The causes and consequences of the 1973 oil crisis still cause heated debate among historians. It is known for sure only that this crisis hit the automotive industry of Western countries very hard. The 1973 oil crisis particularly affected America.
By the end of the embargo in March 1974, the price of oil rose from $ 3. US per barrel to almost 12 dollars. USA on a global scale. Prices in the United States were significantly higher. The embargo triggered an oil crisis or “shock” with many short-term and long-term consequences for global politics and the global economy. It was later called the “first oil shock”, after which there was the 1979 oil crisis, called the “second oil shock”.
How it was
By 1969, US domestic oil production could not keep up with rising demand. In 1925, oil accounted for one fifth of US energy consumption. By the time World War II began, a third of America’s energy needs were met by oil. She began to replace coal as her preferred fuel source — it was used to heat homes and generate electricity, and it was the only fuel that could be used for air transport. In 1920, American oil fields accounted for almost two-thirds of world oil production. In 1945, US production increased to nearly two-thirds. The United States was able to meet its own energy needs on its own for a decade between 1945 and 1955, but by the end of the 1950s it imported 350 million barrels a year, mainly from Venezuela and Canada. In 1973, US production fell to 16.5% of the total. This was one of the consequences of the 1973 oil crisis.
Oil confrontation
Oil production costs in the Middle East were low enough for companies to make a profit despite U.S. oil import duties. This has hurt domestic manufacturers in places like Texas and Oklahoma. They sold oil at tariff prices, and now they had to compete with cheap oil from the Persian Gulf region. The first US firms to use low-cost manufacturing in the Middle East were Getty, Standard Oil of Indiana, Continental Oil and Atlantic Richfield. In 1959, Eisenhower said: “As long as the Middle East oil remains as cheap as it is, we probably can do little to reduce Western Europe’s dependence on the Middle East.” All this will later lead to the 1973 oil crisis.
In the end, at the request of independent American producers, Dwight D. Eisenhower introduced quotas for foreign oil, which remained at a level between 1959 and 1973. Critics called it the "American depletion first" policy. Some scholars believe that politics helped reduce US oil production in the early 1970s. While US oil production declined, domestic demand increased, leading to inflation and a steadily rising consumer price index between 1964 and 1970.
Other consequences
The 1973 oil crisis was preceded by many events. The US trade balance fell from 4 million barrels per day to 1 million barrels per day between 1963 and 1970, which increased US dependence on foreign oil imports. When Richard Nixon took office in 1969, he commissioned George Schultz to chair the Eisenhower quota program review committee - the Schultz committee recommended abolishing quotas and replacing them with duties, but Nixon decided to maintain quotas because of strong political opposition. In 1971, Nixon set a cap on oil prices as oil demand increased and production declined, making it more dependent on foreign oil imports, as consumption was underpinned by low prices. In 1973, Nixon announced the end of the quota system. Between 1970 and 1973, US crude oil imports nearly doubled, reaching 6.2 million barrels per day in 1973.
Continuation of the embargo
The embargo lasted from October 1973 to March 1974. Since Israeli forces did not enter the ceasefire line of 1949, most scholars believe the embargo was a failure. Roy Liklider, in his 1988 Political Power and Arab Oil Weapons books, concluded that it was a failure because the countries it was aimed at did not change their policies regarding the Arab-Israeli conflict. Liklider believed that any long-term changes were caused by an increase in OPEC at the placed oil price, rather than an embargo on the UAEP. On the other hand, Daniel Yergin said the embargo "will remake the international economy."
Severe consequences
In the long run, the oil embargo has changed the nature of Western policies towards expanding research, alternative energy research, energy conservation and more restrictive monetary policies to better fight inflation. Financiers and economic analysts were the only ones who actually understood the 1973 oil crisis system.
This increase in prices has had a significant impact on oil exporting countries and the Middle East, which for a long time has been dominated by industrial powers, which are believed to have taken control of vital commodities. Oil exporting countries began to accumulate enormous wealth.
The role of charity and the threat of Islamism
Some of the revenues were distributed in the form of assistance to other underdeveloped countries, whose economies were affected by higher oil prices and lower prices for their own export products amid falling demand for the West. Much went to the purchase of weapons, which exacerbated political tensions, especially in the Middle East. Over the following decades, Saudi Arabia spent more than $ 100 billion to help spread the fundamentalist interpretation of Islam, known as Wahhabism throughout the world, through religious charities such as the Al-Haramain Foundation, which often also distributed funds to violent Sunni extremist groups. such as Al Qaeda and the Taliban.
Impact on the auto industry
The increase in imported cars in North America has forced General Motors, Ford and Chrysler to introduce smaller and more economical models for domestic sales. The Chrysler, Ford Fiesta, and Chevrolet Chevette Dodge Omni / Plymouth Horizon had four-cylinder engines, and were designed for at least four passengers by the end of the 1970s. By 1985, the average American car had moved 17.4 miles per gallon, compared with 13.5 in 1970. Improvements remained, although the price of a barrel of oil remained constant at $ 12 from 1974 to 1979. Sales of large sedans for most automotive brands (excluding Chrysler products) recovered during the two model years of the 1973 crisis. Cadillac DeVille and Fleetwood, Buick Electra, Oldsmobile 98, Lincoln Continental, Mercury Marquis and several other luxury-oriented sedans became popular again in the mid-1970s. The only full-size models that could not be restored were lower price models such as the Chevrolet Bel Air and Ford Galaxie 500. Few models such as the Oldsmobile Cutlass, Chevrolet Monte Carlo, Ford Thunderbird and others sold well.
Economical imports were accompanied by large, expensive cars. In 1976, Toyota sold 346,920 cars (average weight of about 2,100 pounds), and Cadillac sold 309,139 cars (average weight of about 5,000 pounds).
Automotive revolution
Federal safety standards, such as the NHTSA Federal Safety 215 (related to safety bumpers) and compact devices, such as the 1974 Mustang I, were a prelude to renegotiating DOT categories of vehicles. By 1979, virtually all “full-size” American cars had shrunk, with smaller engines and smaller external dimensions. Chrysler completed the production of full-size luxury sedans in late 1981, switching to an all-wheel-drive auto line for the entire 1982.
The causes of the oil crisis were not limited to US oil embargoes. After World War II, most countries in Western Europe imposed duties on imports of motor fuel, and as a result, most cars made in Europe were smaller and more economical than their American counterparts. Towards the end of the 1960s, revenue growth supported the growth of automobile sizes.
The oil crisis has turned Western European buyers away from larger and less fuel efficient cars. The most notable result of this transition has been the growing popularity of compact hatchbacks. The only notable small hatchbacks built in Western Europe before the oil crisis were the Peugeot 104, Renault 5 and Fiat 127. By the end of the decade, the market had expanded thanks to the introduction of Ford Fiesta, Opel Kadett (sold as Vauxhall Astra in the UK), Chrysler Sunbeam and Citroën Visa. It seems that the mass transition of the population to compact cars was the only way to solve the 1973 oil crisis.