- This article or section should be merged with 1973 energy crisis
On October 16th, 1973, as part of the political strategy that included the Yom Kippur War, OPEC cut production of oil, and placed an embargo on shipments of crude oil to the West, with the Netherlands, specifically targetted. Also imposed was a boycott of Israel, and price increases. Since there was insufficient supply in the West without the oil from OPEC, oil prices rose dramatically and quickly. An world financial system already under pressure from the break down of the Bretton Woods agreement, would be set off on a path of a series of recessions and high inflation that would persist until the early 1980's, and elevated oil prices that would persist until 1986.
The above graph is based on the nominal, not real, price of oil, and so overstates prices at the end. However, the effects of the Arab Oil Embargo are clear - it effectively doubled the real price of crude oil at the refinery level, and caused massive shortages in the US. This would exacerbate a recession that had already begun, and lead to a globl recession through the rest of 1974.
Over the long term, the oil embargo would change the nature of policy in the West, towards more exploration, towards energy conservation, and towards more restrictive monetary policy, which more aggressively fought inflation.
- Sept. 15_ The Organization of Petroleum Exporting Countries (OPEC) declares a negotiating front, consisting of the 6 Persian Gulf States, to pressure for price increases and an end to support of Israel, based on the 1971 Tehran agreement.
- Oct. 6 _ Egypt and Syria attack Israel on Yom Kippur, starting the fourth Arab_Israeli war.
- Oct. 8_10 _ OPEC negotiations with oil companies to revise the 1971 Tehran price agreement fail.
- Oct. 16 _ Saudi Arabia, Iran, Iraq, Abu Dhabi, Kuwait and Qatar unilaterally raise posted prices by 17 percent to $3.65 a barrel and announce production cuts.
- Oct. 17 _ OPEC oil ministers agree to use oil as a weapon to punish the West for its support of Israel in the Arab_Israeli war. They recommend an embargo against unfriendly states and mandate a cut in exports.
- Oct. 19 _ Saudi Arabia, Libya and other Arab states proclaim an embargo on oil exports to the United States.
- Oct. 23_28 _ The Arab oil embargo is extended to the Netherlands. Nov. 5 _ Arab producers announce a 25 percent output cut. A further five percent cut is threatened.
- Nov. 23 _ The Arab embargo is extended to Portugal, Rhodesia and South Africa.
- Nov. 27 _ U.S. President Richard Nixon signs the Emergency Petroleum Allocation Act authorizing price, production, allocation and marketing controls.
- Dec. 9 _ Arab oil ministers agree a further five percent cut for non_friendly countries for January 1974.
- Dec. 25 _ Arab oil ministers cancel the five percent output cut for January. The Saudi oil minister promises a 10 percent OPEC production rise.
- Jan. 7_9, 1974 _ OPEC decides to freeze prices until April 1.
- Feb. 11 _ U.S. Secretary of State Henry Kissinger unveils the Project Independence plan to make U.S. energy independent.
- Feb. 12_14 _ Progress in Arab_Israeli disengagement brings discussion of oil strategy among the heads of state of Algeria, Egypt, Syria and Saudi Arabia.
- Mar. 17 _ Arab oil ministers, with the exception of Libya, announce the end of the embargo against the United States.