Derek Thompson

A second shock followed during the Iranian Revolution of 1979, and gas prices surged again.

The combined effect of these two energy crises was the toxic union of stagflation and inflation, two things that economists had previously suggested were practically incapable of coexisting.

Those immediate effects, gas lines, recession, were actually the least interesting consequences of this historical moment.

The arms of the 1970s oil crisis truly reached around the world.

In the USSR, oil shocks were a windfall for the Soviet petro-economy, and oil money allowed Moscow to paper over the dysfunction of its planned economy for years.

But in the 1980s, oil prices fell, and Gorbachev's petro-economy collapsed, contributing significantly to the demise of the Soviet empire.

In Japan, heavy industry relying on cheap oil had powered that economy in the 1960s, but expensive oil threatened that model of growth.

In the 1970s, industrial policy was rerouted towards smaller manufactured goods that required less energy, things like computer chips, circuits, robotics.

The famous consumer electronics revolution of the 1980s in Japan, the Walkman, the VCR, Nintendo, was an echo of the 1970s oil crisis.

In the U.S., the historian Gary Gersel has described how stagflation shattered the New Deal consensus that had ruled American politics since the 1930s.

Americans lost faith in the sort of activist government associated with Roosevelt, Truman, and Lyndon Baines Johnson.

The political order that emerged from the 1970s prized individualism, celebrated markets, and even outwardly mocked the idea of effective governance.

The election of Ronald Reagan, and thus the rise of the modern Republican Party, is very hard to imagine in a world where the economy of the 1970s was as copacetic as the economy of the 1950s.

So there you go.

The fall of the Soviet Empire, Nintendo, Reagan.

None of those things were entirely caused by the energy crises of the 1970s.

I'm not saying that.

But in each case, the oil shocks of the 70s reshaped the political and economic environment in a way that increased the odds of these world historical developments.

The vast and sprawling tentacles of past energy crises have been on my mind recently during this Iran war, which has already shut down most commerce passing through the thin Strait of Hormuz, through which pass more than 20% of global oil transits, 20% of seaborne liquefied natural gas, 30% of seaborne fertilizer, and a growing amount of global container traffic.

The Strait of Hormuz, as I've said, is a little bit like the global economy's ACL, a small and vulnerable connective tendon that you don't have to think about when it's working perfectly, but causes very loud anguish when normal functioning is ruptured.