1973+Oil+Crisis

__Overall explanation of the 1973 Oil Crisis__ media type="youtube" key="RvmJYaEmlPs" width="425" height="350"**
 *  By Cindy Hwang, Jennifer Kim, Lisa Kim, and Yunji Kim

[|**OPEC**] **(Organization of the Petroleum Exporting Countries)** OPEC is an intergovernmental organization made up of 13 oil producing nations. It was formed in September 14th, 1960 in order to ensure the stabilization of oil prices in international oil markets, regarding the interest of oil-producing countries at all times





__**Increase in price**__ US pulled out of      [|Bretton Woods Accord,] <span style="FONT-FAMILY: 'Courier New', Courier, monospace"><span style="FONT-FAMILY: 'Lucida Console', Monaco, monospace">,<span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">an agreement that all countries fixed thier exchange rate based on US dollar and in return US fixed the price of gold at $35 per ounce, thereby leaving the US dollar without a 'standard' or 'measurement'. As other industrialized countries followed the trend, many expected fluctuation in currency and increased the production of their money, including US. This resulted in the depreciation of US dollar, the currency in which oil was priced with. With the price of oil barely changing and the value of dollar depriciating, OPEC was earning less real income. Thus, when the OPEC announced that they would price the oil according to the price of gold, instead of US dollar, the price of oil substantially rose and exacerbated the oil crisis as well. <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-SIZE: 130%; FONT-FAMILY: Tahoma, Geneva, sans-serif">**__Political strategy__** Yom Kippur war was a conflict between two OPEC members (Egypt & Syria) and Israel. Surrounding Arab members of OPEC endorsed Egypt & Syria, whereas US supported Israel. During October 1973, OPEC announced the oil embargo against US decision to continue the aid for Israel. The embargo applied to any nations that supported Israel, causing Europe & Japan to disassociate themselves with the US middle east policy. Also as domestic oil reserve dwindled with unchanging demand, the price of oil rocket-soared. The political strategy worked and US negotiated with a weaker international position.

**Arab Embargo was an act of restricting trade and raising the price of oil with oil consuming nations by countries that are part of OPEC**
<span style="FONT-SIZE: 130%; FONT-FAMILY: Tahoma, Geneva, sans-serif">__**Introduction**__ <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Before there was an OPEC, the great oil companies of the West ruled the oil industry. Oil is one of the crucial factors that runs the industrialized nations. Yet back before the days of OPEC, the great oil companies often retained 65% or more of the revenue from a product produced. In 1960, many of the oil producing nations, formed a cartel to protect their interests. OPEC set the stage for a new process in which the producer nations would eventually take over the functions of the companies, at least in production, and retain much more of the revenues. However, OPEC really had little impact from its founding in 1960 until 1973.
 * __<span style="FONT-SIZE: 130%; FONT-FAMILY: Tahoma, Geneva, sans-serif">How it happened __**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">January 1973—The <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">[|1973–1974 stock market crash] <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">begins.
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">September 15- The OPEC declares a negotiating front to pressure for price increases and an end to support of Israel, based on the 1971 Tehran agreement.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">October 6- the fourth <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Arab-Israeli War <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> starts.
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">October 8 ~ October 10- OPEC negotiations with oil companies to revise the 1971 Tehran price agreement fail.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">October 12- The United States initiates <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Operation Nickel Grass <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">, an overt strategic airlift operation to provide weapons and supplies to Israel during the Yom Kippur War.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">** October 16 - Saudi Arabia, Iran, Iraq, Abu Dhabi, Kuwait, and Qatar unilaterally raise posted prices by 17% to $3.65 per barrel and announce production cuts. OPEC cut production of oil and placed an embargo on shipments of crude oil to the West, with the United States and the Netherlands specifically targeted.**
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">**October 17- OPEC oil ministers agree to use oil as a weapon to punish the West for its support of Israel in the Arab-Israeli war . **
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">October 19- US President <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Richard Nixon <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> requests Congress to appropriate $2.2billion in emergency aid to Israel, including $1.5 billion in out-right grants.
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">November 5- Arab producers announce a 25% output cut and a further 5% cut is threatened.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">November 23- The Arab embargo is extended to <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Portugal <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">, <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Rhodesia <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">, and <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">South Africa <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">November 27- U.S. President <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Richard Nixon <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> signs the <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">Emergency Petroleum Allocation Act <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> authorizing price, production, allocation and marketing controls.
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">December 9- Arab oil ministers agree to another 5% cut for non-friendly countries.
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">December 25- Arab oil ministers cancel the 5% output cut for January. <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">January 7 ~ January 9, 1974- OPEC decides to maintain the prices until <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">April 1 <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">, 1974.
 * <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"><span style="FONT-SIZE: 130%; COLOR: #f9403e; FONT-FAMILY: Tahoma, Geneva, sans-serif">**March 17- Arab oil ministers, with the exception of Libya, announce the end of the embargo against the United States.**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"><span style="FONT-FAMILY: Arial, Helvetica, sans-serif">December 1974—The <span style="FONT-FAMILY: Arial, Helvetica, sans-serif">1973–1974 stock market crash <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> ends.

media type="youtube" key="VCLRlVxOH-Q" width="425" height="350" <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">NBC Nightly News coverage of OPEC's decision to cut exports of oil to the United States along with other nations. Reported by John Chancellor of the evening of October, 17 1973.
 * __<span style="FONT-SIZE: 130%; FONT-FAMILY: Tahoma, Geneva, sans-serif">Youtube videos to further your understanding __**

<span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> **Even though Arab Oil Embargo ended in March 1974, OPEC countries sold their oil at a high price presenting many problems for countries that import oil.**
 * __ Short term __**

=<span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> =
 * On Oil Consuming Countries **
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">increased oil prices in western world with the strongest effect on United States <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">(prices jumped from 25 cents to over dollar in couple of months)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">limited accessibility to oil and many gas stations ran out of oil
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">oil consumption in United States dropped up to 20 percent

<span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> **On OPEC countries**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">realized their political power on the world by controling oil exports
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">found that they could increase oil prices and make much more profit than before

<span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> **__Long term__** ** Reccesion throughout the whole world ** **US**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">inflation (above 10 percent)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">high unemployment
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">inventions of energy efficient products (cars, appliances)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">oil heat replaced by electric heat
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">infrastructure adopted to use affordable forms of energy went contructing

<span style="FONT-SIZE: 110%; FONT-FAMILY: Tahoma, Geneva, sans-serif">**Canada**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">inflation (reached 10 percent)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">unemployment (reached 7 percent)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">increased demand for oil from US

<span style="FONT-SIZE: 110%; FONT-FAMILY: Tahoma, Geneva, sans-serif">**Japan**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">increased car sales due to its fuel efficiency
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">led to Japan to shift large amount of investment to electronics (products that does not use oil)

<span style="FONT-SIZE: 110%; FONT-FAMILY: Tahoma, Geneva, sans-serif">**World Wide**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">oil that was not imported from OPEC countries also rose since oil companies were looking for excuse to gain more profit ( oil companies made huge amount of money due to Arab Oil Embargo)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Stagflation
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">disappearance of "Cheap Energy"
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Great impact on the car industry which depends heavily on oil accessibility (production of cars that use less oil)

<span style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-ansi-language: FR; mso-fareast-font-family: 'Times New Roman'; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"> <span style="FONT-SIZE: 13pt; FONT-FAMILY: Tahoma, Geneva, sans-serif; msoAnsiLanguage: FRmso-fareast-font-family">** Preservation of oil ** =<span style="FONT-SIZE: 13pt; COLOR: #000000; FONT-FAMILY: Tahoma, Geneva, sans-serif; msoAnsiLanguage: FRmso-fareast-font-family">US = <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> <span style="FONT-FAMILY: Arial, Helvetica, sans-serif"> media type="youtube" key="yG3f-JIZUq8" height="344" width="425" <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> **Canada**
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> dropped speed limit to 55mph on highways
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> use of daylight savings time
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> encourage use of alternative/renewable energy source (wind and solar) for public and industries
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> creation of Energy Department because they realized that being too dependent on other countries' oil was dangerous for their ecomony
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> gas stations sold limited amoun of gas to each customer
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> US citizens changed lifestyles by being more fuel-efficient (cars and homes)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> creation of energy policies ( Energy Policy and Conservation Act of 1976, Energy Conservation and Production Act of 1976, Energy Reorgnization Act of 1974, and National Energy Act of 1978)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> banned sale of gasoline on sundays
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">froze domestic price of oil below world price
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">started to tax exports of oil
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">relied on oil from Western Canada
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Government established Petro-Canada in December of 1973 to urge oil and gas exploration, to help develop the Alberta tar sands, and get trustworthy imports and get valuable information about the industry which the whole country depends on for daily life

<span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> **World Wide** <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif"> __** <span style="FONT-SIZE: 120%; FONT-FAMILY: Tahoma, Geneva, sans-serif"> Conclusion  **__
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Rearch in alternative energy source increased signigicantly (including wind, solar, tide power)
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Oil exploration
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Energy conservation
 * <span style="FONT-FAMILY: Tahoma, Geneva, sans-serif">Washington Energy Conference in 1974 (establishment of International Energy Agency)

Even though 1973 Oil Crisis showed how dependent western world was on foreign oil and how vulnerable they were to limited oil supply, this event made many realize how inefficient they were with energy. From a positive aspect, oil crisis was a good awakening since it made the world create and be more energy efficient. Without the oil crisis, the development in fuel-efficiency cars and products as well as advances in alternative and renewable energy sources might not have reached the stage it is in now. = = = __Bibliography__ =
 * Horton, Sarah. "The 1973 Oil Crisis." __Charlotte Country Day School__. 16 Nov. 2008 [|www.ccds.charlotte.nc.us/History/MidEast/04/horton/horton.htm].
 * "Oil Embargo | Environmental Encyclopedia Summary." __BookRags.com: Book Summaries, Study Guides__. 16 Nov. 2008 http://www.bookrags.com/research/oil-embargo-enve-02/.
 * "Educate Yourself - The Arab Oil Embargo of 1973-74." __Stock, trading stocks, stock trading, trading stock, investments, stocks, the stock market by Buy and Hold__. 16 Nov. 2008 http://www.buyandhold.com/bh/en/education/history/2002/arab.html.
 * "The OPEC oil crisis (Autumn 1973): historical context, economic impactand related links." __Canadian economy online__. 16 Nov. 2008 http://www.canadianeconomy.gc.ca/English/economy/1973opec.html.
 * "Oil Politics: A Modern History of ... - Google Book Search." __Google Book Search__. 16 Nov. 2008 http://books.google.ca/books?id=_HY3dvKYL0AC&pg=PA190&lpg=PA190&dq=washington+energy+conference+1974&source=web&ots=Sp-2rWlgca&sig=G7zNWHWsRGOMOLsUtmF6IPlIdMk&hl=en&sa=X&oi=book_result&resnum=10&ct=result#PPA113,M1.
 * "1973 oil crisis. Who is 1973 oil crisis? What is 1973 oil crisis? Where is 1973 oil crisis? Definition of 1973 oil crisis. Meaning of 1973 oil crisis.." __Knowledgerush__. 16 Nov. 2008 http://www.knowledgerush.com/kr/encyclopedia/1973_oil_crisis/.