Oil crisis 1973
It’s essential to review the existing data as to the 1973 crisis. Similar occurrences such as the escalating oil prices have been witnessed. To come up with a conclusive finding on the issue of rising oil we must review the existing data. It entails studying the causes and the effects of the crisis. The oil crisis of 1973 was basically a conflict between the small, less powerful countries of the Middle East and North Africa under the umbrella famously known as the Organization of Oil Exporting Countries (OPEC). It was the birth of a massive oil crisis which was experienced in the world afterwards.
History of the crisis
Revolutions had taken place across the Arab world which was mainly geared towards shifting the control of oil from the Anglo American companies to the Organization of oil Exporting Countries. It was highly facilitated by the withdrawal of the colonial powers from Africa and Middle East and North Africa. Further the rivalry between capitalism and socialism led helped .these revolutions in a move to get economic triumph over capitalism. Weapons and military support were offered from the Soviet Union to overthrow pro capitalist leaders. The pro west monarchies were overthrown and all the countries under the Organization of the Oil Exporting countries made a declaration not to export oil to the West countries. Needless to say, the OPEC countries created an avenue to seek international political voice. The non oil export move was to sanction America for the continued support to the Israel against the Arab world (Issawi, p.3).
According to Issawi (p. 6) the emergence of a very strong soviet union and the drastic growth of the Chinese economy that we witness today were founded on that crisis. However it should be noted that the crisis witnessed in 1973 was a recurrence of what had earlier happened. In 1950 to 1953, Dr.massadegh of Iran imposed a policy to cut down the production of oil to frustrate the British companies which dependent on Iranian oil. He never succeeded since the British companies focused on other countries as Kuwait for the supply of oil. A coup organized by the CIA led to the ousting of Dr. Massadegh hence the British companies gained momentum forming the Anglo Iranian Oil company. The base of OPEC formation had been set in the 1959 between the e then the president of Venezuela and Saudi Arabia. Their plans were mainly to minimize the production of oil which will in turn bring about prices control.
The closure of Suez canalled to the rise of Libya has a world oil producer.Qadaffi concentrated on the opportunity created and set his price the oil while at the same time issues a stern threat to shut down some of the foreign oil producing companies in his countries if they didn’t adhere with his set rules on production and selling of oil(Issawi p.10).These monopoly of oil production by Libya was a milestone and through support and her coordination with OPEC, the middle East gained more political strength. Libya is held to contribute to this crisis by demanding an increase in the oil prices. The Mediterranean oil producing countries came next and demanded the same increment.
The consequences of such increments in prices resulted into amassing of much money by the Middle East oil producing countries hence fifty to hundred percent of the oil companies rested on the Middle East countries. The high input required to generate other sources of energy made oil the only highly needed source of energy hence its demand soaring. Neglect of other sources of energy for instance the decrease production of coal in Europe since countries mistakenly thought that oil will always remain cheap compared to other sources o energy (Issawi p.11).
According to Issawi (p.12), the oil escalating oil prices crises of 1973 was influenced by king Faisal of Saudi who supplied weapons to Egypt in an effort to induce United States to put pressure on Israel hence bringing to an end the Israel Arab conflict. President Nixon of America gave blind eye to the efforts. The decline of President Nixon to put pressure on Israel left king Faisal with two options which he was fully determined to persue.First he would use oil as a tool to make America listen to his demands and secondly he would impose military interventions against Israel. However it’s not all countries in the OPEC that was interested in king Faisal’s political ideology. Some countries like Iraq and Algeria had large populations and their bargain on the increased prices was not based on political interests but rather to get enough funds to finance their country’s plans.
The Israel Arab war of October 1973 formed part of the several causes of the oil crisis. The Arabic countries doubled the prices of oil to what they named hostile states. There was a gamble for oil hence the prices rose up more rapidly. The Iranian oil was said to for up to seventeen dollars per barrel. The sudden increase in oil prices or what was commonly known as the oil prices shock played a major role in creating world economic crises such as recession on whole effects are very fresh in the mind of Americans.
According to Sheets, Ken, and Nathaniel Kennedy (p.94) the effect of the oil crises experienced in the 1973 oil crises left a scar which becomes fresh when there are conflicts in the Middle East. To counteract such fear many Americans have invested in Middle East oil companies so that they can have an influencing role if a situation like the one witnessed in the past. This crisis was much felt in America since the oil used by then came from foreign countries and more specifically from Middle East. The Iraq issue almost dragged America but the situation has been contained. Every threat to peace in the Arab world has had an effect to the oil prices hence the constant maintained of prices can be achieved by consistent peace prevailing in the Middle East (Issawi, p.5).
According to Rustow (p. 166-72) similar views of the causes and repercussions of the 1973 oil crisis are reflected. The weakening of the OPEC after the 1973 crisis helped in taming the extreme tendency of Arabic countries to mutually agree on the hiking of the prices. The unity and determination seen in the initial stages of OPEC was lost and states had much of their concentration now on state isssues.Bearing in mind that many states more specifically north Africa states such as Tunisia and Algeria had just gain their independence and a great task of building the nation lay ahead. Other countries in Middle East had also come out of revolutions and restructuring of new governments needed much attention. However the most significant and highly held to be a contributing factor for the weakening of OPEC is the ideological difference between the conservative Arabic world and the radical Arabic world. (L. Roeder.P.446) The conservative Arabic for instance Saudi Arabia viewed oil has a good weapon for negotiating a political bargain against the west. On the contrary the radical Arab world played much attention to issues of their countries (Issawi, p.8).
On one side the conservative Arabic world imposed an increase in prices so as to punish the west and to gain political while the radical Arab world focused on high revenues to improve the status and further develop their countryside with no doubt to mention that the increasing of oil prices positively made the Arab states to accumulate a lot of wealth which was used to purchase fire arms mainly from the Soviet bloc. In the meantime economic challenges were hitting America hard. Gas rationing and President Nixon advising the Americans to use Oregon in lighting Christmas lights in December 1973.The greatest fear among the political class in America was the continued Soviet bloc involvement in trade and also weaponry distribution (Rouhani, Fuad P.226).The strength of the soviet bloc would mean a defeat of capitalism by the socialism. The battlefield of socialism and capitalism found a fertile ground in the Middle East and more so the fight to get the favor of the oil producing states under OPEC.By October the U.S through President Nixon gave Israel arms to fight the Arabs. A move well monitored by the Soviet bloc who also supplied weapons to Syria and Egypt. This period will be remembered as the period when wars had taken an economic turn and the cold war propaganda were everywhere. President Nixon continued aid to Israel triggered more developments in the OPEC concerning oil (Mugno p.66).
The OPEC camp was determined that oil production had to be cut until their political goals were achieved. That meant putting pressure on America to stop giving financial and economic assistance to Isreal.This wrangles facilitated by U,S on one side and the Soviet bloc on the other side gave OPEC a valid reason to cut the production of oil creating a high demand of the product .Indeed the embargo condition was created America.Thuogh not long lived the OPEC would have continued making their prices but the disunity among its members. For instance, the rivalry between King Faisal and president Sadat of Egypt. The rivalry split the organization into two. When the conservative and the radical Muslim stated differed in the OPEC it was a great achievement to he US since its always easy to rule disunited people. The western powers there not united either. There was much mistrust by other countries for instance Japan didn’t trust America and their policies towards the oil issues. The OPEC gained momentous due to such conditions hence the imposing of their will on the West states was the easy. The crisis influenced countries to start massive campaigns to sensitize people on the need to conserve energy. This went further and private individuals and business community soon joined in and across Europe and America the campaigns kicked off. It is said that newspapers carried a full page to discuss the effects of the oil crisis and the reason for energy conservation. With time the high guzzling luxurious vehicles lost their market and those who had them kept them in safe garage hoping and waiting for a change in oil crisis. The greatest shock which the Americans never at all times imagined was the shortage of toilet paper in America. It was beyond imagination hence there was panic in corners of the country (Rustow p.53).
This crisis influenced Japan to shift from oil based industries into the manufacturing of electronics. Soon they ventured in vehicle manufacturing whereby they used the effect of the crisis to America to manufacture vehicles with less guzzling capacity. By mid 1980s the eyes of the world were focused towards Japan for the economic friendly cars. The strength of Japan which we see today was born in the 1973.The devastating effects felt by Japan during the Second World War was repaired and healed by such opportunities. The greatest and the most remembered is the stiff competition given to the Americans by Japan. Everyone was going for Japanese models which were efficient and could consume less. The American motor industry was on its knees trying hard to counteract the stiff competition that Japan had engineered (Sheets p.40.)
The crisis brought about different political international relations. Japan became more pro Arab world and the sweet moments of good diplomatic relations between Japan and America. They now engaged in meaningful strategies of improving their economic .Cold war was at its peak and [president Nixon of America could not stomach such losing. There were major uprising against the American policies and the ammonization in general. It’s not only in the Middle East but also the Latin America. Thee overthrow of the Chile president off Chile through a coup to a socialism president. When President Nixon detected that he doubled the fire arms amount to slap the Arab world to their oil increase. The countries considered a threat to the economic status was China and the Soviet Union. President Nixon was surprised that the challenge he had expected came from a third world country (Bhatia p.1191).
The Soviet Union increased the amount of their oil production and they were beating the OPEC countries since they had produced small quantities which the price was highly increased. Saudi Arabia and Iran faced great fears after the embargo issue. This necessitated the purchase of weapons to counteract any external fears o their country. Having accumulated a lot of cash during the crisis America sold more arms to them. The selling of more weapons by the Americans was meant to stop the aggression of the Soviet Union who had invaded Afghanistan immediately after the crisis. The non involvement of Japan in the Israel Arab issues made Japan lose greatly (Exxon, p.17).
Japan was declared a non friendly state by the OPEC countries and this occasioned a major blow to Japan who imported eighty percent of their oil from the middle East. Other European countries such as U.K denied U.S a base to supply Israel with weapons to fight the Arabic world. America was the only pro Israel country after the crisis. In the mean time Iran and Saudi entirely dependent on America for weaponry a move not welcomed by many OPEC countries but by this time the OPEC had lost its commanding authority and each country could sell its oil according to the pressing needs of the country (Roeder p.243).
The most interesting impact of the 1973 oil crisis was the increase consideration and utilizations of other types of energy to replace oil. Coal and ethanol were strongly held to generate energy. Japan also invented nuclear plant which became a major energy generating equipment hence ruling oil as the sole oil generating substance. The aftermath of the oil crisis also warranted the United Nations to pick an interest in the matter and offer a lasting or what they termed lifetime solution to the oil crisis in the world. They proposed an international statute to efficiently control the unfairness associated with increment in oil prices. There are many theories as to what exactly caused the oil crisis but there is a major argument that there was unreasonable consumption of what Americans didn’t produce. The motor car industry enhanced this situation by manufacturing cars with high guzzling capacity. This theory is to the effect that there was no control on the consumption of oil hence when the Arabic world introduced the triple price for their oil it surprised many. The U.S foreign policies to supply weapons to Israel were a major factor towards the oil crisis. If the US had taken a neutral position on the Arab Israel conflict the earlier dealing with the Arab world would have continued without interruptions (Reid. p.316).
The biggest lesson associated with the 1973 oil crisis was the shifting of reliance by America to the foreign oil and other sources of energy were considered to curb such an injustice in future. the presence of closed gas stations and the December 1973 use of Oregon in lighting the Christmas tree necessitated the exploration of domestic ways of generating oil locally thus the approval of the Trans Alaska pipe ( Roeder p.19).
From the data afore discussed the 1973 oil crisis was a threat to not only human survival but also to peace and stability of the entire globe. Its causes as seen and its long term effects as they occurred are still felt today in the economic recession. However the crisis generated some positive impacts which cannot be overlooked, for instance, the immediate use of other sources of energy.
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