In 1970s, American oil intake in form of gasoline and other connected products were on the rise. The USA had domestic oil production companies but their production was on the decline due to the Arctic drilling controversy which has been there since 1977, American oil fields are also not rich like Arabian oil fields. This has made the United States depend on imported oil. Despite this Americans worried little about the spike of oil prices or oil shortages since policymakers assured them of continued supply of oil from the Arab countries. The policymaker argued that the Arab countries could not afford to miss the proceeds the United States contributed to their economies. Despite this being true this attitude was tested in 1973 when the Embargo was imposed. The embargo imposed by the Arab oil giants proved American policymakers wrong and it was clear that America needed oil more than the Arab countries needed the revenue from oil sales. This was evident in the stock market, the American Wall Street and its economy in whole.
In the early 1970s, the world oil consumption was on the rise in form of gasoline and other oil products. There was a chain of energy crisis between 1970 and 1979 that was led by Middle East issues but the crucial ones began in 1973 when the Arabian oil producers enforced an Embargo. The choice to go against America and castigate the west in support of Israel in the Yom Kipper war against Egypt. The targeted Nations were Canada, Japan, the United Kingdom, the Netherlands, and the United States. The Embargo was later imposed on South Africa Rhodesia and Portugal.
As a result of the embargo the prices of crude oil to shoot sky high from three dollars a barrel to twelve dollars by 1974. The price of petrol was bound to rise to make transport a nightmare and more expensive. This led to a BRITAIN talk about rationing the coupons left over’s from the Second World War. This was termed as the first oil shock which was later followed by a second one in the 1979 crisis.
In 1971 president Nixon encouraged the Embargo by deciding to take the United States off the gold standard. This resulted in other countries not being able to cash the U.S dollars in the foreign exchange reserves for gold. Nixon did not honor 1944 Bretton woods pact. This move made the prices of gold skyrocket. The history of Gold standards divulges that this was unavoidable but Nixon’s deeds were unexpected and so sudden, this sent the value of the dollar down as expected. The condensed worth of the dollar wounded OPEC countries because their oil deals were valued in US DOLLAR. This meant that their proceeds reduced together with the dollar. The price of imports that was denominated with further currencies also remained the same or increased which was disastrous for US bargaining power. As a result of OPEC even thought of pricing oil in Gold to prevent the proceeds from vanishing.
For the OPEC the last straw was when the United States of America resolved to back Israel against Egypt during the Yom Kippur War. As a result on October 19, 1973, requested 2.2 billion dollars from Congress to aid crisis military aid for Israel. The Arab members in the OPEC reacted by stopping their oil imports to the United States of America and other Israeli associates which included Canada, The Netherlands, the United Kingdom, Portugal, and Rhodesia. This did not last for long since Egypt, Syria, Israel declared a treaty on October 25, 1973, but the OPEC did not comply till March 1974. By then oil prices had increased from 2.5 dollars barrel to 11.65 dollars a barrel.
The influence of the embargo were immediate and visible all over the world. The conservative government led by Ted Health to struggle to cope with inflated food prices caused by global shortages. This caused an inflation rate of up to 24%. The Labor government governed by Harold Wilson took power but confronted a failure in proceeds and values of stock market . Burial oil a giant in the oil game had to be liberated by the England bank from Bankruptcy due to the embargo. However, Britain was a distinguished champion during that time as it poured cash into the North Sea region and this bought them the rights and capacity to be a net exporter. This period was not good for the country’s already unstable industrial segment since the oil charges were still up high. This hastened the gradual demise of Britain’s dying car industry which was once a revenue earner due to the extra cost of production which was brought about by the sudden change of oil prices.
High oil charges fortified the shift to minor vehicles which led to the rise of Japanese firms such as Toyota and Honda. They became prominent more dominant in the UK and to other parts of the world since they used a considerably low amount of fuel than the previous models. The Japanese who had established smaller and fuel- efficient cars were received in Britain and with their experience, they resurrected the United Kingdom manufacturing industry. The oil charge shock also altered the British relationships abroad that were concentrated on the risks posed by Russian and China as a portion of the cold war.
The oil crisis of the 1970s had a huge impact on the targeted nations. For example, the citizens of these nations developed a negative attitude towards their leaders as they felt the politicians were doing little to resolve the crisis. They felt that the leaders they had placed their trust on were incapable and unprepared to come to their rescue. The lack of confidence of these citizens in their leaders led to considerable panic and irrational actions. For example, Americans began to send letters to the White House since they anticipated their president to do something about the whole menace. Most of the members of the public heavily dependent on the oil for almost half of their energy needs. Consequently, most of them broke into despair wondering how they would survive if their leaders were not in a position to address the oil crisis. They got concerned that they would have to deal with a high rate of oil prices considering the low supply of any product results in an upsurge of prices.
Additionally, the oil crisis of the 1970s is blamed for causing a recession in the targeted nations. For example, high prices of oil meant that the spending power of consumers had to considerably reduce. Consumers did not spend much on good and services because uncertainty about the future had been induced. Consequently, these nations found it hard to experience economic growth. Nonetheless, it is argued that the 1973- 1975 recession in the United States was not necessarily caused by the oil crisis but the policies the government put in place that time. For example, Nixon’s wage-price control policy forced companies to keep wages high which simply meant that companies had to lay off some employees to cut costs. Consequently, the revenue the nation obtained from taxes levied on the incomes of individuals went down considerably because the number of employed people reduced. Moreover, cutting on the number of employees meant that companies could no longer function at their level best, thus the revenue these companies would make significantly reduced. To that end, the government was also getting little as far as revenue was concerned.
The oil crisis of the 1970s also leads to considerable developments. For example, governments and individual consumers began to perceive the wisdom in conserving domestic oil reserves. Additionally, the oil crisis compelled the automobile producers to generate competent engines and more studies were carried out on alternative sources of energy including wind, solar, and nuclear energy. President Ronald Wilson Reagan of the US chiefly advocated for the alternative sources of energy thus signed several industry-friendly laws during his tenure in response to the oil crisis of the 1970s. Moreover, in Canada, the office of energy conservation was created and a series of confrontations emerged between the federal and provincial governments regarding the management of oil resources of Alberta and where the paybacks of the massive reserves ought to flow. In addition, the oil crisis led to the swing of American politics to the right and brought an end to Galbraith’s conception of the American system. The American government also created the strategic petroleum reserve due to the oil embargo. The emergency stockpile of oil was developed for usage in crisis. Furthermore, the American government introduced a rule that required the state speed limit to become 55 miles per hour to preserve gas.
The Britain government, on the other hand, sealed an agreement with Saudi Arabia which was described as a profound economic alliance. The agreement led to an increased supply of oil into the City of London as the oil-producing state felt like it had a major stake in Britain and its economy. Moreover, the recession that had been caused by the oil crisis rendered many people jobless. To that end, the oil crisis can be said to have caused a change in the lives of the citizens of the besieged nations. This is because they were accustomed to being employed, but the recession had left them with no employment and a source of income. The oil crisis had also forced individuals to wake up at dawn and wait in long lines at gas stations something they were not used to doing.
Oil crisis of 1973 also impacted the oil-producing states in a positive way by providing the oil producing countries with political and economic success. For example, the ban made it feasible for the oil producing states to generate enormous fortune which empowered their governments, armies, and economies. Additionally, the embargo compelled the US and some European policies to alter their guidelines and rules toward the Arab -Israeli battle. However, a good number of commentators argue that the ban failed to accomplish its political and economic objectives. For instance, the United States and European countries still support Israel. Moreover, western nations did not fulfill the OAPEC’s demands. For example, the OAPEC members required the western nations to halt diplomatic affairs with Israel and offer military help to Arabs to be added in the friendly nation list. However, the OAPEC members gave Britain, France, and Spain this status even though they had not met the requirements. Japan was also formally categorized as a friendly state without meeting the aforementioned requirements. The nation had pledged to provide loans and technical assistance but it did not honor its promises. Conclusion
In conclusion, the Oil embargo caused a series of changes that are evident in today’s word as discussed in the essay. Therefore oil mining and trade should be regulated appropriately since it can cause economies to fall, wars, poverty, and other adverse effects that can be avoided by advocating peace.
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