page_title: 1973 oil crisis
section_title: Immediate economic effects
hierarchical_section_title: 1973 oil crisis / Effects / Immediate economic effects
caption_attribution_description: English: Father and son hold up their sign saying "Gas Stealers Beware" during the 1973 Oil Crisis
context_page_description: The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries proclaimed an oil embargo. The embargo was targeted at nations perceived as supporting Israel during the Yom Kippur War. The initial nations targeted were Canada, Japan, the Netherlands, the United Kingdom and the United States with the embargo also later extended to Portugal, Rhodesia and South Africa.
  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; US prices were significantly higher. The embargo caused an oil crisis, or "shock", with many short- and long-term effects on global politics and the global economy. It was later called the "first oil shock", followed by the 1979 oil crisis, termed the "second oil shock".
context_section_description: The effects of the embargo were immediate. OPEC forced oil companies to increase payments drastically. The price of oil quadrupled by 1974 from US$3 to nearly US$12 per barrel ($75 per cubic meter), equivalent in 2018 dollars to a price rise from $17 to $61 per barrel.
  This price increase had a dramatic effect on oil exporting nations, for the countries of the Middle East who had long been dominated by the industrial powers were seen to have taken control of a vital commodity. The oil-exporting nations began to accumulate vast wealth.
  Some of the income was dispensed in the form of aid to other underdeveloped nations whose economies had been caught between higher oil prices and lower prices for their own export commodities, amid shrinking Western demand. Much went for arms purchases that exacerbated political tensions, particularly in the Middle East. Saudi Arabia spent over 100 billion dollars in the ensuing decades for helping spread its fundamentalist interpretation of Islam, known as Wahhabism, throughout the world, via religious charities such as the al-Haramain Foundation, which often also distributed funds to violent Sunni extremist groups such as Al-Qaeda and the Taliban.
  Control of oil became known as the "oil weapon". It came in the form of an embargo and production cutbacks from the Arab states. The weapon was aimed at the United States, Great Britain, Canada, Japan and the Netherlands. These target governments perceived that the intent was to push them towards a more pro-Arab position. Production was eventually cut by 25%. However, the affected countries did not undertake dramatic policy changes.
  In the United States, scholars argue that there already existed a negotiated settlement based on equality between both parties prior to 1973. The possibility that the Middle East could become another superpower confrontation with the USSR was of more concern to the US than oil. Further, interest groups and government agencies more worried about energy were no match for Kissinger's dominance. In the US production, distribution and price disruptions "have been held responsible for recessions, periods of excessive inflation, reduced productivity, and lower economic growth." Some researchers regard the 1973 "oil price shock" and the accompanying 1973–74 stock market crash as the first discrete event since the Great Depression to have a persistent effect on the US economy.
  The embargo had a negative influence on the US economy by causing immediate demands to address the threats to U.S. energy security. On an international level, the price increases changed competitive positions in many industries, such as automobiles. Macroeconomic problems consisted of both inflationary and deflationary impacts. The embargo left oil companies searching for new ways to increase oil supplies, even in rugged terrain such as the Arctic. Finding oil and developing new fields usually required five to 10 years before significant production.
  OPEC-member states raised the prospect of nationalization of oil company holdings. Most notably, Saudi Arabia nationalized Aramco in 1980 under the leadership of Saudi oil minister Ahmed Zaki Yamani. As other OPEC nations followed suit, the cartel's income soared. Saudi Arabia undertook a series of ambitious five-year development plans. The biggest began in 1980, funded at $250 billion. Other cartel members also undertook major economic development programs.
  The average US retail price of a gallon of regular gasoline rose 43% from 38.5¢ in May 1973 to 55.1¢ in June 1974. State governments asked citizens not to put up Christmas lights. Oregon banned Christmas and commercial lighting altogether. Politicians called for a national gasoline rationing program. Nixon asked gasoline retailers to voluntarily not sell gasoline on Saturday nights or Sundays; 90% of gas station owners complied, which produced long lines of motorists wanting to fill up their cars while they still could.
  The embargo was not uniform across Europe. Of the nine members of the European Economic Community (EEC), the Netherlands faced a complet
caption: Gas stealers beware, 1974
exif: {"Image ImageDescription": "Country\u2019s fuel shortage led to problems for motorists in finding gas as well as paying much more of it, and resulted in theft from cars left unprotected.  This father and son, made a sign warning thieves of the possible consequences\u201d, April 1974Photographer: FalconerSeries: Photographs and other Graphic Materials from the Environmental Protection Agency, (12/09/1970-)Record Group 412: Records of the Environmental Protection Agency, 1944-2006ARC Series Identifier: 553111Still Pictures Identifier: 412-DA-10652Rediscovery Identifier: 25270", "Image Software": "Adobe Photoshop CS3 Macintosh", "Image Artist": "National Archives, Records of the Environmental Protection Agency"}