Fifty years ago, a secret agreement among Arab governments triggered one of the worst economic crises to plague the United States and other major oil importers.
Saudi King Faisal and other Arab leaders Initiate oil embargo October 17, 1973, in retaliation for Washington’s support for Israel War with neighboring Egypt and Syria.
The hostilities in the oil market stemmed from an agreement between Faisal and the leaders of Egypt and Syria, whose forces planned a surprise move to retake territory under Israeli occupation. Faisal and other Arab producers agreed to retaliate with “oil weapons” if the United States stepped in to aid Israel.
when washington Airlift of U.S. weapons Faisal and the Arab members of OPEC helped Israel thwart Arab interests and retaliated. They raised oil prices, banned oil shipments to the United States, and cut production by 5% per month.
The economic and political carnage that followed is legendary. The embargo triggered prolonged turmoil in global oil markets and caused pain at the gas pumps for Americans and consumers around the world.oil price Almost quadrupled overnight and has remained at that high level for more than a decade. Oil-producing countries used the opportunity to reclaim sovereignty over their oil reserves. By 1980, many countries had completed the process of driving Western oil companies from their territories.
Oil’s Global Regime Change
The embargo’s damaging power is attributed to two key factors: OPEC’s dominance of the world’s oil supply, and oil’s hegemony in the global energy mix.
Before the embargo, oil accounted for nearly half of total energy consumption in the United States (47.5%) and globally (49%). Although OPEC countries produce more than half (53%) global oilthese concessions are operated by Western oil majors.
After the embargo, the producing countries took over. Control of global oil production shifted from Western oil giants such as Shell and Exxon to newly formed national oil companies.
As a result, cash from oil sales has flooded into Middle Eastern countries, which are still building basic services such as electricity. Between 1965 and 1975, Saudi Arabia’s oil revenues grew 40-fold, from $655 million to $26.7 billion.These countries also gathered new geopolitical forces.
How the oil price surge is playing out in the West
In the West, rising prices wreaked havoc on economies and transportation systems that were far less efficient than today. Inflation quickly became “stagflation”, a combination of economic stagnation and high inflation. Misleading policies, including gasoline policy price controls and rationing, exacerbating shortages, causing queues at gas stations and emboldening gasoline thieves. Look back to the oil crisis of the 1970s.
America undergoes a chaotic layoff Gas-guzzling vehicles At the same time, the import of Japanese energy-saving cars will be increased.Drivers become obsessed with miles per gallon, the U.S. government mandates corporate fuel economy averages, or cafe, standardwhich aims to save fuel by requiring automakers to sell more fuel-efficient vehicles.
Western oil companies, driven out of the Middle East and other oil regions, turned to more difficult areas: the Gulf of Mexico and offshore North Sea and the Arctic north of Alaska.
as a scholar vitality policyWe have long studied the spillover effects of embargoes on the global economy and political system. These results are the central theme of Jim Krane’s 2019 book “Energy Kingdom”. On October 17, 2023, on the occasion of the 50th anniversary of the embargo, we will be joined by Prince Turki Al Faisal, son of King Faisal and former Saudi Ambassador to Washington Rice University Baker Institute Conference Discuss the lessons learned from the still-effective Arab oil embargo.
50 years later, new pressures
fifty years later, the market has changed. But oil is still the world’s main energy source.
On the one hand, crude oil usage has grown rapidly. Global supply increases From less than 60 million barrels per day in 1973 to nearly 94 million barrels per day in 2022.Motor fuel prices remain key factor in inflation; we calculate Gas prices rise By 2022, the cost will be average american family About $1,000.
On the other hand, OPEC’s importance – and oil’s share of the global energy mix – has declined. 13 OPEC member countries Currently it accounts for only 36% of global oil production. High oil prices resulting from the 1973 embargo incentivized oil drillers to seek new sources of oil and develop alternative fuels to replace petroleum.
In the 15 years since the embargo, oil production outside OPEC has increased by 14 million barrels per day. Oil from Alaska and the Gulf of Mexico has helped stabilize U.S. production. later, shale revolution making the United States the world’s largest producer and net oil exporterbringing an end to 50 years of exploration.
The world has also become more efficient, reducing the amount of oil needed to maintain the same activity. Our calculations show that global per capita oil use per dollar of gross domestic product has fallen by a whopping 60% since 1973.
But as in 1973, energy security issues are back at the top of the national agenda.
Russia’s invasion of Ukraine in 2022 once again raises the risk of the “weaponization” of energy.Europe is particularly hurt Overdependence on Russian natural gas and has run to Change energy sources. The Israel-Hamas war that began on October 8, 2023 has yet to trigger a retaliatory response from Arab governments, and the initial impact on oil While the impact is small, the geopolitical implications of such a major event could still disrupt markets.
Energy security itself is changing too.Transition to renewable energy sources such as wind and solar Protect consumers from most supply chain risks. Electric vehicles also protect owners from volatile oil prices. So while critical materials can still be manipulated by governments, shortages and price increases mainly affect parts manufacturers and their investors. If supply bottlenecks last long enough, the energy transition could be delayed.
Like the embargo 50 years ago, today’s crisis leaves the future of energy with great uncertainty.Changes in the global energy structure, especially the rapid growth of electric vehicles, may Reduce the importance of oil and cartels Supervise it.
as Former Saudi Arabian Oil Minister Ahmed Zaki Yamani He is reported to have said a quarter of a century ago: “The Stone Age did not end for lack of stone, and the Petroleum Age will end long before the world runs out of oil.”
Jim Crane Energy Studies Fellow, Baker Institute for Public Policy; Lecturer, Rice University and Mark Finlay is an energy and global oil fellow at the Baker Institute for Public Policy. Rice University.
This article is reproduced from dialogue Licensed under Creative Commons.read Source article.
Svlook
