video: The 1973 Oil Crisis: Why America Ran Out of Gas (and Why It's Happening Again)

The Arab oil embargo after the 1973 war did not delete the world's oil. It removed roughly nine percent of global supply. Nine percent is serious. It is not “the taps run dry.” Yet Americans waited in lines that stretched for miles. Something else was converting a shock into a shortage you could photograph.

Texas was the world's insurance policy—until it wasn't

In 1967, a similar embargo hit. Texas spare capacity stepped in and broke it. Domestic wells could pump more when foreign barrels disappeared. By October 1973, that insurance was largely gone. U.S. production had peaked; the swing producer was OPEC, not West Texas.

OPEC then raised prices sharply—about seventy percent in one move—and the posted price moved from roughly $2.90 to $11.65 a barrel. That is a political and economic weapon, not a rounding error. But price alone does not automatically mean you cannot buy gasoline on a Tuesday afternoon. The mechanism that followed is what I keep teaching.

Price caps and the allocation formula

Washington had price controls on oil and refined products. When crude jumped, regulated prices at the pump did not move freely. Stations sold fuel below what the market would clear at. Margins collapsed. Some owners stopped ordering. Others sold out the moment a tanker arrived.

On top of that came a federal allocation formula—rules about who got how much, and when. Bureaucratic rationing is slow. It mis-matches local demand. A station that needed a delivery on Thursday might be told to wait until next week. Meanwhile drivers, hearing “shortage,” topped up early and often.

Odd–even rationing, gas station flags, and the visible queue were not just theatre. They were the physical result of capped prices plus rigid allocation plus everyone trying to fill the tank before the neighbour did.

How fear became the shortage

There is an honest counter-argument, and I leave room for it in the video. Inflation was already running. The dollar was weakening. Oil priced in dollars looked worse even before the embargo. Panic alone did not invent the crisis.

But panic amplified it. A supply shock is one curve. A price ceiling is another. Panic buying is a third. Stack them and you get the 1970s photo essay: cars wrapped around blocks, owners guessing which stations still had green flags.

Profits told their own story. Exxon’s 1973 profits made the front page in January 1974—not because voters love oil companies, but because it showed who could pass pain through and who could not.

What America built—and what 2026 is repeating

After the shock, the U.S. did not just complain. It built the Strategic Petroleum Reserve and tightened fuel economy standards—tools aimed at both supply buffer and demand. Those choices mattered for decades.

In October 2026, the rhyme is not identical but it is close enough to notice. Attacks around the Strait of Hormuz have disrupted flows that markets treat as normal background. Brent above $100 puts the same question on every desk: is this a volume problem or a logistics problem? Reuters columnist Ron Bousso argued recently that oil’s headache is often movement, not barrels in the ground.

The G7 talked about a hundred-million-barrel release from strategic stocks—echo of “use the insurance policy.” In South Africa, Scrolla.Africa reported motorists swamping stations before a midnight petrol hike—panic buying with a deadline, same psychology as the flag system, different country.

The question 1974 forgot to ask is the one I think we are still skipping: when you fix the price at the pump or slow allocation with rules, who decides who goes without—and do queues teach people to hoard?

What I'm watching next

• Whether strategic releases actually reach retail tanks or only smooth crude benchmarks while local distribution still bottlenecks.
• Policy responses to high oil: price caps, export bans, and odd-even style rules—each one revives the 1973 playbook.
• Hormuz-related disruption headlines versus confirmed flow data; I treat unconfirmed reports carefully until they harden.

Every price has a hidden hand. Sometimes the hand is OPEC. Sometimes it is a formula in a federal office. Sometimes it is you and me, filling the tank because the car behind us might take the last drop.

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Sources: Daniel Yergin, Columbia Center on Global Energy Policy (2023); Federal Reserve History, “Oil Shock of 1973–74”; U.S. State Department Office of the Historian, “Oil Embargo, 1973–1974”; Smithsonian Magazine (2021); The New York Times, 24 January 1974 (Exxon 1973 profits); Reuters, Ron Bousso (5 Oct 2026); Al Jazeera (6 Oct 2026); Scrolla.Africa (7 Oct 2026).

For information only. Not financial advice.