Blistered by the Arab oil embargoOctober 16, 2012
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.