1973 oil crisis: the story on HearLore

Countdown To War

Arab oil producing countries attempted using oil as leverage twice before during the Suez Crisis in 1956 when Britain France and Israel invaded Egypt. During that conflict Syrian sabotage disrupted both the Trans-Arabian Pipeline and Iraq-Baniyas pipeline cutting off Western Europe. The second instance occurred during war between Egypt and Israel in 1967 but the embargo lasted only a few months. Most scholars agree the 1967 embargo proved ineffective. Some members of OAPEC supported using oil as a weapon while Saudi Arabia traditionally remained strongest supporter separating oil from politics. Saudis were wary due to availability from non-Arab producers and conservative monarchies grew dependent on Western support against rising Nasserism. Algeria Iraq and Libya strongly backed using oil as a weapon instead. Arab newspapers like Egyptian Al-Ahram Lebanese An-Nahar and Iraqi Al-Thawra historically supported this tactic. In 1970 President Nasser died succeeded by Anwar Sadat who believed in diplomacy of surprise engaging sudden moves upsetting diplomatic equilibrium. Sadat liked saying his favorite game was backgammon where skill persistence rewarded but best won by sudden gambles making analogy between how he played backgammon and conducted diplomacy. Under Nasser Egypt and Saudi Arabia engaged what known as Arab Cold War but Sadat got along very well with King Faisal forming alliance between most populous Arab state and wealthiest Arab state. Unlike secularist Nasser Sadat was pious Muslim having strong personal rapport with equally pious King Faisal. Henry Kissinger later admitted being so engrossed with Paris peace talks ending Vietnam war that Washington missed significance of Egyptian-Saudi alliance. At same time Sadat moved closer to Saudi Arabia also wanted rapprochement with United States moving Egypt away from Soviet Union alliance. In 1971 US had information Arab states willing implement another embargo. July 1972 Sadat expelled all 16,000 Soviet military personnel signaling desire better relations with United States. Kissinger taken completely surprised asking why no concessions demanded first. Sadat expected reward would be US pressuring Israel return Sinai to Egypt but anti-Soviet move prompted no response from United States. By November 1972 Sadat moved again closer to Soviet Union buying massive amount of Soviet arms for planned war against Israel in 1973. For Sadat cost no object since money came from Saudi Arabia. Simultaneously Faisal promised Sadat if war came Saudi Arabia would embargo oil to West. April 1973 Saudi Oil Minister Ahmed Zaki Yamani visited Washington meeting Kissinger telling him King Faisal becoming increasingly unhappy wanting America pressure Israel return lands captured Six Day War 1967. Later interview Yamani accused Kissinger not taking warning seriously saying only asked him stop speaking threat. Angry at Kissinger Yamani warned in Washington Post interview the 19th of April 1973 that King Faisal considering oil embargo. At time general feeling Washington Saudis bluffing nothing coming threats. Fact Faisal's half brother King Saud imposed crippling oil embargo Britain France during Suez War 1956 considered unimportant precedent. CEOs four US oil companies arrived Washington May 1973 after speaking Faisal warning considerably tougher intelligent ruthless than deposed Saud 1964 threats serious. Kissinger declined meet four CEOs. Assessment done by Kissinger staff Middle East summer 1973 repeated statements Sadat waging jihad dismissed empty talk while warnings Faisal regarded inconsequential. September 1973 Nixon fired Rogers Secretary State replacing with Kissinger. Kissinger later stated not given enough time know Middle East settling into Foggy Bottom office Egypt Syria attacked Israel the 6th of October 1973.

The Oil Weapon Unleashed

the 6th of October 1973 Yom Kippur/October War began when Egypt attacked Bar Lev Line Sinai Peninsula Syria launched offensive Golan Heights occupied Israel during 1967 Six-Day War. Faisal Saudi Arabia supportive telling two Egyptian envoys October 8 "You made us proud past we could lift heads up now can." Promised give Egypt quality aid worth $200 million assisting war effort stating willing use oil weapon necessary support Egypt. War began height Watergate scandal Nixon largely let Kissinger manage foreign policy distracted scandal. Kissinger promised Israeli Prime Minister Golda Meir United States replace losses equipment after war. Initially sought delay arm shipments believing improve odds making peace along lines UN Security Council Resolution 242 calling land-peace deal if armistice signed Egypt Syria gaining territory Sinai Golan Heights respectively. Nixon ordered arms lift Israel October 12 but Kissinger used excuse bureaucratic delays limit amount weapons ammunition sent Arab concept peace brave victorious leader magnanimous defeated opponents meant possibility Sadat make peace provided war ended way Egypt perceived not defeated. Likewise Kissinger regarded Meir arrogant believed armistice ending manner unambiguous Israeli victory make humble. Cold War concerns emerged both Syria Egypt lost much equipment fighting Soviet Union began flying new equipment starting October 12. Soviet flights recorded British radar stations Cyprus though Soviets flew average 60 flights daily exaggerated accounts appeared Western newspapers speaking hundred flights daily. Point Nixon Kissinger saw October War terms Cold War rather Middle Eastern politics seeing Soviet arms lifts power play requiring American answer. the 12th of October 1973 US president Richard Nixon authorized Operation Nickel Grass strategic airlift deliver weapons supplies replacing materiel losses following Soviet moves supplying Arab side. First American weapons arrived Tel Aviv only October 15 despite Nixon orders number planes flying initially limited. After first week Israelis halted Syrian offensive Golan Heights pushing Syrians back towards Damascus. Along Suez canal heavy fighting Egyptians holding own. October OPEC summit Sheraton Hotel Kuwait City October 16 announced price oil go $3.01 per barrel to $5.12 per barrel. News grim Arab viewpoint Syrians steadily pushed back Israelis opened counter-offensive crossing Great Bitter Lake. Responses varied Saudi Oil Minister Ahmed Zaki Yamani stated 1981 interview king still wanted give America chance stay out fighting agreed cut production just 5% monthly full embargo implement felt things absolutely hopeless. Iranian delegation left agreeing higher prices Shah Iran supported only higher oil prices. Iraqi Oil Minister Sa'dun Hammadi demanded total nationalization assets American oil companies Middle East withdrawal all Arab funds United States breaking diplomatic relations. Libyan Oil Minister Izz al-Din al-Mabruk called nationalization assets Western oil companies Middle East. Saudi delegation led Yamani supported Algerian delegation fought hard against Iraqi Libyan demands maintaining forcing increase price best way influence United States. Hammadi rest Iraqi delegation left upset won majority delegations Saudi viewpoint. Statement issued midnight Sheraton Hotel handwritten reflecting tense talk several paragraphs crossed written hands different. October 17 Arab oil producers cut production 5% threatening oil embargo Israel wartime allies United States Netherlands Rhodesia South Africa Portugal.

Global Economic Shockwaves

Immediate effects every Arab state except Iraq Libya joined oil embargo exports Middle East West down 60-70% November 1973. Japan nations western Europe imported some 75% Near East leading immediate sharp price raises competing desperately dwindling supplies consumers showed willing pay unparalleled money oil. Saudi Arabia held 25% world's reserves but embargo imposed United States led shortages setting inflationary spiral new high prices American market led sharp increases nations not subjected embargo. When Iranian state oil company held auction the 16th of December 1973 bids $17 per barrel made late December OPEC conference Vienna announced price barrel increase from $5 to $11.65. Faisal opposed largely work Iranian delegation. the 22nd of February 1974 King Faisal chaired second summit Islamic states Lahore acclaimed conquering hero humiliated humbled West wrecking economy. Pakistan Prime Minister Zulfikar Ali Bhutto opened stating armies Pakistan armies Islam enter Jerusalem brothers-in-arms! Attempts resolution the 7th of November 1973 Kissinger flew Riyadh meet King Faisal ask end exchange promising evenhanded Arab-Israeli dispute. Plane carrying him prepared land clearly nervous prospect negotiating stern Wahhabi Faisal marked dislike Jews. Summit Cairo day before asked Sadat what Faisal like told Well Dr Henry probably go Communism Jews. King Faisal two great hatreds communism Zionism believing Soviet Union Israel plotting together against Islam. Shown translation Arabic Protocols Learned Elders Zion instantly believed authenticity despite exposed forgery 1921. Kissinger discovered worthy companion Lê Đức Thọ terms stubbornness accused United States biased favor Israel going long rant balefulness Jewish Communists Russia Israel despite efforts charm refused end oil embargo. Initially Secretary Defense James Schlesinger suggested USA invade Saudi Arabia another Arab countries seize fields. Kissinger stated private state department meeting ridiculous civilized world held up 8 million savages overthrow one sheikh show do it? Formed plan invade Abu Dhabi Kuwait Saudi Arabia. Kissinger publicly threatened countermeasures the 21st of November 1973 press conference if not lifted Saudis responded threatening further cuts burn fields US military invaded. After CIA confirmed threats gave up military intervention deciding deal troop withdrawals settling diplomatic solutions. Lifting the 18th of March 1974 King Faisal ended oil embargo. Sadat reported Faisal United States more evenhanded Kissinger promised sell weapons previously denied grounds used against Israel. More importantly Saudi billions invested Western banks massive bout inflation set off threat fortune eroded value money giving vested interest helping contain damage inflicted economies West. Since Israeli forces withdrew 1949 Armistice Line majority scholars believe failure Roy Licklieder 1988 book Political Power Arab Oil Weapon concluded countries targeted did change policies Daniel Yergin said remade international economy Robert Lacey wrote changed nature policy West towards increased exploration alternative energy research conservation restrictive monetary policy better fight inflation. Effects immediate OPEC forced companies increase payments drastically price quadrupled by 1974 from $3 nearly $12 per 42 gallon barrel equivalent 2018 dollars rise $. In 1973 about 25% oil used United States came Arab countries. Mere shortage caused by Arab oil embargo within United States forced prices raise leading everywhere all over world producers joined embargo such Iran Venezuela Libya Iraq demanded higher prices Japan Europe initiative ship instead United thus settling worldwide inflationary spiral. Only European nations subject Netherlands Dutch Foreign Minister Max van der Stoel strongly pro-Israeli Portugal show support independence movements colonies but shortage US led sharp rises all European nations. Although severely disrupted supplies Americans imported more non-embargoed nations like Iran resulting 400% increase caused damage American economy. Nations classified friendly France Belgium suffered most worldwide inflation caused. Crisis eased when lifted March 1974 negotiations Washington Oil Summit effects lingered throughout 1970s dollar price energy increased following year amid weakening competitive position dollar world markets. Arab oil embargo ended long period prosperity West begun 1945 throwing world's economy steepest contraction since Great Depression. Long summer prosperity post-war years made possible swinging sixties related rise rebellious youth culture easy hedonist rebellion traditional values time unprecedented prosperity. Lacey wrote impact Arab oil embargo 1973-74 people West life suddenly slower darker chiller gasoline rationed lights turned Times Square gas guzzler automobiles stopped selling speed limits common restrictions weekend driving bid conserve fuel. American automobile industry specialized producing heavy gas-guzzler vehicles immediate shift consumers lighter fuel-efficient vehicles produced Japanese West German industries sending American auto industry decline. Years 1945 to 1973 period unprecedented prosperity West long summer many believed never end abrupt end 1973 as oil embargo increased price 400% matter days threw world's economy sharp recession unemployment mounting inflation raging came profound shock. End French called Trente Glorieuses Glorious Thirty years led widespread pessimism Financial Times running famous headline late 1973 Future subject Delay. Address General Assembly Kurt Waldheim secretary-general United Nations complained note helplessness fatalism creeping world affairs. Sudden abrupt end long summer prosperity 1973-1974 played major role pessimistic mood characterized culture rest 1970s. 1975 report Congress Federal Energy Administration estimated caused about 500,000 Americans lose jobs GNP loss between $10 billion-$20 billion.

National Responses And Adaptations

Impact on United States production distribution price disruptions held responsible recessions periods excessive inflation reduced productivity lower economic growth. Some researchers regard 1973 oil price shock accompanying 1973-74 stock market crash first discrete event since Great Depression persistent effect US economy. Embargo negative influence causing immediate demands address threats energy security. International level price changes competitive positions industries automobiles. Macroeconomic problems consisted both inflationary deflationary impacts. Left companies searching new ways increase supplies rugged terrain Arctic finding developing fields usually required five to ten years significant production. Average US retail price gallon regular gasoline rose 43% from 38.5 cents May 1973 55.1 cents June 1974. State governments asked citizens put Christmas lights Oregon banned Christmas commercial lighting altogether. Politicians called national gasoline rationing program Nixon asked retailers voluntarily sell Saturday nights Sundays 90% owners complied producing long lines motorists wanting fill still could. Oil shock provided considerable impetus American nuclear industry way achieve energy independence Middle East. the 7th of November 1973 Nixon Congress called Project Independence make self-sufficient energy by 1980 calling massive investment nuclear industry. Envisioned economical encouraged enthusiasm officials saw technology future. Late 1960s lively environmentalist movement emerged Project Independence subject much debate media Congress. Debates revealed many claims made nuclear power underestimated true costs reactors equally problematic issue safety store spent rods emitting toxic radioactivity centuries cost-effective manner. Issue difficult NIMBYism communities unwilling accept storage place inevitable by-product government find community store rods. Many ordered 1973 cancelled due cost overruns over 100 plants shut uneconomical next 10 years. Unlike nations tried use nuclear power way energy independence France Sweden United States substantial reserves own oil weakened case ensuring debates. By 1989 only 18% American energy came nuclear plants fraction Project Independence envisioned 1973. Oil shock led anti-Arab feelings common cartoons published American newspapers depicted Arabs disgusting ugly obese corrupt greedy. Long hooked Semitic noses traditionally featured anti-Jewish applied Arab sheiks illustrate supposed greed. Public opinion did not see use weapon politics tended explain embargo excessive greed King Faisal other leaders hence hooked nose shorthand insatiable greed. Impact on Soviet Union USSR beneficiary crisis prompted raise energy prices Council Mutual Economic Assistance inability meet demand allies East European governments purchase Middle Eastern countries increasing world market prices crippling balance payments accentuating economic shortcomings. Impact Western Europe nine members EEC Netherlands faced complete embargo Britain France received almost uninterrupted supplies reward refusing allow US use airfields stopping arms supplies Arabs Israelis. Other six EEC nations faced partial cutbacks UK traditionally ally Israel Harold Wilson's government supported Six-Day War successor Ted Heath reversed policy 1970 calling withdrawal pre-1967 borders. 1969 France devalued franc made exports expensive consumers encouraging buy French products making cheaper abroad entirely dependent imported oil through French companies continued lease concessions Algeria until 1971. Low price internationally compensated certain extent higher caused by shock devalued franc ensured dramatic increases hit French economy especially hard 1973. UK Germany Italy Switzerland Norway banned flying driving boating Sundays Sweden rationed gasoline heating oil Netherlands imposed prison sentences those used more electricity ration. EEC unable achieve common policy first month issued statement November 6 after began widely viewed pro-Arab supporting Franco-British line war. OPEC lifted embargo all EEC members. Other European states rallied defense Dutch left fend themselves instead reached bilateral deals Saudi Arabia Iraq Iran. Faced recession tendency within EEC turn inwards away European integration. Price rises much greater impact Europe than embargo retarded movement towards economic integration gathering pace since founded 1957. German historian Jens-Uwe Wunderlich wrote 1973 attempts finish off common market came complete standstill 1973 not until 1977 resumed. Customs union made impossible raise tariffs against other members tendency especially pronounced France United Kingdom governments subsidize national champions selected corporations receiving grants tax breaks response crisis. Oil shock increased appeal nuclear energy way achieve independence turbulent Middle East. Starting March 1974 Energy Plan introduced premier Pierre Messmer French state made massive investment nuclear energy 1990s 80% France's energy came plants. Impact United Kingdom North Sea fields discovered 1969 started exploited 1975 making entirely dependent imported oil 1973. Way world prices quadrupled late 1973 very adverse impact British economy series speeches December 1973 Prime Minister Edward Heath warned because shock British economy going recession people expect austerity. Need avoid importing now expensive manage balance-payments led Heath government turn coal Britain self-sufficient substitute source miners union immense leverage press higher wages offered 7% rejected insufficient went strike. Though subjected embargo UK nonetheless faced energy crisis own strikes railroad workers winter 1973-74 became major factor defeat Heath Conservative February 1974 general elections. New Labour government told heat one room houses over winter Harold Wilson settled giving 35% pay increase. Impact Japan hard hit since imported 90% Middle East had stockpile good 55 days another 20-day supply en route facing most serious crisis since 1945 government ordered 10% cut consumption industrial oil electricity December ordered immediate 20% cut major industries leisure automobile usage Economist predicted growth plunge 5% annually zero negative territory. Inflation hit 9%. Seeking advantage crisis business called relax controls air pollution water refused Moscow tried take advantage promising assistance renounce claim Kurile Islands Tokyo refused instead made $3.3 billion loans Arab states calling Israel step back. Long run never wavered determination maintain strong close ties United States self-defense briefly providing Arab powers rhetoric demanded resuming shipments early 1974. Defensive strategy explained Kissinger met top leaders Tokyo November 1973. To assure future flows added suppliers outside Middle East invested nuclear power imposed conservation measures provided funding Arab governments Palestinians. Crisis major factor long-run shift economy away oil-intensive industries investment shifted electronics auto makers benefited jump gasoline prices helped small fuel-efficient models gain market share gas-guzzling Detroit competition triggered drop American sales brands lasted into 1980s.

What caused the 1973 oil crisis?

The 1973 oil crisis began when Egypt and Syria launched a surprise attack on Israel during the Yom Kippur War on the 6th of October 1973. Arab oil producers subsequently cut production by 5% and threatened an embargo against nations supporting Israel including the United States and Netherlands.

When did King Faisal end the 1973 oil embargo?

King Faisal ended the oil embargo on the 18th of March 1974 following negotiations in Washington. The embargo had been imposed starting in November 1973 to pressure Western nations regarding the Israeli occupation of territories captured during the Six-Day War.

How much did oil prices rise during the 1973 oil crisis?

Oil prices quadrupled from approximately $3 per barrel in 1973 to nearly $12 per barrel by 1974. The price increase reached $17 per barrel during an auction held by the Iranian state oil company on the 16th of December 1973 before OPEC set the official rate at $11.65.

What economic impact did the 1973 oil crisis have on the United States?

The 1973 oil crisis caused about 500,000 Americans to lose jobs and resulted in a gross national product loss between $10 billion and $20 billion according to a 1975 report. Average US retail gasoline prices rose 43% from 38.5 cents in May 1973 to 55.1 cents in June 1974.

Which countries were targeted by the 1973 Arab oil embargo?

Arab oil producers imposed an embargo specifically against Israel wartime allies including the United States Netherlands Rhodesia South Africa Portugal and Japan. European nations such as France Belgium and the UK received almost uninterrupted supplies while other EEC members faced partial cutbacks or complete embargoes.

1973 oil crisis.