1973 oil crisis: Difference between revisions - Wikipedia

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{{short description|OAPEC petroleum embargo}}

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In October 1973, the [[Organization of Arab Petroleum Exporting Countries]] (OAPEC) announced that it was implementing a total [[oil embargo]] against the countries who had supported [[Israel]] at any point during the 1973 [[Yom Kippur War|Fourth Arab–Israeli War]], which began after [[Egypt]] and [[Syria]] launched a large-scale surprise attack in an ultimately unsuccessful attempt to recover the territories that they had lost to Israel during the 1967 [[Six-Day War|Third Arab–Israeli War]]. In an effort that was led by [[Faisal of Saudi Arabia]],<ref>Smith, Charles D. (2006), Palestine and the Arab–Israeli Conflict, New York: Bedford, p. 329.</ref> the initial countries that OAPEC targeted were [[Canada]], [[Japan]], the [[Netherlands]], the [[United Kingdom]], and the [[United States]]. This list was later expanded to include [[Estado Novo (Portugal)|Portugal]], [[Rhodesia]], and [[South Africa]]. In March 1974, OAPEC lifted the embargo,<ref name="USstate2ndCrisis">{{cite web |url=https://history.state.gov/milestones/1969-1976/oil-embargo |title=OPEC Oil Embargo 1973–1974 |publisher=[[U.S. Department of State]], [[Office of the Historian]] |access-date=August 30, 2012 |archive-url=https://web.archive.org/web/20140306225604/http://history.state.gov/milestones/1969-1976/oil-embargo |archive-date=March 6, 2014 |url-status=live }}</ref> but the [[price of oil]] had risen by nearly 300%: from US{{convert|3|$/oilbbl|$/m3|lk=on}} to nearly US{{convert|12|$/oilbbl|$/m3}} globally. Prices in the United States were significantly higher than the global average. After it was implemented, the embargo caused an oil crisis, or "shock", with many short- and long-term effects on the global economy as well as on global politics.<ref name="cbc" /> The 1973 embargo later came to be referred to as the "first oil shock" vis-à-vis the "second oil shock" that was the [[1979 oil crisis]], brought upon by the [[Iranian Revolution]].

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===Arab-Israeli conflict===

Ever since Israel [[Israeli Declaration of Independence|declared independence in 1948]] there was [[Arab–Israeli conflict|conflict between Arabs and Israelis]] in the [[Middle East]], including [[List of wars involving Israel|several wars]]. The [[Suez Crisis]], also known as the Second Arab–Israeli war, was sparked by Israel's southern port of [[Port of Eilat|Eilat]] [[Israeli passage through the Suez Canal and Straits of Tiran|being blocked by Egypt]], which also [[Nationalization|nationalized]] the [[Suez Canal]] belonging to French and British investors. As a result of the war, [[Closure of the Suez Canal (1956–1957)|the Suez Canal was closed for several months between 1956 and 1957]].<ref>{{cite web | url=https://www.aljazeera.com/news/2008/2/29/the-1956-suez-war | title=The 1956 Suez War }}</ref>

The [[Six-Day War]] of 1967 included an Israeli invasion of the Egyptian [[Sinai Peninsula]], which resulted in Egypt [[Closure of the Suez Canal (1967-1975)|closing the Suez Canal for eight years]].<ref>{{cite web | url=https://historyofyesterday.com/the-8-year-long-blockage-of-the-suez-canal-7ccec77bd907 | title=The 8 Year Long Blockage of the Suez Canal | date=April 7, 2021 }}</ref> Following the [[Yom Kippur War]], the canal was [[1974 Suez Canal Clearance Operation|cleared in 1974]] and opened again in 1975.<ref>{{cite web | url=https://peacemaker.un.org/egyptisrael-interimagreement75 | title=Interim Agreement between Israel and Egypt (Sinai II) &#124; UN Peacemaker }}</ref><ref>{{cite web | url=https://www.history.com/topics/middle-east/six-day-war | title=Six-Day War | date=June 5, 2023 }}</ref> [[OAPEC]] countries cut production of oil and placed an [[embargo]] on oil exports to the United States after [[Richard Nixon]] requested $2.2 billion to support Israel's war effort. Nevertheless, the embargo lasted only until January 1974, though the price of oil remained high afterwards.<ref>{{cite web | url=https://www.federalreservehistory.org/essays/oil-shock-of-1973-74 | title=Oil Shock of 1973–74 &#124; Federal Reserve History }}</ref>

===American production decline===

By 1969, American domestic output of oil was peaking and could not keep pace with increasing demand from vehicles. The U.S. was importing {{convert|350|e6oilbbl|e6m3|abbr=off}} per year by the late 1950s, mostly from [[History of the Venezuelan oil industry|Venezuela]] and [[History of the petroleum industry in Canada|Canada]]. Because of transportation costs and tariffs, it never purchased much oil from the Middle East. In 1973, US production had declined to 16% of global output.<ref name=painter>{{Cite journal| volume = 39| issue = #4| last = David S. Painter| title = Oil and Geopolitics: The Oil Crises of the 1970s and the Cold War| journal = Historical Social Research / Historische Sozialforschung| pages = 186–208| jstor = 24145533| year = 2014}}</ref><ref name=little>{{Cite book| publisher = Univ of North Carolina Press| isbn = 978-0-8078-7761-6| last = Little| first = Douglas| title = American Orientalism: The United States and the Middle East since 1945| chapter=2. Opening the Door: Business, Diplomacy, and America's Stake in Middle East Oil |date = 2009}}</ref> Eisenhower imposed [[Import quota|quota]]s on foreign oil that would stay in place between 1959 and 1973.<ref name=little /><ref>{{Cite book| publisher = Greenwood Publishing Group| isbn = 978-0-275-94562-6| last = Pelletiere| first = Stephen C.| title = Iraq and the International Oil System: Why America Went to War in the Gulf| chapter = 4. The OPEC Revolution and the Clashes Between Iraq and the Cartel| url = https://books.google.com/books?id=EQ1cpB65KR4C| date = 2001| access-date = June 21, 2018| archive-url = https://web.archive.org/web/20130319022057/http://books.google.com/books?id=EQ1cpB65KR4C| archive-date = March 19, 2013| url-status = live}}</ref> Critics called it the [[Mandatory Oil Import Quota Program|"drain America first"]] policy. Some scholars believe the policy contributed to the [[peak oil|decline of domestic US oil production]] in the early 1970s.<ref name=price>{{Cite book| publisher = The MIT Press| isbn = 978-0-262-02906-3| last = Price-Smith| first = Andrew T.| title = Oil, Illiberalism, and War: An Analysis of Energy and US Foreign Policy |chapter=1. The History of Oil in International Affairs | date = 2015}}</ref><ref name=spr >{{Cite book| publisher = Texas A&M University Press| chapter = 1. The Energy Crisis Begins 1970–1975| isbn = 978-1-60344-464-4| last = Beaubouef| first = Bruce Andre| title = The Strategic Petroleum Reserve: U.S. Energy Security and Oil Politics, 1975–2005| date = 2007| chapter-url-access = registration| chapter-url = https://archive.org/details/strategicpetrole00beau}}</ref> The cheapness of oil compared with coal led to the decline of the coal industry. In 1951, 51% of America's energy came from coal, and by 1973, only 19% of America's industry was coal-based.{{sfn|Lacey|1981|p=415}}

When [[Richard Nixon]] became president in 1969, he assigned [[George Shultz]] to head a committee to review the Eisenhower-era quota program. Shultz's committee recommended that the quotas be abolished and replaced with tariffs but Nixon decided to keep the quotas due to vigorous political opposition.<ref name=yergin9>{{Cite book| publisher = Simon and Schuster| last = Yergin| first = Daniel| title = The Prize: The Epic Quest for Oil, Money & Power| chapter = 29. The Oil Weapon| url = https://archive.org/details/prizeepicquestfo0000yerg| year=1991| isbn = 978-0671502485| access-date = September 6, 2018 }}</ref> Nixon imposed a [[price ceiling]] on oil in 1971 as demand for oil was increasing and production was declining, which increased dependence on foreign oil imports as consumption was bolstered by low prices.<ref name=spr /> In 1973, Nixon announced the end of the quota system. Between 1970 and 1973 US imports of crude oil had nearly doubled, reaching 6.2 million barrels per day in 1973. Until 1973, an abundance of oil supply had kept the market price of oil lower than the posted price.<ref name=yergin9 />

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===OPEC===

The [[OPEC|Organization of Petroleum Exporting Countries]] (OPEC), was founded by five oil producing countries at a [[Baghdad]] conference on September 14, 1960. The five founding members of OPEC were [[Venezuela]], [[Iraq]], [[Saudi Arabia]], [[Iran]] and [[Kuwait]].<ref name=rose>{{Cite journal |volume=58 |issue=#3 |pages=424–443 |last=Euclid A. Rose |title=OPEC's Dominance of the Global Oil Market: The Rise of the World's Dependency on Oil |journal=Middle East Journal |date=2004 |jstor=4330033|doi=10.3751/58.3.15 | issn=0026-3141 }}</ref> OPEC was organized after the oil companies slashed the [[posted price]] of oil, but the posted price of oil remained consistently higher than the market price of oil between 1961 and 1972.<ref name=kuiken>{{Cite journal |doi=10.3366/brw.2015.0165 |issn=2043-8567 |volume=8 |issue=#1 |pages=5–26 |last=Kuiken |first=Jonathan |title=Striking the Balance: Intervention versus Non-intervention in Britain's Oil Policy, 1957–1970 |journal=Britain and the World |date=March 1, 2015}}</ref>

In 1963, the [[Seven Sisters (oil companies)|Seven Sisters]] controlled 86% of the oil produced by OPEC countries, but by 1970 the rise of "independent oil companies" had decreased their share to 77%. The entry of three new oil producers—[[Algeria]], [[Libya]] and [[Nigeria]]—meant that by 1970, 81 oil companies were doing business in the Middle East.<ref>{{Cite book |publisher=Greenwood Press |isbn=978-0-313-32459-8 |last=Alnasrawi |first=Abbas |title=Iraq's Burdens: Oil, Sanctions, and Underdevelopment |chapter=1. The International Context of the Iraqi Oil Industry |date=2002}}</ref><ref>{{Cite book |publisher=Yale University Press |last=Stein|first=Judith|title=Pivotal Decade: How the United States Traded Factories for Finance in the Seventies |chapter=OPEC and the Trade Unionism of the Developing World |pages=74–100 |date=2010 |jstor=j.ctt5vkxqd.8|isbn=978-0300118186 }}</ref>

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In the early 1960s [[Libya]], [[Indonesia]] and [[Qatar]] joined OPEC. OPEC was generally regarded as ineffective until political turbulence in Libya and Iraq strengthened their position in 1970. Additionally, increasing [[Soviet Union|Soviet]] influence provided oil producing countries with alternative means of transporting oil to markets.<ref name=peelo>{{Cite journal |issn=0577-5132 |volume=18 |issue=#4 |pages=49–54 |last=Peelo |first=Victor |title=Behind the U.S.–OPEC Conflict |journal=Challenge: The U.S. Economy in Action |date=October 9, 1975 |doi=10.1080/05775132.1975.11470142 }}</ref>

Under the [[1970–1979_world_oil_market_chronology1970–1979 world oil market chronology#1971|Tehran Price Agreement of 1971]], signed on February 14, the posted price of oil was increased and, due to a decline in the value of the US dollar relative to gold, certain anti-inflationary measures were enacted.<ref name=peelo /><ref name="independent_Hammes_2005">{{cite journal |title=Black Gold The End of Bretton Woods and the Oil-Price Shocks of the 1970s |first1=David |last1=Hammes |first2=Douglas |last2=Wills |journal=The Independent Review |volume=9 |number=4 |pages=501–511 |url=https://www.independent.org/pdf/tir/tir_09_4_2_hammes.pdf |date=2005|issn=1086-1653 |jstor=24562081}}</ref><ref>For a discussion about the impact of inflation on the purchasing power of oil revenues in the 1970s ''see'' {{Cite journal |issn=0098-1818 |volume=98 |number=11 |pages=36 |last1=Murphy |first1=Edward E. |last2=Perez-Lopez |first2=Jorge F. |title=Trends in U.S. export prices and OPEC oil prices |journal=Monthly Labor Review |date=1975 }}</ref>

Because of a severe drain on U.S. gold reserves, leading to higher inflation and lack of confidence in the strength of the dollar, President Nixon issued [[Executive Order]] 11615 on August 15, 1971, closing the "[[gold window]]". This action made the dollar inconvertible to gold directly, except on the open market, and was soon dubbed the ''[[Nixon Shock]]'', leading eventually to the collapse of the [[Bretton Woods system]] in 1976. Because oil was priced in dollars, oil producers' real income decreased when the dollar started to float free of the old link to gold. In September 1971, OPEC issued a joint communiqué stating that from then on, they would price oil in terms of a fixed amount of gold.<ref>{{cite book|last1=Taghizadegan|first1=Rahim|last2=Stöferle|first2=Ronald|last3=Stöferle|first3=Mark|title=Österreichische Schule für Anleger: Austrian Investing zwischen Inflation und Deflation|date=2014|publisher=FinanzBuch Verlag|isbn=978-3862485949|page=87|url=https://books.google.com/books?id=Er9SBAAAQBAJ&pg=PA87|language=de|quote=Unsere Mitgliedslander werden alle notwendigen Schritte unternehmen und/oder Verhandlungen mit den Olfirmen fuhren, am Mittel und Wege zu finden, um nachteiligen Auswirkungen auf das Realeinkommen der Mitgliedslander, die sich aus den internationalen monetaren Entwicklungen per August 15, 1971 ergeben, entgegenzuwirken.|access-date=June 20, 2015|archive-url=https://web.archive.org/web/20161230181608/https://books.google.com/books?id=Er9SBAAAQBAJ&pg=PA87|archive-date=December 30, 2016|url-status=live}}</ref>

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In 1970, President Nasser of Egypt died and was succeeded by [[Anwar Sadat]], a man who believed in the diplomacy of surprise, in engaging in sudden moves to upset the diplomatic equilibrium.{{sfn|Lacey|1981|p=393}} Sadat liked to say that his favourite game was [[backgammon]], a game where skill and persistence was rewarded, but was best won by sudden gambles, making an analogy between how he played backgammon and conducted his diplomacy.{{sfn|Lacey|1981|p=393}} Under Nasser, Egypt and Saudi Arabia had engaged what was known as the [[Arab Cold War]], but Sadat got along very well with King [[Faisal of Saudi Arabia]], forming an alliance between the most populous Arab state and the wealthiest Arab state.{{sfn|Lacey|1981|p=393}} Unlike the secularist Nasser, Sadat was a pious Muslim and he had a strong personal rapport with King Faisal, who was an equally pious Muslim.{{sfn|Lacey|1981|p=393}} The man largely in charge of American foreign policy, the National Security Adviser, [[Henry Kissinger]], later admitted that he was so engrossed with the Paris peace talks to end the Vietnam war that he and others in Washington missed the significance of the Egyptian-Saudi alliance.{{sfn|Lacey|1981|p=393}} At the same time that Sadat moved closer to Saudi Arabia, he also wanted a rapprochement with the United States and to move Egypt away from its alliance with the Soviet Union.{{sfn|Lacey|1981|p=393}} In 1971, the US had information that the Arab states were willing to implement another embargo.<ref>{{Cite journal|last=Cohen|first=Jordan|date=2021|title=The First Oil Shock? Nixon, Congress, and the 1973 Petroleum Crisis|url=https://doi.org/10.1080/21520844.2021.1886501|journal=The Journal of the Middle East and Africa|volume=12|pages=49–68|doi=10.1080/21520844.2021.1886501|s2cid=232272500|issn=2152-0844}}</ref> In July 1972, Sadat expelled all 16,000 of the Soviet military personnel in Egypt in a signal that he wanted better relations with the United States.{{sfn|Lacey|1981|p=393}} Kissinger was taken completely by surprise by Sadat's move, saying: "Why has he done me this favor? Why didn't he demand all sorts of concessions first?"{{sfn|Lacey|1981|p=393}}

Sadat expected as a reward that the United States would respond by pressuring Israel to return the Sinai to Egypt, but after his anti-Soviet move prompted no response from the United States, by November 1972 Sadat moved again closer to the Soviet Union, buying a massive amount of Soviet arms for a war he planned to launch against Israel in 1973.{{sfn|Lacey|1981|p=393}} For Sadat, cost was no object as the money to buy Soviet arms came from Saudi Arabia.{{sfn|Lacey|1981|pp=393–394}} At the same time, Faisal promised Sadat that if it should come to war, Saudi Arabia would embargo oil to the West. In April 1973, the Saudi Oil Minister [[Ahmed Zaki Yamani]] visited Washington to meet Kissinger and told him that King Faisal was becoming more and more unhappy with the United States, saying he wanted America to pressure Israel to return all the lands captured in the Six Day War of 1967.{{sfn|Lacey|1981|pp=398–399}}

In a later interview, Yamani accused Kissinger of not taking his warning seriously, saying all he did was to ask him not to speak anymore of this threat.{{sfn|Lacey|1981|p=399}} Angry at Kissinger, Yamani in an interview with the ''Washington Post'' on April 19, 1973, warned that King Faisal was considering an oil embargo.{{sfn|Lacey|1981|p=399}} At the time, the general feeling in Washington was the Saudis were bluffing and nothing would come of their threat to impose an oil embargo.{{sfn|Lacey|1981|pp=400–401}} The fact that Faisal's ineffectual half brother King Saud had imposed a cripplingly oil embargo on Britain and France during the Suez War of 1956 was not considered an important precedent. The CEOs of four of America's oil companies had after speaking to Faisal arrived in Washington in May 1973 with the warning that Faisal was considerably tougher, more intelligent and more ruthless than his half-brother Saud whom he had deposed in 1964, and his threats were serious.{{sfn|Lacey|1981|pp=401–402}} Kissinger declined to meet the four CEOs.{{sfn|Lacey|1981|p=402}}

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===The "oil weapon"===

On October 6, 1973, Egypt attacked the [[Bar Lev Line]] in the [[Sinai Peninsula]] and Syria launched an offensive in the [[Golan Heights]], both of which had been [[Israeli occupied territories|occupied by Israel]] during the 1967 [[Six-Day War]]. The war began during the height of the Watergate scandal and Nixon largely let Kissinger manage foreign policy as he was distracted by the scandal.{{sfn|Lacey|1981|pp=408-409}} On 8 October 1973, Faisal told two Egyptian envoys: "You have made us all proud. In the past we could not lift our heads up. Now we can".{{sfn|Lacey|1981|p=404}} Faisal promised to give to Egypt a quality of aid worth $200 million US dollars to assist with the war effort, and stated he was willing to use the "oil weapon" if necessary to support Egypt.{{sfn|Lacey|1981|p=404}} Kissinger promised the Israeli Prime Minister [[Golda Meir]] the United States would replace its losses in equipment after the war, but sought initially to delay arm shipments to Israel as he believed it would improve the odds of making peace along the lines of [[United Nations Security Council Resolution 242]] calling for a "land for peace" deal if an armistice was signed with Egypt and Syria gaining some territory in the Sinai and the Golan Heights respectively.{{sfn|Lacey|1981|p=408}} Nixon had ordered an arms lift to Israel on 12 October 1973, but Kissinger used the excuse of bureaucratic delays to limit the amount of weapons and ammunition sent to Israel.{{sfn|Lacey|1981|p=409}} The Arab concept of the "peace of the brave" (i.e. a victorious leader being magnanimous to his defeated opponents) meant there was a possibility that Sadat at least would make peace with Israel provided that the war ended in such a way that Egypt was not perceived to be defeated. Likewise, Kissinger regarded Meir as being rather arrogant and believed that an armistice that ended the war in a manner that was not an unambiguous Israeli victory would make her more humble.{{sfn|Lacey|1981|p=408}}

As both Syria and Egypt lost much equipment during the fighting, the Soviet Union began to fly new equipment in starting on October 12, and the Soviet flights to Syria and Egypt were recorded by the British radar stations in Cyprus.{{sfn|Lacey|1981|p=408}} Though the Soviets were flying in an average of 60 flights per day, exaggerated accounts appeared in Western newspapers speaking of "one hundred flights per day".{{sfn|Lacey|1981|pp=408–409}} At this point, both Nixon and Kissinger began to see the October War more in terms of the Cold War rather than Middle Eastern politics, both seeing the Soviet arms lifts to Egypt and Syria as a Soviet power play that required an American answer.{{sfn|Lacey|1981|pp=408–409}} On October 12, 1973, US president [[Richard Nixon]] authorized [[Operation Nickel Grass]], a [[strategic airlift]] to deliver weapons and supplies to Israel in order to replace its [[materiel]] losses,<ref>October 9, 1973, conversation (6:10–6:35 pm) between Israeli Ambassador to the United States [[Simcha Dinitz]], Henry Kissinger, Brent Scowcroft, and [[Peter Rodman]]. [http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB98/octwar-21b.pdf Transcript] {{Webarchive|url=https://web.archive.org/web/20140617083459/http://www2.gwu.edu/~nsarchiv/NSAEBB/NSAEBB98/octwar-21b.pdf |date=June 17, 2014 }} George Washington University National Security Archive</ref> after the Soviet Union began sending arms to Syria and Egypt.<ref>{{cite journal|first=Walter J.|last=Boyne|url=http://www.airforce-magazine.com/MagazineArchive/Pages/1998/December%201998/1298nickel.aspx |title=Nickel Grass|journal=Air Force Magazine|date=December 1998|archive-url=https://web.archive.org/web/20120331195111/http://www.airforce-magazine.com/MagazineArchive/Pages/1998/December%201998/1298nickel.aspx |archive-date=March 31, 2012 }}</ref> The first American weapons to Israel arrived only on 15 October 1973, and despite Nixon's orders the number of American planes flying into Tel Aviv were initially limited.{{sfn|Lacey|1981|p=410}} After the first week of the war, the Israelis had halted the Syrian offensive in the Golan Heights and were pushing back the Syrians back towards Damascus, but along the Suez canal, there was heavy fighting with the Egyptians holding their own.{{sfn|Lacey|1981|p=405}} Yamani stated in a 1981 interview: "The king still wanted to give America a chance to stay out of the fighting. So we agreed to cut back production by just 5 percent per month. A full embargo, we agreed, was something we would implement only if we felt that things were absolutely hopeless".{{sfn|Lacey|1981|pp=405-406}}

At an OPEC summit at the Sheraton Hotel in Kuwait City on October 16, 1973, it was announced the price of oil would go from $3.01 U.S. dollars per barrel to $5.12 per barrel.{{sfn|Lacey|1981|p=406}} After agreeing to the price increase, the Iranian delegation left Kuwait City as the Shah of Iran was only interested in higher oil prices.{{sfn|Lacey|1981|p=406}} The Oil Minister of Iraq, [[Sa'dun Hammadi]] demanded the "total nationalization" of all assets of American oil companies in the Middle East, the withdrawal of all Arab funds from the United States and for all Arab states to break diplomatic relations with the United States.{{sfn|Lacey|1981|p=406}} The Libyan Oil Minister, Izz al-Din al-Mabruk, called for the nationalization of all the assets of all Western oil companies in the Middle East.{{sfn|Lacey|1981|p=406}} The news about the war on October 16 was grim from the Arab viewpoint with the Syrians steadily being pushed back while Israelis had opened an counter-offensive against the Egyptians and crossed the Great Bitter Lake.{{sfn|Lacey|1981|p=406}} The Saudi delegation led by Yemani, supported by the Algerian delegation, fought hard against the Iraqi and Libyan demands for an embargo as Yemani maintained that forcing through an increase in the price of oil was the best way to influence the United States.{{sfn|Lacey|1981|pp=406=407}} Hammadi and the rest of the Iraqi delegation left in a huff as Yemani had won over the majority of the delegations to the Saudi viewpoint.{{sfn|Lacey|1981|p=408}} The statement issued after midnight at the Sheraton Hotel was handwritten and reflecting the tense talk had several paragraphs crossed out while other paragraphs were written in by different hands.{{sfn|Lacey|1981|p=407}}

On October 17, Arab oil producers cut production by 5% and instituted an oil embargo against Israel's allies: the United States, the Netherlands, [[Rhodesia]], South Africa, and Portugal.<ref name=spr /> On October 17–19, 1973, the Saudi Foreign Minister, [[Omar Al Saqqaf]], visited Washington together with the foreign ministers of Algeria, Kuwait and Morocco to warn that there was a real possibility of an oil embargo being imposed.{{sfn|Lacey|1981|p=410}} Saqqaf complained to King Faisal that Nixon seemed more interested in a dispute about "a burglary" (i.e. the Watergate scandal) than about the October War.{{sfn|Lacey|1981|p=410}} During a press conference, an American reporter mocked the threat, contemptuously saying the Saudis "could drink their oil", leading Saqqaf to reply in anger "All right, we will!".{{sfn|Lacey|1981|p=410}} Joined by the foreign ministers of Algeria, Kuwait and Morocco, Saqqaf met with Nixon in the Oval Office who promised him that the United States would mediate a settlement to the war that would be "peaceful, just and honorable" to both sides.{{sfn|Lacey|1981|p=410}} Saqqaf reported to King Faisal that Nixon told him that he ended the Vietnam war on an honorable basis and now intended to end the October war in the same manner.{{sfn|Lacey|1981|p=410}}

Israel took heavy losses in men and material during the fighting against Egypt and Syria, and on October 18, 1973, Meir requested $850 million worth of American arms and equipment to replace its material losses.{{sfn|Lacey|1981|pp=410–411}} Nixon decided characteristically to act on an epic scale and instead of the $850 million worth of arms requested sent a request to Congress for some $2.2 billion worth of arms to Israel, which was promptly approved.{{sfn|Lacey|1981|pp=410–411}} Nixon, whose administration was being badly battered by the Watergate scandal, felt that a bold foreign policy move might resuscitate his administration.{{sfn|Lacey|1981|p=411}} Nixon later boasted in his memoirs that the U.S. Air Force flew more sorties to Israel in October 1973 than it had during the Berlin Airlift of 1948–49, flying in a gargantuan quantity of arms, though he also admitted that by the time the arms lift had begun, the Israelis had already "turned the tide of battle" in their favor, making the arms lift irrelevant to the outcome of the war.{{sfn|Lacey|1981|pp=410–411}} In an interview with the British historian [[Robert Lacey]] in 1981, Kissinger later admitted about the arms lift to Israel: "I made a mistake. In retrospect it was not the best considered decision we made".{{sfn|Lacey|1981|p=411}}

The arms lift enraged King Faisal of Saudi Arabia and he retaliated on October 20, 1973, by placing a total embargo on oil shipments to the United States, to be joined by all of the other oil-producing Arab states except Iraq and Libya.{{sfn|Lacey|1981|pp=411–412}} Faisal was angry that Israel had only asked for $850 million worth of American weapons, and instead received an unsolicited $2.2 billion worth of weapons, which he perceived as a sign of the pro-Israeli slant of American foreign policy.{{sfn|Lacey|1981|pp=411–412}} Faisal also felt insulted that Nixon had just promised Saqqaf a "honorable" peace the day before he submitted the request to Congress for some $2.2 billion worth of arms for Israel, which he saw as an act of duplicity on Nixon's part.{{sfn|Lacey|1981|p=411}} Faisal had been opposed to a total embargo and only agreed to the 5% cut on October 17 under pressure from other Arab states.{{sfn|Lacey|1981|p=411}} Faisal felt his efforts on behalf the United States were not being appreciated in Washington, which increased his fury at Nixon.{{sfn|Lacey|1981|p=411}}

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The embargo lasted from October 1973 to March 1974.<ref name=ahrari05 /> During a summit in Cairo on November 6, Kissinger asked Sadat what Faisal was like and was told: "Well, Dr. Henry, he will probably go on with you about Communism and the Jews".{{sfn|Lacey|1981|p=417}} King Faisal's two great hatreds were Communism and Zionism as he believed that the Soviet Union and Israel were plotting together against Islam.{{sfn|Lacey|1981|pp=385–386}} When King Faisal was shown a translation into Arabic of ''The Protocols of the Learned Elders of Zion'', he instantly believed in the authenticity of ''The Protocols'' and therefore talked to anyone who would listen about what he had learned, despite the fact that ''The Protocols'' had been exposed as a forgery in 1921.{{sfn|Lacey|1981|pp=385–386}}

Initially, Secretary of Defense [[James Schlesinger]] suggested to Kissinger that the USA invade Saudi Arabia and another Arab countries and seize their oil fields. Kissinger stated in a private state department meeting that it’sit's “ridiculous that the civilized world is held up by 8 million savages... Can’t we overthrow one of the sheikhs just to show that we can do it?” They formed a plan to invade [[Abu Dhabi]], Kuwait, and Saudi Arabia.<ref name="hsg1">{{cite web |title=247. Memorandum of Conversation |url=https://history.state.gov/historicaldocuments/frus1969-76v36/d247 |website=US Office of the Historian |publisher=history.state.gov |access-date=22 May 2024}}</ref><ref name="wp1">{{cite news |title=U.S. Mulled Seizing Oil Fields In '73 |url=https://www.washingtonpost.com/archive/politics/2004/01/01/us-mulled-seizing-oil-fields-in-73/0661ef3e-027e-4758-9c41-90a40bbcfc4d/ |newspaper=Washington Post |access-date=22 May 2024 |date=26 January 2024}}</ref> Kissinger publicly threatened "countermeasures" in a Nov 21st, 1973 press conference if the embargo was not lifted, and the Saudis responded with threatening further oil cuts and to burn their oil fields if the US military invaded. After the CIA confirmed these threats, Kissinger gave up military intervention and decided that dealing with Israel's troop withdrawals and settled on diplomatic solutions to the oil embargo.<ref name="nlm1">{{cite web |last1=Alamer |first1=Sultan |title=How Henry Kissinger Bungled the Arab Oil Embargo |url=https://newlinesmag.com/argument/how-henry-kissinger-bungled-the-arab-oil-embargo/ |website=New Lines Magazine |access-date=22 May 2024 |language=en |date=8 April 2024}}</ref><ref name="oh2">{{cite web |title=140. Memorandum of Conversation |url=https://history.state.gov/historicaldocuments/frus1969-76v36/d140 |website=US Office of the Historian |publisher=history.state.gov |access-date=22 May 2024}}</ref>

On November 7, 1973, Kissinger flew to Riyadh to meet King Faisal and ask him to end the oil embargo in exchange for promising to be "evenhanded" with the Arab-Israeli dispute.{{sfn|Lacey|1981|p=417}} As the plane carrying him prepared to land in Riyadh, Kissinger was clearly nervous at the prospect of negotiating with the stern Wahhabi Faisal who had a marked dislike of Jews.{{sfn|Lacey|1981|p=417}} Kissinger discovered that King Faisal was a worthy companion to [[Lê Đức Thọ]] in terms of stubbornness as the king accused the United States of being biased in favor of Israel, going on in a long rant about the balefulness of "Jewish Communists" in Russia and Israel, and despite all of Kissinger's efforts to charm him, refused to end the oil embargo.{{sfn|Lacey|1981|pp=418–419}} Faisal told Kissinger: "The United States used to stand up to aggression-you did that in World War Two and in 1956 during the Suez War. If the United States had done the same after 1967, we would not have witnessed the this deterioration... Before the Jewish State was established, there existed nothing to harm good relations between Arabs and Jews. There were many Jews in Arab countries. When the Jews were persecuted in Spain, Arabs protected them. When the Romans drove the Jews out, Arabs protected them. At Yalta, it was Stalin who said there had to be a Jewish state...Israel is advancing Communist objectives...Among those of the Jewish faith there are those who embrace Zionism...Most of the immigration to Israel is from the Soviet Union...They want to establish a Communist base right in the Middle East...And now, all over the world, the Jews are putting themselves into positions of authority".{{sfn|Lacey|1981|p=418}} On February 22, 1974, King Faisal chaired the second summit of Islamic states in [[Lahore]] (which, unlike the first summit that Faisal had chaired in 1969, was not boycotted by Iraq and Syria<ref>{{cite web |title=SECOND ISLAMIC SUMMIT CONFERENCE |url=http://www.oic-oci.org/english/conf/is/2/2nd-is-sum.htm |website=Organisation of Islamic Cooperation |access-date=October 31, 2023 |archive-url=https://web.archive.org/web/20061014111124/http://www.oic-oci.org/english/conf/is/2/2nd-is-sum.htm |archive-date=October 14, 2006}}</ref>) where he was acclaimed as a conquering hero who humiliated and humbled the West by wrecking its economy.{{sfn|Lacey|1981|pp=419–420}} The prime minister of Pakistan, Zulfikar Ali Bhutto, opened the conference by stating: "The armies of Pakistan are the armies of Islam. We shall enter Jerusalem as brothers-in-arms!"{{sfn|Lacey|1981|p=419}}

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[[File:Crude oil prices since 1861.png|thumb|upright=1.5|Oil prices in USD, 1861–2015 (1861–1944 averaged US crude oil, 1945–1983 Arabian Light, 1984–2015 Brent). Red line adjusted for inflation, blue not adjusted.]]

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 42 gallon barrel ($75 per cubic meter), equivalent in 2018 dollars to a price rise from ${{Inflation|US|3|1973|2018|r=0}} to ${{Inflation|US|12|1974|2018|r=0}} per barrel.<ref name=cbc>{{Cite news|url=http://www.cbc.ca/news/background/oil/|title=The price of oil – in context|access-date=May 29, 2007 | work=CBC News| archive-url= https://web.archive.org/web/20070609145246/http://www.cbc.ca/news/background/oil/| archive-date= June 9, 2007 | url-status= live}}</ref> Saudi Arabia had 25% of the world's oil, but only 4% of the oil used in the United States in 1973 came from the kingdom.{{sfn|Lacey|1981|p=413}} However, Saudi Arabia plays an over-sized role within the Arab world, and as a Beirut oil consultant noted in 1974: "If Saudi Arabia moves from A to B, then every other oil producer must move at least as far, if not to C."{{sfn|Lacey|1981|p=413}} In 1973, about 25% of the oil used in the United States came from Arab countries.{{sfn|Shwadran|2019|p=58}} The mere shortage of oil caused by the Arab oil embargo within the United States forced prices to raise, which in turn led prices to rise everywhere all over the world as oil producers that had not joined the embargo such as Iran, Venezuela, Libya and Iraq demanded higher prices in Japan and Europe as an initiative to ship oil to those places instead of the United States, thus settling off a worldwide inflationary spiral.{{sfn|Lacey|1981|pp=413-414}} The only European nations subject to the oil embargo were the Netherlands (because the Dutch Foreign Minister [[Max van der Stoel]] was strongly pro-Israeli) and Portugal (in a support of show for the independence movements in Portugal's African colonies), but the shortage of oil in the United States led to sharp price rises in all of the European nations.{{sfn|Lacey|1981|p=413}} The embargo itself did not cause much economic difficulty in the United States as the Americans simply imported more oil from nations that were not part of the embargo such as Iran, but the 400% increase in the price of oil caused by the embargo did damage the American economy.{{sfn|Shwadran|2019|p=58}} A number of nations such as Venezuela, Nigeria, Iran and Iraq increased their oil production during the embargo, but just sold their oil at a higher price.{{sfn|Garavini|2019|p=219}} The leader who pushed the most for higher oil prices was the Shah of Iran, and the Italian historian Giuliano Garavini has argued that the leader most responsible for the West's economic problems during the "oil shock" was not King Faisal, but rather the Shah.{{sfn|Garavini|2019|p=221}} Some of the nations that were classified as "friendly" to the Arab viewpoint in regards to the Arab-Israeli dispute such as France and Belgium were the ones who suffered the most from the worldwide inflation caused by the embargo.{{sfn|Garavini|2019|p=219}}

The crisis eased when the embargo was lifted in March 1974 after negotiations at the Washington Oil Summit, but the effects lingered throughout the 1970s. The dollar price of energy increased again the following year, amid the weakening competitive position of the dollar in world markets.

The Arab oil embargo ended the long period of prosperity in the West that had begun in 1945, throwing the world's economy into the steepest economic contraction since the Great Depression.{{sfn|Lacey|1981|pp=414–415}} The "long summer" of prosperity in the post-war years had made possible the "swinging sixties" and the related rise of a rebellious youth culture as it was very easy to be hedonist and/or in rebellion against traditional values in a time of unprecedented affluence and prosperity.{{sfn|Lacey|1981|p=414}} Lacey wrote about the impact of the Arab oil embargo of 1973–74 that for people in the West life suddenly become "slower, darker and chiller" as gasoline was rationed, the lights were turned off in Times Square, the "gas guzzler" automobiles suddenly stopped selling, speed limits became common and restrictions were placed on weekend driving in a bid to conserve fuel.{{sfn|Lacey|1981|p=415}} As the American automobile industry specialized in producing heavy "gas guzzler" vehicles, there was an immediate shift on the part of consumers to the lighter and more fuel efficient vehicles produced by the Japanese and West German automobile industries, sending the American automobile industry into decline. The years from 1945 to 1973 had been a period of unprecedented prosperity in the West, a "long summer" that many believed would never end, and its abrupt end in 1973 as the oil embargo which increased the price of oil by 400% within a matter of days threw the world's economy into a sharp recession with unemployment mounting and inflation raging came as a profound shock.{{sfn|Lacey|1981|pp=414–416}} The end of what the French called the ''Trente Glorieuses'' ("Glorious Thirty" [years]) led to a mood of widespread pessimism in the West with the ''Financial Times'' running a famous headline in late 1973 saying "The Future will be subject to Delay".{{sfn|Lacey|1981|pp=416–417}} Kurt Waldheim, the secretary-general of the United Nations in an address to the General Assembly complained about "the note of helplessness and fatalism creeping into world affairs".{{sfn|Lacey|1981|p=416}} The sudden and abrupt end of the "long summer" of prosperity in 1973-1974 played a major role in the pessimistic mood that characterized the culture of the rest of the 1970s.{{sfn|Lacey|1981|pp=416–417}} In 1975, a report to Congress from the Federal Energy Administration estimated that the embargo of 1973-1974 had caused about 500,000 Americans to lose their jobs and caused a GNP loss between $10 billion-$20 billion dollars.{{sfn|Shwadran|2019|p=58}}

===Impact on oil exporting nations===

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[[File:No gas 1974.gif|thumb|left|upright|An American at a service station reads about the gasoline rationing system in an afternoon newspaper; a sign in the background states that no gasoline is available. 1974]]

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.<ref>{{cite news|url=https://www.huffingtonpost.com/dr-yousaf-butt-/saudi-wahhabism-islam-terrorism_b_6501916.html|title=How Saudi Wahhabism Is the Fountainhead of Islamist Terrorism|first=Yousaf|last=Butt|date=January 20, 2015|work=Huffington Post|access-date=June 25, 2016|archive-url=https://web.archive.org/web/20190227080131/https://www.huffingtonpost.com/dr-yousaf-butt-/saudi-wahhabism-islam-terrorism_b_6501916.html|archive-date=February 27, 2019|url-status=live}}</ref> The 400% increase in the world oil prices led to extravagant promises being made by the leaders of oil-producing nations. The Shah of Iran told his subjects in a speech in December 1973 that he was launching "Great Civilization" project that would make Iran into a First World nation by the 1990s; President [[Carlos Andrés Pérez]] of Venezuela likewise launched his ''Le Gran Venezuela'' project intended to make Venezuela into a First World nation; and President [[Yakubu Gowon]] of Nigeria told his people that henceforward Nigeria's main problem would be "managing abundance".{{sfn|Garavini|2019|p=281}} After the oil shock, Nigeria presented itself as the first African nation that would reach First World status and in Lagos a series of stately modernist buildings were erected as appropriate for a nation that saw itself as the leader of all black Africa..{{sfn|Garavini|2019|p=187}} Much of the oil wealth in Nigeria was stolen by corrupt politicians. However, at least some of Nigeria's new oil wealth went to rebuild the areas devastated by the civil war of 1967-1970 and to address the complaints that too much of Nigeria's oil wealth went to the federal government in Lagos instead of the people.{{sfn|Garavini|2019|p=168}} In Iran, the Shah who was aware by 1974 that he had developed the cancer that was to ultimately kill him in 1980 pushed very strongly for his "Great Civilization" for rapid modernization not the least because he wanted to see the "Great Civilization" before his death, which explained his grandiose announcements.{{sfn|Garavini|2019|p=225}} The new wealth generated by the "oil shock" allowed for Chairman [[Houari Boumédiène]] of Algeria to become a global leader, courted by elites in both the First World and the Third World.{{sfn|Garavini|2019|p=250}}

The oil embargo led a sudden interest in the Palestinian issue. Between 1973 and 1981, Saudi Arabia donated a sum worth $1 billion US dollars to the [[Palestine Liberation Organization]], which thus had a budget that exceeded that of many Third World nations.{{sfn|Lacey|1981|p=446}} On November 8, 1973, Kissinger became the first Secretary of State to meet with a Saudi leader since 1953 as he met King Faisal to ask him to end the embargo.{{sfn|Lacey|1981|p=417}} Within two week of the embargo being launched, all of the foreign ministers of the nations of the European Economic Community (now the European Union) met in a conference to issue a statement calling for Israel "to end the territorial occupation which has maintained since the conflict of 1967".{{sfn|Lacey|1981|p=415}} On December 11, 1973, the Japanese Foreign Minister [[Masayoshi Ōhira]] flew in to Riyadh to meet King Faisal for "talks on improving bilateral relations".{{sfn|Lacey|1981|p=415}} Shortly afterwards, the French foreign minister [[Michel Jobert]] arrived to sign an agreement that provided oil for France for the next twenty years.{{sfn|Lacey|1981|pp=415–416}} On January 24, 1974, as the Shah of Iran, [[Mohammad Reza Pahlavi]], was coming off the ski slopes of [[St. Moritz]], he was met by the British Chancellor of Exchequer, [[Anthony Barber]], and the Trade Secretary, [[Peter Walker, Baron Walker of Worcester|Peter Walker]].{{sfn|Lacey|1981|p=416}} In a role-reversal, Barber and Walker paid homage to the Shah, who promised them that his nation would sell the United Kingdom 5 million tons of oil in exchange for some £100 million of British goods to aid his plans to industrialize Iran.{{sfn|Lacey|1981|p=416}}

Saudi Arabia experienced an upsurge of prosperity and affluence after the oil embargo whose consequences horrified King Faisal.{{sfn|Lacey|1981|p=423}} Faisal who was devoted to a harsh puritanical strain of Sunni Islam known in the West as Wahhabism was appalled by the way that his subjects became materialistic, devoted only to conspicuous consumption and greed as they lost interest in Islam.{{sfn|Lacey|1981|p=423}} Lacey wrote: "The spiritual dangers of easy affluence distressed him more. His simple gesture of piety and honor seemed to have opened a Pandora's Box that threatened to turn his realm into a parody of all he held dear".{{sfn|Lacey|1981|p=423}} In the last two of years of his life, Faisal fell into depression over the way his subjects had been seduced into a consumerist lifestyle, becoming lost in a sense of "melancholia"..{{sfn|Lacey|1981|p=423}} Faisal's son, Crown Prince Mohammad told Lacey in 1981: "The profligacy, the greed, he felt he could not stem it. He become so bound up in his work, there was almost nothing private of him left"..{{sfn|Lacey|1981|pp=423-424}} A sign of the changed values was that despite the total ban on alcohol in Saudi Arabia that drinking along with drug use become common with the younger members of the House of Saud..{{sfn|Lacey|1981|pp=425-426}} James Akins, the American ambassador in Riyadh reported; "the sky over Riyadh is black with vultures with new get-richer-quicker plans under their wings".{{sfn|Lacey|1981|p=422}} In 1974, property prices in Riyadh doubled on a weekly basis for the entire year as the prosperity led to a real estate speculation bubble that was often compared to the Klondike gold rush of 1898-18991898–1899.{{sfn|Lacey|1981|p=422}} At the Red Sea port of [[Jeddah]], there were so many ships queuing up laden with cement for the construction boom in Saudi Arabia that construction contractors hired helicopters to fly the cement in, twenty bags per flight.{{sfn|Lacey|1981|p=422}} A number of families engaged in the Saudi construction industry such as the Juffali, Alireza, al-Khasshoggi and the bin Laden families all become very wealthy as a result of the construction boom.{{sfn|Lacey|1981|p=507}} The period after the oil shock of 1973-1974 is still fondly remembered in Saudi Arabia as the "age of abundance" where nearly everyone had a significant increase in their standard of living.{{sfn|Garavini|2019|p=281}}

The wealth and corruption generated by the oil shock led to a fundamentalist backlash in Saudi Arabia.{{sfn|Lacey|1981|pp=481-482}} On 20 November 1979, Islam's most holiest shrine, the Grand Mosque of Mecca, was seized by a group of fanatics who proclaimed themselves to be the followers of the Mahdi (a messianic figure said to appear at the dawn of every Muslim century to strike down the enemies of Islam).{{sfn|Lacey|1981|pp=478-479}} The leader of the uprising, [[Juhayman al-Otaybi]], read out a list of grievances as he accused the House of Saud of being corrupt and degenerate as he listed by name a number of Saudi princes who were engaged in dubious business dealings and/or who drank alcohol.{{sfn|Lacey|1981|p=482}} The Saudi Army recaptured the Grand Mosque and the surviving "renegades" as the rebels were labelled were executed.{{sfn|Lacey|1981|pp=485-490}} Likewise, the perception that that most of the wealth being generated by the now higher price of oil was being stolen by a corrupt Shah along with the unfulfilled promises of the "Great Civilization" project played a major role in causing the Iranian Revolution of 1978-1979 that toppled the Shah and led to the establishment of the Islamic Republic of Iran in February 1979..{{sfn|Garavini|2019|p=287}} In Algeria, the "oil shock" led to the establishment of a welfare state where none had existed previously. The lower oil prices of the 1980s along with cutbacks and the belief that the FLN regime was corrupt helped cause the riots of October 1988 against the FLN regime that killed at least 500 people.{{sfn|Le Sueur|2010|p=31-32}} The riots were largely caused by the fact that the low oil prices had forced the Algerian state to end many of its more generous social policies between 1986 and 1988, leading to an unemployment rate of 30% by 1988 along with the knowledge that the FLN regime had stolen millions.{{sfn|Le Sueur|2010|p=32}} In the aftermath of the October riots, President Chadli Bendjedid began a transition to democracy. The first free elections in Algeria in January 1992 were won by the Islamist FIS, which led to a military coup and an outbreak of civil war that was to kill hundreds of thousands.{{sfn|Le Sueur|2010|p=53}}

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&nbsp;billion. Other cartel members also undertook major economic development programs.

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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.{{sfn|Frum|2000|pp=313, 318}}

The "oil shock" provided considerable impetus to the American nuclear industry as a way to achieve "energy independence" from the Middle East.{{sfn|Jasper|1990|p=3}} On 7 November 1973, Nixon in an address to Congress called for Project Independence to make the United States self-sufficient in energy by 1980, which called for a massive investment in the nuclear industry.{{sfn|Jasper|1990|p=115}} Nixon seems to have assumed that nuclear energy was economical, and was encouraged by the faddish enthusiasm of many officials who more on the basis of faith than rationality saw nuclear energy as the technology of the future.{{sfn|Jasper|1990|p=115}} By the late 1960s, a lively environmentalist movement had emerged in the United States, and the Project Independence nuclear program was the subject of much debate in both the media and Congress.{{sfn|Jasper|1990|p=107-109}} The ensuringensuing debates revealed that many of the claims made for nuclear power vast underestimated the true costs of nuclear reactors.{{sfn|Jasper|1990|p=108}} Equally problematic was the troublesome issue of where to safety store the spent nuclear rods that emitted a toxic level of radioactivity for centuries afterward in an cost-effective manner. The issue of the spent nuclear rods was especially difficult because in a classic case of [[NIMBYism]], communities proved very unwilling to accept a storage place for the inevitable by-product of nuclear power, the spent nuclear rods, with the demand being made that the government find some other community to store the rods.{{sfn|Jasper|1990|p=219}} Many of the nuclear reactors ordered in 1973 were cancelled due to the horrendous cost overruns while over 100 nuclear plants were shut down as uneconomical over the next 10 years.{{sfn|Jasper|1990|p=4}} Unlike nations that tried to use nuclear power as a way for "energy independence" such as France and Sweden, the United States had substantial reserves of its own oil, which weakened the case for nuclear power in the ensuring debates.{{sfn|Jasper|1990|p=101}} By 1989, only 18% of American energy came from nuclear power plants, which was a faction of what Project Independence had envisioned in 1973.{{sfn|Jasper|1990|p=4}}

The "oil shock" led to anti-Arab feelings becoming common. Cartoons published in American newspapers during the "oil shock" depicted Arabs as disgusting, ugly, obese, corrupt and greedy.{{sfn|Armstrong|19912001|p=525}} In the cartoons, the long hooked Semitic [[Jewish nose|noses]] that had traditionally been featured in anti-Jewish cartoons were applied to the Arab sheiks as a way to illustrate their supposed greed.{{sfn|Armstrong|19912001|p=525}} American public opinion did not see the use of the "oil weapon" as due to politics, and tended to explain the embargo as only due to the excessive greed of King Faisal and the other Arab leaders, hence the use of the hooked Semitic nose in the cartoons as a sort of shorthand for insatiable greed.{{sfn|Armstrong|19912001|p=525}}

===Impact of the Soviet Union===

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===Impact on Western Europe===

The embargo was not uniform across Western Europe. In 1969, France devalued the franc.{{sfn|Wunderlich|2020|p=93}} The devalued franc made exports more expensive for French consumers, which encouraged them to buy French, while making French more cheaper abroad. France was entirely dependent upon imported oil (through French companies continued to lease the oil concessions in Algeria until 1971). The low price of oil internationally compensated to a certain extent for the higher price of oil caused by the devaluation. The devalued franc ensured that the dramatic price increases caused by the "oil shock" hit the French economy especially hard in 1973.{{sfn|Wunderlich|2020|p=93}} The UK, Germany, Italy, Switzerland and Norway banned flying, driving and boating on Sundays. Sweden rationed gasoline and heating oil. The Netherlands imposed prison sentences for those who used more than their ration of electricity.{{sfn|Frum|2000|p=318}}

Of the nine members of the [[European Economic Community]] (EEC), the Netherlands faced a complete embargo. By contrast Britain and France received almost uninterrupted supplies. That was their reward for refusing to allow the US to use their airfields and stopping arms and supplies to both the Arabs and the Israelis. The other six EEC nations faced partial cutbacks. The UK had traditionally been an ally of Israel, and [[Harold Wilson]]'s government supported the Israelis during the Six-Day War. His successor, [[Edward Heath|Ted Heath]], reversed this policy in 1970, calling for Israel to withdraw to its pre-1967 borders.

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===Impact on United Kingdom===

The North Sea oil fields, which were discovered in 1969, did not start to be exploited until 1975, making the United Kingdom entirely dependent upon imported oil in 1973. The way that world oil prices quadrupled in late 1973 had a very adverse impact on the British economy,.{{sfn|Silverwood|20202021|p=106}} In a series of speeches in December 1973, the Prime Minister [[Edward Heath]] warned that because of the "oil shock" that the British economy was going into recession and the British people should expect economic austerity.{{sfn|Byrne|Randall|Theakson|20202021|p=335}} The need to avoid importing the now more expensive oil to help manage the balance-of-payments led the Heath government to turn towards coal (which Britain was self-sufficient in) as a substitute source of energy, which gave the coal miners union immense leverage over the government to press for higher wages for the coal miners.{{sfn|Dorfman|1979|p=93}} Heath offered the coal miners a 7% wage increase, which was rejected as insufficient by the miners who went on strike.{{sfn|Dorfman|1979|p=95}} Through not subjected to the embargo, the UK nonetheless faced an energy crisis of its own—a series of strikes by coal miners and railroad workers over the winter of 1973–74 became a major factor in the defeat of Heath's Conservative government in [[February 1974 United Kingdom general election|February 1974 general elections]].<ref>{{Cite news|last1=Slavin|first1=Barbara|last2=Freudenheim|first2=Milt|last3=Rhoden|first3=William C.|date=January 24, 1982|title=The World; British Miners Settle for Less|work=The New York Times|url=https://query.nytimes.com/gst/fullpage.html?res=9E01E1DB1E38F937A15752C0A964948260|access-date=April 20, 2010}}</ref> The new Labour government told the British to heat only one room in their houses over the winter.{{sfn|Frum|2000|p=319}} The Labour government of Harold Wilson settled the strike by giving the coal miners a 35% pay increase.

===Impact on Japan===

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To assure future oil flows, Japan added suppliers outside of the Middle East; invested in nuclear power; imposed conservation measures; and provided funding for Arab governments and the Palestinians.<ref>S.N. Fukai, "Japan's energy policy" ''Current History'' (April 1988) 87#528, pp. 169–175.</ref> The crisis was a major factor in the long-run shift of Japan's economy away from oil-intensive industries. Investment shifted to electronics. Japanese auto makers also benefited from the crisis. The jump in gasoline prices helped their small, fuel-efficient models to gain market share from the "gas-guzzling" Detroit competition. This triggered a drop in American sales of American brands that lasted into the 1980s.<ref>Yergin (1991) pp. 654–655.</ref>

===Impact on India===

The oil crisis contributed to the poor state of the Indian economy and played a role in Indira Gandhi's decision to impose [[The Emergency (India)|The Emergency]], a dictatorship.<ref name=":0">{{Cite journal |last=Chatterjee |first=Elizabeth |date=2024 |title=Late Acceleration: The Indian Emergency and the Early 1970s Energy Crisis |url=https://doi.org/10.1093/ahr/rhae068 |journal=American Historical Review |volume=129 |issue=2 |pages=429–466|doi=10.1093/ahr/rhae068 }}</ref> The state led a push for coal as an energy source, even though there were reservations about its adverse environmental effects.<ref name=":0" />

===Impact on South Vietnam===

The oil shock destroyed the economy of [[South Vietnam]]. A spokesman for President [[Nguyễn Văn Thiệu]] admitted in a TV interview that the government was being "overwhelmed" by the inflation caused by the oil shock, while an American businessman living in Saigon stated after the oil shock that attempting to make money in South Vietnam was "like making love to a corpse".<ref>{{Cite book |last=Cooper |first=Andrew Scott |title=The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East |date=2011 |publisher=Simon & Schuster |location=New York |page=205 |language=en}}</ref> In December 1973, Vietcong sappers attacked and destroyed the petroleum depot of Nha Be, further depleting fuel sources.<ref>{{cite web | url=https://arsof-history.org/articles/v12n1_casualty_resolution_page_2.html | title=Vietnam Casualty Resolution: Top U.S. Peace Priority | access-date=July 25, 2022 | archive-date=July 25, 2022 | archive-url=https://web.archive.org/web/20220725212123/https://arsof-history.org/articles/v12n1_casualty_resolution_page_2.html | url-status=dead }}</ref> By the summer of 1974, the U.S. embassy in Saigon reported that morale in the ARVN (Army of the Republic of Vietnam) had fallen to dangerously low levels and it was uncertain how much more longer South Vietnam would last.{{sfn|Karnow|1983|pp=660–661}} As inflation eroded the value of the South Vietnamese ''đồng'', it became common by the summer of 1974 to see ARVN soldiers and their families begging in the streets for food.{{sfn|Karnow|1983|pp=660–661}} In December 1974, the North Vietnamese PAVN (People's Army of Vietnam) launched an offensive in the Central Highlands, which far more successful than expected as the ARVN, which was suffering from low morale, put up a feeble resistance. On March 1, 1975, the PAVN launched a major offensive that saw them quickly overrun the Central Highlands and by March 25, 1975, Hue had fallen.{{sfn|Karnow|1983|pp=664–665}} Following their victory in the Central Highlands, the North Vietnamese launched the "Ho Chi Minh Campaign" that saw Saigon fall on April 30, 1975.

===Impact on southern Africa===

Three of the nations targeted by the embargo were located in southern Africa or had colonies there. Portugal which ruled the colonies of Angola, Portuguese Guiana (modern Guinea-Bissau), and Portuguese East Africa (modern Mozambique) had fighting colonial wars in all of its African colonies since the 1960s with Angola being the first to rise up in 1961. Angola is rich in oil, which protected Portugal from the worse of the embargo. But the economic stability of the ''Estado Novo'' regime was damaged by the worldwide inflation, which help cause the Carnation Revolution which toppled the ''Estado Novo'' regime in April 1974 and led to the restoration of democracy.{{sfn|Accornero|2016|p=120}} Portugal granted independence to all of its colonies except for Macau in 1975.

The British historian Rob Skinner wrote the embargo had a "significant impact" on the South African economy.{{sfn|Skinner|2017|p=117}} The inflationary rise in commodity prices increased the input costs of South African manufacturing, making South African manufactured goods uncompetitive on the world market.{{sfn|Skinner|2017|p=117}} The rise in the price of gold as a hedge against inflation (South Africa has the world's largest gold mines) caused the ''rand'' to increase in value, which caused further problems for South African manufacturing.{{sfn|Skinner|2017|p=117}} The strategy pursued by the National Party government since 1948 of sponsoring the industrialization of South Africa was derailed by the "oil shock" with what Skinner described as "important social and political consequences" for the ''apartheid'' regime.{{sfn|Skinner|2017|p=117}} The [[Soweto uprising]] of 1976 was at least in part caused by anger at the high unemployment rate in black South African community.{{sfn|Skinner|2017|p=117}}

Even worse hit than South Africa was Rhodesia (modern Zimbabwe) , where oil was already expensive as the white supremacist government of Rhodesia had been under United Nations sanctions since 1965, and thus the smugglers who sold Rhodesia oil charged a premium for their services.{{sfn|Hermele|Odén|1988|p=18}} The premium charged by the "sanctions busters" such as Iran increased after the embargo, which threw the Rhodesian economy into recession.{{sfn|Hermele|Odén|1988|p=18}} Despite the United Nations sanctions, Rhodesia was a major exporter of chrome, steel and tobacco with the United States exempting "strategical" Rhodesian products such as chrome from the sanctions.{{sfn|Hermele|Odén|1988|p=17}} The global recession of 1973-1975 proved more effective than the United Nations in ending the global demand for Rhodesian products, which made the Rhodesian recession especially severe.{{sfn|Hermele|Odén|1988|p=18}} Unlike South Africa, which had a sizable and long-standing white population, the white population of Rhodesia was much smaller and more recent. Rhodesia depended considerably more than South Africa on white immigration to provide enough soldiers for its army while most of the Rhodesian whites had only arrived in the 1950s and did not have very deep roots in the country. The "white flight" caused by the recession put the Rhodesian Army at a major disadvantage in its war against the black guerrillas. The war costed the Rhodesian government one million Rhodesian dollars per day by 1975, and the costs of the war threatened to bankrupt Rhodesia.{{sfn|Hermele|Odén|1988|p=19}} In 1979, Rhodesia signed the Lancaster House Agreement, which led to majority rule in 1980.{{sfn|Hermele|Odén|1988|p=19}}

===Price controls and rationing===

====United States====

[[File:FLAG POLICY DURING THE 1973 oil crisis.gif|thumb|upright|Oregon gasoline dealers displayed signs explaining the flag policy in the winter of 1973–74]]

[[Price controls]] exacerbated the crisis in the US.{{citation needed|date=July 2022}} The system limited the price of "old oil" (that which had already been discovered) while allowing newly discovered oil to be sold at a higher price to encourage investment. Predictably, old oil was withdrawn from the market, creating greater scarcity. The rule also discouraged development of [[Alternative energy|alternative energies]].{{sfn|Frum|2000|p=313}} The rule had been intended to promote [[oil exploration]].<ref>{{Cite news | url=http://research.stlouisfed.org/publications/review/75/11/Controls_Nov1975.pdf | title=Oil Price Controls: A Counterproductive Effort | publisher=Federal Reserve Bank of St.&nbsp;Louis Review | date=November 1975 | access-date=June 7, 2010 | archive-url=https://web.archive.org/web/20091212142946/http://research.stlouisfed.org/publications/review/75/11/Controls_Nov1975.pdf | archive-date=December 12, 2009 | url-status=live }}</ref> Scarcity was addressed by rationing (as in many countries). Motorists faced long lines at gas stations beginning in summer 1972 and increasing by summer 1973.{{sfn|Frum|2000|p=313}} A sign of the change caused by the crisis was that in 1974 the [[ExxonMobil|Exxon]] oil company (which had once been part of the Standard Oil company) replaced the General Motors corporation to be the largest corporation in the world as measured by gross sales revenues.{{sfn|Lacey|1981|p=404}}

In 1973, Nixon named [[William E. Simon]] as the first Administrator of the Federal Energy Office, a short-term organization created to coordinate the response to the embargo.{{sfn|Frum|2000|p=312}} Simon allocated states the same amount of domestic oil for 1974 that each had consumed in 1972, which worked for states whose populations were not increasing.{{sfn|Frum|2000|p=320 }} In other states, lines at gasoline stations were common. The [[American Automobile Association]] reported that in the last week of February 1974, 20% of American gasoline stations had no fuel.{{sfn|Frum|2000|p=320}}

Line 302 ⟶ 306:

OPEC soon lost its preeminent position, and in 1981, its production was surpassed by that of other countries. Additionally, its own member nations were divided. Saudi Arabia, trying to recover market share, increased production, pushing prices down, shrinking or eliminating profits for high-cost producers. The world price, which had peaked during the [[1979 energy crisis]] at nearly $40 per barrel, decreased during the 1980s to less than $10 per barrel. Adjusted for inflation, oil briefly fell back to pre-1973 levels. This "sale" price was a windfall for oil-importing nations, both developing and developed.

During the [[Iran-Iraq war]] of 1980–1988, the stated war aim of Iran was to overthrow the Baath regime in Iraq and then overthrow the House of Saud in Saudi Arabia.{{sfn|Bulloch|Morris|1989|p=163}} As a consequence, Saudi Arabia and the other Arab Gulf states leaned in a very pro-Iraqi neutrality during the war.{{sfn|Bulloch|Morris|1989|p=163}} As a part of its policy of supporting Iraq, Saudi Arabia pumped out oil in massive quantities to lower the price as a way of hurting Iran's economy.{{sfn|Brogan|19891990|p=252}} The low price of oil also hurt Iraq's economy, which forced Iraq to borrow massive sums of money, putting Iraq deeply into debt; by contrast, Iran refused to borrow any money because of its refusal to pay interest on any loans and paid the costs of the war direct from the sale of its oil.{{sfn|Brogan|19891990|p=252}} Iran's revenue from the sale of oil went from $20 billion US dollars per year in 1982 to $5 billion US dollars per year by 1988, which pushed Iran to the verge of bankruptcy and forced Iran to finally make peace with Iraq later in 1988.{{sfn|Brogan|19891990|p=252}} During the war, the Iranian delegation at OPEC tried very hard to have the group cut production to raise prices, but were blocked by the other delegations led by the Saudi delegation, who insisted on more oil production.{{sfn|Brogan|19891990|p=252}}

===Oil sources diversification===

Line 341 ⟶ 345:

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* Kissinger, Henry. ''Years of Upheaval'' (1982).{{ISBN?}}

==External links==

{{Commons category|1973 oil crisis}}

* Hakes, Jay (2008). [http://www.ensec.org/index.php?option=com_content&id=155 35 Years After the Arab Oil Embargo], ''Journal of Energy Security''.

* Morgan, Oliver; Islam, Faisal (2001). [https://www.theguardian.com/business/2001/jan/14/globalrecession.oilandpetrol Saudi dove in the oil slick], ''The Guardian''. Sheikh Ahmed Zaki Yamani, former oil minister of Saudi Arabia, gives his personal account of the 1973 energy crisis.