The Supreme Court upheld challenges to the Oklahoma law, indicating that the limited production prevented physical waste. Price effects were judged to be incidental. Major producing states later adopted conservation statutes that include the market demand provision, and the federal government passed a law which made it illegal for oil produced over and above state quotas to be shipped across state lines.
1c. Demand for oil grew during the early 1970s as world economies continued to expand. Oil remained a bargain energy source even at slightly higher prices than the 1960s saw. Supply failed to grow at the same pace as demand, with the result that actual prices rose above posted prices. In OPEC countries, there were ceilings on production and increasing risks to the point that investment in new oil areas declined.
In 1973, OPEC members met with oil companies to negotiate tax reference prices by more than two dollars a barrel. During a recess in those meetings, Arab OPEC members decided that no further negotiation was necessary and instituted the requisite price increase. Combined with the Arab Embargo that resulted from the political situation in 1973, the price hike caused fear among some oil companies. Panic buying ensued, with the result that prices were driven up even further in many situations.
In 1979, Saudi authorities imposed a production limit in the middle of the month, with the resul