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SEVEN U.S. Motorization since the OPEC Embargo The OPEC oil embargo of 1973 and the Iranian revolution of 1979 were hinge events in the history of U.S. motorization, events that rocked the industrial world and the global economy. Higher oil prices and uncertain oil supplies affected motorists, truckers, transit operators, the fuel tax revenues of the state highway programs, and the sales and production volumes of the world’s automakers . These economic shocks produced a one-year pause in the economic growth of the industrialized nations. They also produced gasoline lines and spurred increases in transit ridership. The aftershocks affected the U.S. highway program and the automobile industry in less direct but more lasting ways. In the case of the automobile industry, they triggered the beginnings of a long-term shift in consumer loyalties that eventually enabled imported cars to capture a substantial share of the passenger car market in the United States. In turn, declining sales volume reduced the economies of scale essential to the profitability of the domestic automakers. The oil shocks also produced short-term declines in VMT, which resulted in a significant loss in fuel tax revenues and the cessation of highway right-of-way reservation in many states. In turn, the present difficulties of right-of-way acquisition pose a largely unacknowledged constraint on the potential for future highway development, which in turn signals the likelihood of continuing increases in metropolitan congestion. U.S. MOTORIZATION SINCE THE OPEC EMBARGO ⴗ 173 Responding to the 1973–74 oil shocks, Congress imposed mandatory fuel efficiency standards for cars and trucks and made transit eligible to compete for funds previously earmarked for highway purposes. The oil shocks also led Congress to authorize what proved to be a short-lived program of federal operating subsidies for mass transit. More significant over the long term has been the financial damage that the oil shocks have done to the U.S. automobile industry. Vehicle ownership and registrations have continued to increase, virtually without pause, but the year-to-year predictability of the mix of vehicles that Americans will want to purchase has been affected profoundly. Since the OPEC embargo, U.S. consumers have signaled that they want more imports and fewer domestics, more fuel-efficient small cars and fewer ‘‘gas-guzzlers,’’ and more trucks and SUVs a few years later. In turn, this variability and volatility has wreaked havoc with the product and production planning of the U.S. automakers . Together, the oil shocks, ‘‘the import invasion,’’ and the volatility of demand for full-size vehicles and sport utility vehicles have substantially reduced both the sales volumes and the profitability of the U.S. automakers. Significant import penetration in the U.S. passenger car market is a direct consequence of both the oil shocks and the quality of the second wave of imports that arrived in the 1980s. Imports gained and have substantially retained a sales edge with the 75 million U.S. baby boomers, the generation of Americans who bought their first cars after the OPEC oil embargo. The size of this cohort and its bifurcated preferences for SUVs and for small and midsized cars with European styling have had profound impacts on the U.S. auto market and the U.S. automakers, as have the succession of oil shocks that occurred, first in 1973, then again in 1981, and still again in 2004–2006. The Oil Shocks In February 1973, the price of a barrel of imported oil stood at $6.41 in 1992 dollars.∞ By July 1974, at the price peak associated with the OPEC embargo, a barrel of imported crude reached $24.53 in 1992 dollars. Over the next 12 years, oil prices retreated from their 1974 peak but remained relatively high and quite volatile. The monthly low for the next seven years was reached in September 1978, when the price of oil retreated to $20.48 in 1992 dollars. Clearly, the OPEC cartel was effective in maintaining oil prices at levels much higher than the price that prevailed in February 1973. With the Iranian revolution and the displacement of the shah of Iran, the import price of oil reached a new high of $40.18 per barrel in June 1981. Production was restored quickly, and a new low of $9.21 was achieved by April 1983, but volatility remained the norm as the price of imported crude reached a new peak of $29.40 per barrel...

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