Two decades ago, in the disconcerting early weeks of the 1973 Arab oil embargo, U.S. reliance on petroleum became a menacing new problem in the public mind.
The predictions began:
Crude oil prices would be sky-high by the 1990s--$60, $80, $100 a barrel--as rich foreign oil producers tightened their grip on a fast-dwindling resource. Gasoline lines would be the common symbol of a nation starved for energy. Crash programs to build more nuclear and alternative power plants, and to drill for more domestic oil, would struggle to catch up with booming demand.
But 1993 doesn't look at all like that.
In fact, for the past seven years, crude oil has puttered along at a fraction of those prophesied prices. And with more estimated reserves today than when the embargo began, the world's oil tiger has become tame--almost a dependable commodity. If anything, oil has reared back to bite those it was expected to best serve.
Indeed, crude oil prices that are among the lowest in the industry's history have wrought massive, painful change in the petroleum business. And they have returned the nations of a much-weakened Organization of Petroleum Exporting Countries to oil revenues at the level of 20 years ago.
As for the alternative energy sources that once counted on $80-a-barrel oil to make themselves competitive, many have been battered--and in some cases beaten--by an unexpectedly low-cost rival.
Meanwhile, Americans are driving more, with little fear of gas lines--in part because their cars are more efficient, a response to the oil scare of the 1970s.
Other traditional oil consumers have also comfortably readjusted to prices that fell to $10 a barrel in 1986 and still linger well below $20 today. The groundswell of public demand for energy independence that erupted in the mid-1970s, when Americans discovered that 38% of their oil came from foreign wells, has faded to a whimper--even though half the nation's oil now is imported.
"Low oil prices tend to make society forget its fears and objections and campaigns," notes analyst Trilby Lundberg.
Beyond motorists--who pay no more in inflation-adjusted terms for gas than they did 20 years ago--the beneficiaries of cheap oil permeate the landscape:
* Fuel is second only to labor, for example, as a share of airlines' operating costs. To pull a wide-bodied jet up to the fuel pump these days costs more than $10,000--but that's less than it cost (adjusted for inflation) a decade ago.
"Low jet fuel prices are one of the few blessings the airline industry has experienced in the last couple of years," says Chris Chiames, a spokesman for the Air Transport Assn.
Another blessing is a legacy of the oil shocks: improved airplane design, which has made planes 50% more energy-efficient than they were in 1973, according to Chiames.
* To truckers, low-cost diesel fuel "is the profit margin," says Dave Titus of the California Trucking Assn. Titus estimates that in the deregulated trucking industry, margins are running at about 1%.
"In a competitive market," he says, "survival basically comes down to good maintenance and fuel cost, especially if you're an over-the-road hauler."
* Lower prices for asphalt since the 1986 fall in crude prices have given that petroleum-based material an edge in the paving market against cement. Low bunker fuel prices have beefed up marine shipping profits. And cheap oil has slowed the penetration of coal into industrial energy production.
* Even suppliers of petrolatum--used in cosmetics, pharmaceuticals and the original Vaseline petroleum jelly--are doing all right in a slow economy. "We're very happy with our performance in the last couple of years," says Newton Brightwell, a vice president of New York-based Witco Corp., one of the largest U.S. petrolatum suppliers.
* U.S. plastics makers--which derive half their products from crude oil and half from natural gas--have had a more complex time of it.
Certainly, low feedstock costs have helped the industry make market inroads--as in the plastic grocery bags that are fast replacing paper in thousands of supermarkets around the country. And low gasoline prices can encourage home buying, also a boon to plastics manufacturers.
"People have more money to spend because they're not sending it to the oil companies," says John Johnson, senior consultant at Probe Economics Inc., a plastics-industry research firm.
Even better off are European and Japanese manufacturers, which use crude oil as their sole feedstock--and thus have had a cost advantage since 1986.
Times have been much tougher in the U.S. oil industry itself.
A listless economy, energy conservation, the continuing glut of oil on the world market and sparse U.S. drilling prospects--the legacy of a century of exploration and more recent environmental restrictions--have cost half a million oil patch jobs in the past decade and cut the number of working U.S. rigs to Depression-era lows.
