Precedent · Energy
1973 / 1979 Oil Shocks
1973–1980
Two supply-driven oil shocks — the 1973 OPEC embargo and the 1979 Iranian revolution — that roughly quadrupled then re-doubled crude, drove double-digit inflation, and produced stagflation: falling output alongside rising prices. The defining shock of the 1970s.
The signature
Each variable's peak deviation from the pre-event baseline, with the curve shape, the lag before it moved, and how long the recovery ran.
| Variable | Peak deviation | Shape | Lag / Recovery | Confidence |
|---|---|---|---|---|
| CPI Inflation CPI ~3% → ~14% peak | +250% | Ramp | 60d lag · 1000d | high |
| S&P 500 1973–74 bear market (S&P −48%) | −45% | U | 30d lag · 720d | high |
| Real GDP 1973–75 recession | −3% | U | 180d lag · 540d | high |
| Brent Crude 1973 embargo + 1979 revolution; crude ~4× then re-doubled, sustained | +300% | Step | 0d lag · 1000d | high |
Methodology
Encoded as sustained deviations from the pre-shock baseline (these were regime changes, not spikes). The signature is stagflation: oil steps up and stays, CPI ramps to ~14%, GDP falls into the 1973–75 recession, and equities endure the −48% 1973–74 bear market. Shapes are mostly step (oil, inflation) and U (output, equities).
What's different now
The US is far less oil-intensive per unit of GDP than in 1973, and is a net energy exporter — a supply shock bites less. But the inflation-expectations channel is the transferable lesson: once embedded, it took a punishing rate cycle to break. Read this for the stagflation dynamic, not the magnitude.