1973 oil crisis

The 1973 oil crisis was a major economic event known as the first oil shock. It began when several oil-producing nations stopped selling oil to specific countries. This action is called an oil embargo. This embargo caused prices to rise very quickly across the globe. It changed how nations managed their energy and their politics. The crisis showed how much the world depended on oil for power.

The crisis was rooted in the Arab-Israeli conflict in the Middle East. Following Israel's declaration of independence in 1948, several wars occurred between Arabs and Israelis. In 1967, the Six-Day War took place, which resulted in Israel invading the Egyptian Sinai Peninsula. This led to Egypt closing the Suez Canal for eight years. In 1973, Egypt and Syria launched a surprise attack to try and recover lost territories. This conflict is known as the Yom Kippur War.

The Organization of Arab Petroleum Exporting Countries, or OAPEC, decided to use oil as a political tool. They implemented a total embargo against countries that supported Israel during the war. This effort was led by King Faisal of Saudi Arabia. The initial target countries included Canada, Japan, the Netherlands, the United Kingdom, and the United States. Later, the list expanded to include Portugal, Rhodesia, and South Africa. The embargo was a response to the United States providing $2.2 billion to support Israel's war effort.

Before the crisis, the United States was becoming very dependent on foreign oil. American domestic oil production peaked in 1970 and then began to decline. By 1973, US production accounted for only 16% of the global output. At the same time, the use of coal for energy was dropping. In 1951, coal provided 51% of American energy, but by 1973, it provided only 19%. This shift made the US economy very vulnerable to changes in the oil market. Between 1970 and 1973, US imports of crude oil nearly doubled to 6.2 million barrels per day.

The economic impact of the embargo was massive and immediate. By the time OAPEC lifted the embargo in March 1974, oil prices had risen by nearly 300%. The price of a barrel of oil had moved from a very low, stable rate to a much higher one. For much of the 1960s, a barrel of oil cost about $1.80. This cheap energy had supported a long period of prosperity after 1945. After the shock, the cost of fuel became a heavy burden for many people. In the United States, prices rose significantly higher than the global average.

Life changed for many people during this period of high prices and low supply. In the United States, some people had to use gasoline ration stamps to get fuel. There were even signs at service stations to manage the limited supply. Some families struggled with the cost of heating their homes. Some even had to use fireplaces for heat because heating oil was so expensive.

The 1973 crisis had long-lasting effects on global systems. It highlighted the power held by the Organization of Petroleum Exporting Countries, or OPEC. OPEC was founded in 1960 by Venezuela, Iraq, Saudi Arabia, Iran, and Kuwait. The crisis proved that oil could be used as a powerful weapon in international diplomacy. This era of instability was followed by a second oil shock in 1979 after the Iranian Revolution. The events of 1973 forced the world to rethink how it produced and used energy.