Description
the oil crisis of 1973, reasons of the crisis, effect of the crisis and how the crisis was overcome.
OIL CRISIS 1973
INTRODUCTION
• In October of 1973 Middle-eastern OPEC nations stopped exports to the US, to Western Europe and Japan. • They meant to punish the western nations that supported Israel, their enemy, in the Yom Kippur War, but they also realized the strong influence that they had on the world through oil. • One of the many results of the restriction was higher oil prices all throughout the western world, particularly in America. The restriction forced America to consider many things about energy, such as the cost and supply, which up to 1973 no one had worried about.
HISTORY
• The Arab-Israeli conflict was the main reason behind oil crisis. • World War II a Zionist state, known as Israel, was created on 56% of the land that was formerly known as Palestine. • This state served as a homeland for Jews. The local Arabs were enraged by the fact that the Palestinian land had been taken to create this state.
• They refused to acknowledge Israel as an independent state. • The Arabs began to launch efforts to recapture the land that they felt was rightfully theirs. • This created the Suez-Sinai War. The British and the French sided with the Israelis in order to punish Nasser for nationalizing the Suez Canal.
• The strong Israeli military forces quickly defeated the Arabs. The Arabs responded to this defeat by uniting. In 1967 Israel launched the Six-Day War, claiming much land. In 1973 Arab forces retaliated. On Yom Kippur, the holiest Jewish holiday, Arab forces attacked, backed by Soviet technology (The Mid-east Oil Crisis)
• Saudi Arabia's King Faisal swayed other oil supporting countries into placing an embargo on crude oil to Western nations, in late October. This was meant to punish the Western states that had supplies weapons and aid to Israel (The Arab oil embargo of 1973-74). Arab oil-producing countries wished to pressure the Western countries, specifically America into demanding that Israel withdraw their troops from the Arab territories that they had occupied since 1967.
• This included the ones that the Israelis had recently conquered . They used the embargo in this way as a political tactic. They were also able to use the embargo for economic means. Once they had placed the embargo on the west, the world's largest consumer of oil, the Arabs realized the power that they had over the world through oil. Once they had resumed shipments of oil they were able to keep the prices high and make a larger profit.
• Panicking investors and oil companies added to the surge in oil prices in the U.S. These causes plunged a nation where everything seemed to revolve around cars into desolation and insecurity. America found that it could no longer afford to thoughtlessly consume oil.
Alternate Reason
• It is true that the OPEC move was perhaps not as unforeseeable as it would seem. What happened somewhat earlier, in 1971, was an important policy move of the United States administration which consisted in suspending the convertibility of the dollar into gold, thus detaching it from the gold standard, and was followed by two successive devaluations.
• As the dollar was the currency commonly used in oil trade, for the oil exporting countries its devaluation meant a fall in the real value of their exports and all their assets. When looked at against this background, the OPEC decision can be interpreted as a pre-planned counter-action, launched at a propitious moment.
• This, however, does not change the fact that it was the oil crisis that opened the struggle for control of the world's oil market and for a new set-up for the distribution of revenues between the industrially developed and the oil-exporting countries.
• By contrast, the oil-importing market economies entered a period of chaotic development. On the one hand, the price shock caused a very serious outburst of price inflation. On the other hand, the energy shortages caused a serious reduction of energy consumption, particularly in the United States, and thus led to a recessionary fall of output which, in turn, resulted in rising unemployment.
• The Arab embargo was never equally addressed to all the Western countries because of their differentiated attitude to the Arab-Israeli conflict. • In Europe only the Netherlands were directly affected, while Britain and France were supplied without serious interruption.
Immediate Results
• Prices of gasoline quadrupled, rising from just 25 cents to over a dollar in just a few months. • The American Automobile Association recorded that up to twenty percent of the country’s gas stations had no fuel one week during the crisis. In some places drivers were forced to wait in line for two to three hours to get gas . The total consumption of oil in the U.S. dropped twenty percent.
• This was due to the effort of the public to conserve oil and money. There was an instant drop in the number of homes created with gas heat, because other forms of energy were more affordable at this time
Measures To Improve The Situation
• Congress issued a 55mph speed limit on highways. • Daylight savings time was issued year round in an effort to reduce electrical use. • Tax credits were offered to those who developed and used alternative sources for energy. These included solar and wind power.
• Nixon, who was president at that time, ordered the department of defense to create a stockpile of oil in case the country needed the military to carry it through a time of chaos. • Nixon formed the Energy Department and it became a cabinet office. It developed the national energy policy. They made plans to make the U.S. energy independent
• Gas stations also wouldn't sell more than ten gallons of gasoline to a customer at a time. • Gas stations would voluntarily close on Sundays. • Companies and industries switched their energy source to coal. • Japan was the first country to start restructuring the economy towards an escape from oilintensive industries by starting large-scale investment in electronics.
After Effects
• The Arabs began to ship oil to Western nations again, but this time at inflated prices. • One of the long-term effects of the embargo was an economic recession throughout the world. Inflation remained above ten percent and unemployment was at its record high. • The era of economic growth which had been in effect since World War II had now ended.
• It also ended the common belief that economic prosperity reflected oil consumption statistics. • Today's appliances or the good ones at least, require less than half the energy that they required three decades ago.
• Speed limits and fuel economy stickers are a result of the government’s efforts to preserve oil. Exploration and development of resources within the U.S. increased dramatically. • The government was very concerned about the dependency of the U.S. on foreign oil. • The Corporate Average Fuel Economy (CAFE) eventually raised its standards up to 27.5 miles per gallon. Oil heat was slowly replaced by electric heat.
• The number of homes using oil heat fell about twenty-three percent. The decline would have been even more rapid were it not for the new homes with natural gas heat in northern regions. • One of the biggest long-term effects was the massive change in cars due to the oil restriction In Detroit the production of giant, gas guzzling cars was halted.
• Cars with big engines and large heavy bodies were no longer made in order to preserve oil and boost the economy. • Detroit was forced to increase the fuel efficiency of all its cars. • The sale of Japanese cars increased, because they met the efficiency standards that American cars did not. • The American Auto industry was forced to meet these standards and reformulate its cars
doc_563752345.pptx
the oil crisis of 1973, reasons of the crisis, effect of the crisis and how the crisis was overcome.
OIL CRISIS 1973
INTRODUCTION
• In October of 1973 Middle-eastern OPEC nations stopped exports to the US, to Western Europe and Japan. • They meant to punish the western nations that supported Israel, their enemy, in the Yom Kippur War, but they also realized the strong influence that they had on the world through oil. • One of the many results of the restriction was higher oil prices all throughout the western world, particularly in America. The restriction forced America to consider many things about energy, such as the cost and supply, which up to 1973 no one had worried about.
HISTORY
• The Arab-Israeli conflict was the main reason behind oil crisis. • World War II a Zionist state, known as Israel, was created on 56% of the land that was formerly known as Palestine. • This state served as a homeland for Jews. The local Arabs were enraged by the fact that the Palestinian land had been taken to create this state.
• They refused to acknowledge Israel as an independent state. • The Arabs began to launch efforts to recapture the land that they felt was rightfully theirs. • This created the Suez-Sinai War. The British and the French sided with the Israelis in order to punish Nasser for nationalizing the Suez Canal.
• The strong Israeli military forces quickly defeated the Arabs. The Arabs responded to this defeat by uniting. In 1967 Israel launched the Six-Day War, claiming much land. In 1973 Arab forces retaliated. On Yom Kippur, the holiest Jewish holiday, Arab forces attacked, backed by Soviet technology (The Mid-east Oil Crisis)
• Saudi Arabia's King Faisal swayed other oil supporting countries into placing an embargo on crude oil to Western nations, in late October. This was meant to punish the Western states that had supplies weapons and aid to Israel (The Arab oil embargo of 1973-74). Arab oil-producing countries wished to pressure the Western countries, specifically America into demanding that Israel withdraw their troops from the Arab territories that they had occupied since 1967.
• This included the ones that the Israelis had recently conquered . They used the embargo in this way as a political tactic. They were also able to use the embargo for economic means. Once they had placed the embargo on the west, the world's largest consumer of oil, the Arabs realized the power that they had over the world through oil. Once they had resumed shipments of oil they were able to keep the prices high and make a larger profit.
• Panicking investors and oil companies added to the surge in oil prices in the U.S. These causes plunged a nation where everything seemed to revolve around cars into desolation and insecurity. America found that it could no longer afford to thoughtlessly consume oil.
Alternate Reason
• It is true that the OPEC move was perhaps not as unforeseeable as it would seem. What happened somewhat earlier, in 1971, was an important policy move of the United States administration which consisted in suspending the convertibility of the dollar into gold, thus detaching it from the gold standard, and was followed by two successive devaluations.
• As the dollar was the currency commonly used in oil trade, for the oil exporting countries its devaluation meant a fall in the real value of their exports and all their assets. When looked at against this background, the OPEC decision can be interpreted as a pre-planned counter-action, launched at a propitious moment.
• This, however, does not change the fact that it was the oil crisis that opened the struggle for control of the world's oil market and for a new set-up for the distribution of revenues between the industrially developed and the oil-exporting countries.
• By contrast, the oil-importing market economies entered a period of chaotic development. On the one hand, the price shock caused a very serious outburst of price inflation. On the other hand, the energy shortages caused a serious reduction of energy consumption, particularly in the United States, and thus led to a recessionary fall of output which, in turn, resulted in rising unemployment.
• The Arab embargo was never equally addressed to all the Western countries because of their differentiated attitude to the Arab-Israeli conflict. • In Europe only the Netherlands were directly affected, while Britain and France were supplied without serious interruption.
Immediate Results
• Prices of gasoline quadrupled, rising from just 25 cents to over a dollar in just a few months. • The American Automobile Association recorded that up to twenty percent of the country’s gas stations had no fuel one week during the crisis. In some places drivers were forced to wait in line for two to three hours to get gas . The total consumption of oil in the U.S. dropped twenty percent.
• This was due to the effort of the public to conserve oil and money. There was an instant drop in the number of homes created with gas heat, because other forms of energy were more affordable at this time
Measures To Improve The Situation
• Congress issued a 55mph speed limit on highways. • Daylight savings time was issued year round in an effort to reduce electrical use. • Tax credits were offered to those who developed and used alternative sources for energy. These included solar and wind power.
• Nixon, who was president at that time, ordered the department of defense to create a stockpile of oil in case the country needed the military to carry it through a time of chaos. • Nixon formed the Energy Department and it became a cabinet office. It developed the national energy policy. They made plans to make the U.S. energy independent
• Gas stations also wouldn't sell more than ten gallons of gasoline to a customer at a time. • Gas stations would voluntarily close on Sundays. • Companies and industries switched their energy source to coal. • Japan was the first country to start restructuring the economy towards an escape from oilintensive industries by starting large-scale investment in electronics.
After Effects
• The Arabs began to ship oil to Western nations again, but this time at inflated prices. • One of the long-term effects of the embargo was an economic recession throughout the world. Inflation remained above ten percent and unemployment was at its record high. • The era of economic growth which had been in effect since World War II had now ended.
• It also ended the common belief that economic prosperity reflected oil consumption statistics. • Today's appliances or the good ones at least, require less than half the energy that they required three decades ago.
• Speed limits and fuel economy stickers are a result of the government’s efforts to preserve oil. Exploration and development of resources within the U.S. increased dramatically. • The government was very concerned about the dependency of the U.S. on foreign oil. • The Corporate Average Fuel Economy (CAFE) eventually raised its standards up to 27.5 miles per gallon. Oil heat was slowly replaced by electric heat.
• The number of homes using oil heat fell about twenty-three percent. The decline would have been even more rapid were it not for the new homes with natural gas heat in northern regions. • One of the biggest long-term effects was the massive change in cars due to the oil restriction In Detroit the production of giant, gas guzzling cars was halted.
• Cars with big engines and large heavy bodies were no longer made in order to preserve oil and boost the economy. • Detroit was forced to increase the fuel efficiency of all its cars. • The sale of Japanese cars increased, because they met the efficiency standards that American cars did not. • The American Auto industry was forced to meet these standards and reformulate its cars
doc_563752345.pptx