Lessons Learned in '70s Have Made US, World Economies Less Vulnerable to Oil Shocks

While oil prices are surging again, the global economy is better equipped to withstand disruptions than it was 50 years ago.

Apr. 12, 2026 at 9:03am

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An abstract geometric illustration using bold shapes and primary colors to conceptually represent the global economy's reduced reliance on oil and increased energy efficiency in the wake of past oil crises.A visual metaphor for the global economy's reduced vulnerability to oil shocks, through strategic investments in energy efficiency and alternative fuel sources.NYC Today

The world economy is experiencing a flashback to the 1970s, with oil prices surging due to the war in the Middle East. However, the U.S. and global economies are less vulnerable now than they were during the oil shocks of that era. Countries have increased energy efficiency, reduced dependence on Middle Eastern oil, stockpiled fuel, and developed alternative energy sources. The U.S. in particular has become a net petroleum exporter thanks to the rise of fracking. While oil is still the dominant transportation fuel, the economy is better positioned to withstand disruptions.

Why it matters

The 1970s oil shocks led to a toxic mix of higher prices and slower growth, known as stagflation, that caused significant economic pain. While the current situation is still challenging for consumers and businesses, the global economy is better equipped to cushion the blow from oil supply disruptions today compared to 50 years ago.

The details

In response to the 1973 oil embargo and the 1979 Iranian revolution, countries took steps to increase energy efficiency, reduce dependence on Middle Eastern oil, stockpile fuel, and develop alternative energy sources. The U.S. in particular has become a net petroleum exporter thanks to the rise of fracking, and oil's share of global energy supplies has fallen from 46% in 1973 to 30% today. However, oil still accounts for about 90% of the energy used in the transportation sector, leaving the economy vulnerable to price shocks.

  • In 1973, oil accounted for almost half - 46% - of world energy supplies.
  • By 2023, oil's share had fallen to 30%, according to the International Energy Agency.
  • U.S. oil production shot up from 5 million barrels a day in 2008 to 13.6 million barrels a day last year.
  • Over the same period, U.S. natural gas production has more than doubled.

The players

Amy Myers Jaffe

Research professor at New York University's Center for Global Affairs.

Lutz Kilian

Director of the Federal Reserve Bank of Dallas' Center for Energy and the Economy.

Sam Ori

Executive director of the University of Chicago's Energy Policy Institute.

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What they’re saying

“We have decades of experience now dealing with these kinds of oil shocks.”

— Amy Myers Jaffe, Research professor

“The U.S. economy is much better positioned than it was in the 1970s, when it was particularly vulnerable to an oil price shock.”

— Sam Ori, Executive director

“What we can learn from the 1970s is that a well-intentioned policy of stimulating the economy by lowering interest rates has the potential of inadvertently reigniting inflation.”

— Lutz Kilian, Director

What’s next

The Biden administration is expected to continue efforts to reduce U.S. reliance on fossil fuels and promote clean energy alternatives, in contrast to the policies of the previous administration.

The takeaway

While the current oil price shock is still causing significant economic pain, the global economy is better equipped to withstand such disruptions compared to the 1970s. Decades of investment in energy efficiency, diversification of energy sources, and strategic stockpiling have made the U.S. and other economies less vulnerable to oil supply shocks.