1973 oil crisis
The 1973 Oil Crisis is an international crisis that took place in 1973 with the decision of several countries in the Persian Gulf not to export oil to Western countries.
The determination of the Arab bloc of the Organization of the Petroleum Exporting Countries (OPEC) to carry out an oil embargo on Western nations was an act of retaliation to the countries that supported Israel in the Yom Kippur War. This punishment measure caused an increase in oil prices and consequently a sharp increase in inflation. Other effects of this crisis were increased unemployment and low economic growth.
Origins of the crisis
Between the end of the Second World War and well into the 1970s, Japan, the United States, and Europe consumed oil massively. In other words, in the West there was a strong dependence on oil. Meanwhile, the value of the US dollar was falling in value among other things as a result of the Vietnam War. The North American economy began to show worrying symptoms such as a slowdown in growth.
For his part, President Nixon decided to untie the dollar from the gold standard, ending the system agreed upon in the Bretton Woods agreements. To all this had to be added a great trigger: The Yom Kippur war. The Arab countries of OPEC decided to establish an embargo on the western countries that supported Israel in that conflict.
Development and consequences of the crisis
Due to the heavy dependence on oil from the Middle East, Western countries were plunged into a serious economic crisis while the price of oil rose. The price of a barrel of oil increased from $ 2.90 to $ 11.90.
Faced with an exorbitant rise in oil prices and supply problems, many countries chose to reduce their dependence on crude oil by investing in other sources of energy. France, for example, opted for nuclear energy, while the United States and Canada opted for burning wood waste.
Meanwhile, many developing OPEC countries nationalized oil companies and saw their government revenues increase dramatically. In other words, the oil-exporting Arab countries experienced remarkable economic growth in the short term, but not in the long term.
Faced with the embargo carried out by the nations of the Middle East, there were major energy supply problems and the consequences for the most developed countries were not long in being noticed. Despite the fact that the embargo lasted six months (it was lifted in March 1974), there was an increase in inflation and many countries entered a stage of low economic growth. Precisely in this economic period, marked by high inflation and a stagnant economy, the term "stagflation" was coined.
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