Effects of 1973 Oil Embargo

Written by David Charles, February 5, 2021

The world is a home to different countries of diverse cultural, ethnic, religious and political orientations. On this basis, some countries enjoy unflagging supports and loyalties between and among themselves while some are regarded as enemies as their relationship could be described as that of a cat and a rat. Over the years, The United States of America and Israel have formed a cordial relationship that has birthed fruitful cooperative efforts between these two great nations. Military, economic as well as technical assistance have made the roots of their relationship firm and it appears unlikely if not impossible to be cut off. Based on the foregoing, this article seeks to explore the effects of the 1973 Oil Embargo placed on The United States of America and its allies. Before swimming in the pool of discussion, it is pertinent to bring to the fore the historical antecedents that resulted in this economic punishment.

In 1960, during the conference held in Baghdad, Saudi Arabia, Kuwait, Iraq, Iran and Venezuela formed the Organization of the Petroleum Exporting Countries (OPEC). In the aftermath of its creation, countries like Nigeria, The Congo, Qatar, Indonesia, Ecuador, Libya, U A E, Gabon, Angola, and Equatorial Guinea became registered members. Co-ordination and unification of petroleum products between and among registered nations, with a view to securing affordable rates for producers, the production of petroleum to the countries in need, are part of the objectives for establishing this organization.

The 1973 oil embargo came to be in October when the members of OPEC agreed to punish the countries that were believed to be supporting Israel during the Yom Kippur War. Oil embargo simply means a limited supply of petroleum to an area. Countries like Canada, Japan, the Netherlands, the United Kingdom and the United States suffered the heat of the embargo. According to Wikipedia, by the end of the embargo in March 1974, the price of oil had risen nearly 300%, from US$3 per barrel to nearly $12 globally. The significant increase in the US prices allowed many economic downturns. As a result of the above, a global recession appeared to be set in motion.

The embargo arguably provided for two punishments. Firstly, it banned petroleum exports to the targeted nations; secondly, it introduced cuts in oil production. This punishment acutely strained the U.S. economy that had grown increasingly dependent on foreign oil to satisfy the desires of industrialization. The proliferation of industries was on the increase. It was also recorded that the U.S. auto and steel industries were strongly affected by the oil embargo. However, the quest for other means of sustaining the industrialization process was huge, and the negative economic effects are still there to deal with. A crucial scenario arose as European nations and Japan were in need of U.S. assistance to secure energy sources. The United States, on the other hand, which faced growing dependence on oil consumption as a result of the growing domestic industrial activities and dwindling domestic reserves, found itself depending on imported oil for sustenance.

To cap it all, the oil embargo changed the nature of policy in the West towards increased exploration. It provided a watered-down ground for alternative energy research, energy conservation and a more restrictive monetary policy to fight inflation better. It gave room for research as other means of energy consumption were produced. Particularly, the invention of solar panels proliferated, and this is enjoyed all over the world today. Home appliances and gadgets do not need to depend on oil (petroleum) before they can perform tasks. The US-Israeli alliance is still strong despite going through thick and thin. Negative and positive effects were experienced as a result of the embargo.

Resources:

https://www.reuters.com/article/us-oil-opec-falih-exclusive-idUSKCN1SO03Y