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Blistered by the Arab oil embargo

October 16, 2012
Price controls caused run on service stations

Gas station line during the Arab oil embargo

Thirty-nine years ago today, OPEC announced the price hikes that would result in the oil crisis of 1973.  U.S. attempts to limit the price of gasoline resulted in supply shortages and long lines at American gas stations.  The instigators of the Arab oil embargo were rewarded for their mischief-making by obtaining concessions on Israeli troop withdrawals negotiated by the U.S.

Here’s the official history from the State Department:

The OPEC Oil Embargo, which lasted from October 1973 to March 1974, posed a major threat to the U.S. economy. Moreover, the Nixon Administration’s efforts to address the effects of the embargo ultimately presented the United States with many foreign policy challenges.

During the October 1973 Arab-Israeli War, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) announced an embargo against the United States in response to the U.S. decision to re-supply the Israeli military during the war. OPEC members also extended the embargo to other countries that supported Israel. The embargo both banned petroleum exports to the targeted nations and introduced cuts in oil production. Several years of negotiations between oil producing nations and oil companies had already destabilized a decades-old system of oil pricing, and thus the OPEC embargo was particularly effective.

Implementation of the embargo, and the changing nature of oil contracts, set off an upward spiral in oil prices that had global implications. The price of oil per barrel doubled, then quadrupled, leading to increased costs for consumers world-wide and to the potential for budgetary collapse in less stable economies. Since the embargo coincided with a devaluation of the dollar, a global recession appeared imminent. U.S. allies in Europe and Japan had stockpiled oil supplies and thus had a short term cushion, but the longer term possibility of high oil prices and recession created a strong rift within the Atlantic alliance. European nations and Japan sought to disassociate themselves from the U.S. Middle East policy. The United States, which faced growing oil consumption and dwindling domestic reserves and was more reliant on imported oil than ever before, had to negotiate an end to the embargo from a weaker international position. To complicate the situation, OPEC had linked an end to the embargo to successful U.S. efforts to create peace in the Middle East.

To address these developments the United States announced Project Independence to promote domestic energy independence. It also engaged in intensive diplomatic efforts among its allies, promoting a consumers’ union that would provide strategic depth and a consumers’ cartel to control oil pricing. Both of these efforts were only partially successful.

The Nixon Administration also began a parallel set of negotiations with OPEC members to end the embargo, and with Egypt, Syria, and Israel to arrange an Israeli pull back from the Sinai and the Golan Heights. By January 18, 1974 Secretary of State Henry Kissinger had negotiated an Israeli troop withdrawal from parts of the Sinai. The promise of a negotiated settlement between Israel and Syria was sufficient to convince OPEC members to lift the embargo in March 1974. By May, Israel agreed to withdraw from the Golan Heights.

Rather than supporting energy independence that would prevent American foreign policy from being held hostage by the Arab world again, Democrats and environmentalists have continued limiting energy production at every turn over the years by prohibiting ANWAR drilling, blocking the Keystone XL pipeline, imposing a moratorium on Gulf of Mexico drilling, pushing for heavy taxes on oil companies and gasoline, keeping excessively long permitting processes for building new oil refineries or authorizing hydraulic fracturing, and by fabricating doomsday scenarios about peak oil.

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2 comments

  1. King Saud succeeded to the throne on his father’s death in 1953. However, an intense rivalry between the King and his half-brother, Prince Faisal emerged, fueled by doubts in the royal family over Saud’s competence. As a consequence, Saud was deposed in favor of Faisal in 1964. The major event of King Faisal’s reign was the 1973 oil crisis , when Saudi Arabia, and the other Arab oil producers, tried to put pressure on the US to withdraw support from Israel through an oil embargo. Faisal was assassinated in 1975 by his nephew, Prince Faisal bin Musaid .


  2. The Americans had saved Israel from defeat in 1973 with a massive airlift of weapons at a key moment in the Yom Kippur War. But there was a new president and a new goal. In addition to dealing with the economic effects of the Arab oil embargo begun in the wake of the 1973 war, Ford wanted to stymie Soviet designs on the region—especially after the regime of Anwar el-Sadat had a dramatic falling-out with the Soviets that led to the expulsion of all Soviet diplomats and military advisers from Egypt. This was seen as a historic opportunity for the United States, and many in government believed the best way to regain credibility and support in Egypt would be to deliver Israeli concessions on captured territory. Henry Kissinger undertook a 15-day effort in “shuttle diplomacy,” carrying terms back and forth between Egypt and Israel in hopes of coming up with a grand bargain.



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