Oil Crisis 1973 Pdf Download: A Symposium on OPEC and Its Economic Consequences

AbstractMuch of the existing historical research discusses the 1973 oil crisis through single national perspectives. In contrast, this article focuses on the multilateral dimension of this far-reachingevent. Starting with the Suez crisis of 1956, it explores the work of the OECD Oil Committee and its High... view more

Oil Crisis 1973 Pdf Download

Download Zip

This is the fifth of nine parts of the H-Energy 1973 Energy Crisis Anniversary Discussion. Dr. Fiona Venn provides a fascinating account of what led to the 1973 energy crisis (or as she argues two crises -- one economic and one political) and the immediate effects and consequences in the US, Europe, and Middle East. First published on H-Energy in November 2013.

Since the oil crisis of 1973, a number of studies have been made in various countries of the effects of the rise in petrol prices on the level of traffic flow, but rather fewer have attempted to delineate the complex chain of reactions within the car market set off by this impulse. We attempt to do this, using data from the UK.

Since 1966 during the prediction stage of the first London Transportation Study it became obvious that low income and high income households had different rates of growth of car ownership, mainly because low income households bought cheap, old cars which vary in quantity and price differently from expensive, new cars. The Greater London Council therefore sponsored a study of car prices by age and size, starting from 1957 annually, and since the oil crisis, evaluated monthly. This has enabled us to examine the strong change in trend that had occurred, with large cars depreciating 15% per annum more than the smallest. The quantities of cars of each size registered each month are available from national statistics and this enables us to say that the previous 1% per annum increase in car size was arrested, with new cars becoming substantially smaller.

The implications of the two trends noted above on the prediction of future car ownership growth are discussed, with the standstill since the oil crisis attributed to petrol prices via the split in household expenditure between purchase and use.

Marino Auffant is a Ph.D. candidate in international history at Harvard University. His research explores the transformation of world order during the 1970s energy crisis. He currently serves as an Ernest May Fellow in History and Policy at the Belfer Center for Science and International Affairs at Harvard Kennedy School, and as a graduate student associate at the Weatherhead Center for International Affairs. In August 2022, he will be an America in the World Consortium Postdoctoral Fellow at the Henry A. Kissinger Center for Global Affairs at the Johns Hopkins School of Advanced International Studies, and a Hans J. Morgenthau Fellow at the Notre Dame International Security Center.

This paper surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Although oil was used much differently and was substantially less important economically in the nineteenth century than it is today, there are interesting parallels between events in that era and more recent developments. Key post-World-War-II oil shocks reviewed include the Suez Crisis of 1956-57, the OPEC oil embargo of 1973-1974, the Iranian revolution of 1978-1979, the Iran-Iraq War initiated in 1980, the first Persian Gulf War in 1990-91, and the oil price spike of 2007-2008. Other more minor disturbances are also discussed, as are the economic downturns that followed each of the major postwar oil shocks.

Today, the OPEC embargo stands as an illustration of the consequences of relying too heavily on imported energy sources. In response, the United States has experienced rapid growth in the renewable energy and energy efficiency sectors since 1973, with an accompanying plateau of fossil fuel use and decrease in nuclear power use (since 1991). But the United States continues to import almost $1 billion of oil per day , money which often finds its way to foreign governments that do not have America's best interests at heart. This money could be better used domestically, to invest in our economy and clean energy. America's continued dependence on oil also makes it and our allies vulnerable to instability in the Middle East, and has led it to war.

The oil shock of 1973-1974 was an economic and politic important event that produced controversies in the years that followed. No event in the last decades of the 20th century was as visible as the fourfold increase of the oil price in 1973-1974.

Due to different opinions and the topic itself there are many theories and point of views related to the oil crisis. This paper aims to analyze the first oil shock and to brig to attention the existent theories on the topic.

In 1970, a presidential commission recommended the elimination of oil importquotas. In mid-1972 a court challenge to the legality of the import quotaswas filed by several northeastern states, where it was easier and cheaper toget oil from abroad than from Texas. In late 1972 President Nixon relaxedquotas on gasoline and heating fuel to stave off threatened shortages.Nonetheless, oil shortages and rising prices persisted during the earlymonths of 1973, with no sign of relief from domestic production. Quotas wererelaxed further in January of that year and again in April and were finallyended by executive order on May 1. By September 1973, one month before theinitial supply cuts by the Arab producers, the U.S. producer price index forcrude oil had risen nearly 17% from its January level. U.S. crude oilproducers had little excess production capacity and dwindling oil fieldreserves; thus, even at higher prices, they were unable to respond in theshort term. The stage was set for OPEC to step into the spotlight.

International oil markets responded quickly to the tight supply/consumptionsituation. The U.S. monthly average import price for crude oil stood at$2.75 per barrel in January 1973; by September it had increased 23% to$3.38. In October 1973 the Persian Gulf members of OPEC doubled the price oftheir crude oil, then in January 1974 doubled it again. By that time theaverage price in the U.S. for imported oil had more than doubled to $6.92per barrel, and by March it had increased to $11.10. Prices drifted upwardduring the next four years and held around $13.50 per barrel throughout1978. By the late 1970s higher oil prices had elicited increased oilproduction not only from OPEC, but also from elsewhere, especially Mexico,the Alaskan North Slope, and the newly opened fields in the North Sea. Atthe same time, energy conservation measures were on the verge ofsignificantly cutting oil consumption in the industrial countries.

First, the reaction of the industrial oil importers to the dramatic priceincreases of 1973-74 and 1979-80 conveyed an important message to OPEC oilministers. Initially, the dramatically higher prices caused consumers toreduce their demand for oil. Over time, the economies of the oil consumersadjusted to the new mix of energy prices, and demand for oil changed suchthat the increase in revenue to oil producers backed off further.5In part, this stems from conservation efforts as well as the fact that inmany uses there are substitutes for oil, especially when oil prices are highrelative to other forms of energy.

Government regulations were also imposed on the oil industry. The price of petroleum products was controlled first by jawboning in 1969 and then by mandatory controls in 1971. This period witnessed the most rapid rate of inflation since the Civil War. As the real price of oil declined, the supply of domestically produced petroleum declined and the share of petroleum imports increased. At controlled prices, the earnings of oil producers decreased, and there was little incentive to invest. By the time of the oil embargo of 1973, there were half as many drilling rigs in operation in the continental US as there were twenty years before. Dependence on imported petroleum approached half of the total consumption.[3]

In October, 1973, the Organization of Arab Petroleum Exporting Countries announced that its member states would immediately cut oil production by 5 percent and continue to do so each and every month until Israel withdrew from the West Bank, Gaza, and Jerusalem. Days later, Saudi Arabia and Kuwait announced even more dramatic production cuts, and most Petroleum Exporting members likewise declared that they would stop selling oil to the United States until America abandoned support for the state of Israel.

Some people believe that the embargo was directly responsible for long gasoline lines and for service stations running dry. The shortages were, in fact, a byproduct of price controls imposed by President Nixon in August 1971, which prevented oil companies from passing on the full cost of imported crude oil to consumers at the pump (small oil companies, however, were exempted from the price control regime in 1973). In the face of increasing world oil prices, "Big Oil" did the only sensible thing: it cut back on imports and stopped selling oil to independent service stations to keep its own franchisees supplied. By May of 1973, five months before the embargo, 1,000 service stations had shut down for lack of fuel and many others had substantially curtailed operations. By June, companies in many parts of the country began limiting the amount of gasoline motorists could purchase per stop. 2ff7e9595c