#REVOLUTION2 FALLING BLOCKS DRIVERS#
#REVOLUTION2 FALLING BLOCKS DRIVER#

#REVOLUTION2 FALLING BLOCKS DRIVERS#

Some states also established a policy that only allowed drivers to buy $5 of gasoline at a time, meaning that they had to buy more frequently, virtually assuring longer lines.Ĭrude oil markets were regulated as well.

Further aggravating the shortages, the federal government had an allocation system that did not allow gasoline distribution to adjust to demand conditions around the country. In an environment of rising prices, the price controls incentivized refiners to withhold gasoline and sell it later at higher prices, rather than selling it today. The controls allowed refiners to raise gasoline prices each month based on the previous month’s crude oil price. Price controls on gasoline exacerbated shortages, by not allowing rising prices to curb demand. However, government policies that regulated the petroleum industry made the situation much worse. There was a genuine shortage of gasoline in the United States for a while, as refineries geared to run Iranian crude oil could not produce as much gasoline from other types. Deregulation of American fuel marketĮndless lines at gasoline stations are the overwhelming image in the minds of Americans who lived through the oil shocks. The Iranian revolution and the oil price shocks that followed catalyzed a number of important changes in petroleum markets that remain in place today. Oil on the spot market sold for as much as $50 per barrel. Panic buying more than doubled the actual shortage. As a result, crude oil buyers not only bought to cover current demand, but also increased their crude oil inventories, deepening the shortage and further driving up prices. Buyers were concerned that the crisis would only get worse, that the combination of religious fundamentalism and nationalism would spread to other oil producing countries in the region, and that ever-growing oil demand would continually drive up the price.

#REVOLUTION2 FALLING BLOCKS DRIVER#

The loss of production was important, but panic among crude oil buyers was an important driver of price.

Revolution2 falling blocks