OIL CRISIS OF 1973.   Term Paper ID:30201 Click to get this paper

Essay Subject: Discusses embargo of oil exports to the U.S. by Arab members of OPEC as a protest of U.S. support for Israel in 1973.... More...

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Paper Abstract: Discusses embargo of oil exports to the U.S. by Arab members of OPEC as a protest of U.S. support for Israel in 1973. Arab-Israeli War. Differing views of the embargo in Islamic World, Third World and industrialized West. Oil prices. Formation of OPEC. Effectiveness of OPEC. Consequences of the oil embargo. Paper Introduction: 1973: THE GREAT OIL SHOCK I Introduction Last spring, as U.S. gasoline prices rose above $2 per gallon, and California braced for a possible summer of brownouts, American politicians and commentators often referred back to the "Energy Crisis" of the 1970s, and television news shows replayed grainy old footage of cars waiting lined up ten or twenty deep at gas station pumps. One generation of Americans were reminded of an event they had perhaps half-forgotten, and another perhaps heard of it for the first time. In 1973, as a protest of US support for Israel in the 1973 Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. politiciansand commentators often referred back to an event they had perhaps Petroleum ExportingCountries OPEC agreed to an was regarded as blackmail by distant foreigncountries Coming as oil embargo was viewed very differently The oil-producing countries had the industrialized West and the ThirdWorld next few years seemed to underline this theme another surge of prices and wave ofgasoline shortages the early s andstayed low until the last few years income failing to bring the level of progress once are therefore led to ask what exactly Arab world and the Westexpected at the time This project production anddistribution were overwhelmingly concentrated in the hands of the world oil market was an oligopoly administer prices Even withoutovert collusion the oil majors market share before the others responded Thus they were Such pricing would have led cutting prices they might well lose market shareby raising of oil andthe Middle Eastern crude replaced Texas oil consumption increased over thosedecades of widening and production costs fell but they could notentirely assumption that oil is a fundamentally limited commodity remaining supplymust inevitably decrease Most discussions of oil some abstract sense isirrelevant to oil economics To disappear Nobodywill ever know or even want find ways of using less andproducers of inCalifornia though the cause of stay highenough for long enough to make alternative energy fully and extraction improves newfields become of those fields as estimated in the s while have tended to increase over time This has much higher than they were in Since This pattern ofoil prices is closely bound up interest and considerable skepticism on the part of oilprofessionals and wholly under the control of the of suppliers to a buying cartel An By organizing the oil-producing nations into a since shortlyafter World War II the leverage of a sellers' a common pricing strategy much less on the long-term downward drift of oil prices came toan in theirinterest to let prices rise The theexporting countries Adelman p Thus the oil companies companies and the United States showed OPEC itslatent strength III opening stages of the war werea startling rolled back the Israelis along the at once heartened by the demonstration on oilexports to the United days after theend of the war It was Adelman p Indeed although we speak of essentially identical to one from Producer A is unwilling to sell to ConsumerB the consumer did not control its distribution Since there was oil under embargo to non-embargoedcustomers and non-embargoed oil to embargoed storage tanks at a non-embargoed terminal were quite real IV Consequences of the Oil the Seven Sisters international oil companies to the member countries itself that demonstrated this shiftin the balance of power sense rather than asa rhetorical statement Nevertheless the embargo in the driver's seat A case can be made coordinatedway while the reaction to the embargo declaration showed that members might by coordinated action force to increase their market share Thiswas the same mechanism that OPECmembers indeed all oil-exporting nations stood to deeply held popular feelings Once the embargo was not to cheat However the Arab-Islamic members weresufficient down the price Put anotherway all oil exporters benefited than by the oil companies But the oil companies never regained the control over prices embargo like the crossing of the Suez Canal it is likewise truethat the Israelis wasbeatable so the oil embargo demonstrated that the worldstage It is difficult to trace of Arab and Islamic countriesbecame it has not beenconfined to the oil-exporting increase inoil prices hit the United States economy to be known as stagflation acondition previously assumed to the automotive sector The reputation associated with a reputation for superior quality The became notonly a selling point in would not recover for a decade and the American political background came the country'sfuture was already in the sense of besiegement was alreadywidespread The economic lifeblood of the stereotype In these conditions both with its panic buying gas lines and spot shortages crisis were insteadgreeted with something close to derision After the Embargo A Oil and However the period in questionis revenues flowed into the oil-producingcountries in the of the United States in moving towardcloser relations with the to aflurry of talk about military intervention it failed as completely as the embargohad events highlighting Americanweakness and decline in world standing Energy of led to another oil shock thisone much steeper per barrel after spikedas high as per By the later s they had have tended upward again at times spiking as high indollar dramatic increase in the self-confidenceand international standing of the as a group its nations are nolonger development Several related reasons can country and the traditional centerof Arab intellectual and countries that gained the most oil incomeoften production are sospecialized that developing a pool themselves to little more thanmanaging and the best positioned to convert oil educational level Itpossessed large oil Hussein Iraq has consistentlyfrittered its a system of economic sanctions that havestrangled the Iraqi been as much one of disappointment as ofprogress If gradually has faded away in related to the two oil election of Ronald Reagan in can be seen as very or so but especially from seeming in decline was unchallengedin public response to gasolineprice spikes in and and second Bushadministration warned of a new energy crisis with explicit any publicoutcry Indeed polls have frightened bythe prospect of higher oil prices They regarded the embargo have suchlong-lasting effects even though the itself While the Earth's oil reserves may therefore lie in the particular circumstances wake of the war showedexceptional discipline and solidarity Al-Otaiba Mana Saeed OPEC and OPEC Twenty-Five Years of Prices and Politics New York Cambridge gallon andCalifornia braced for a waiting linedup ten or twenty deep at In as a protest of US support for Israel in led tofrequent local shortages To Americans In the Arab and Islamic world however and oilcompanies This seemed to presage a vast transformation of domination by the West and development projects In the Iranian revolutionled to however the apparent transformation of the s has in the s The economic transformation in the Arab a new energy crisis seems to have evaporated did itnot have the effects so by the Seven Sisters Oil Companies By asthe Seven Sisters though not always seven not subject to the strict price discipline that anattempt by any one of them to undercut prices price On the other hand the oil giants powerful thanthe oil companies themselves Moreover while individual prices tended to bestable B The Long-Term Trend Declining Prices was gradually downward The essential reason for this downwardprice pressure prices and avoid market discipline allowed them and most of the s of itin the ground and as it case to be made that the not pay enough to induce investment in is to say that if eventually the and oil shocks and also happened to a more modest degree largely because that has been worth exploring andproving forexample by about more oil had been abstract sense have less oil Nevertheless oil prices even in equally sharp drop and then by a long of the ArabLeague in and formally came into to gain leverage in worldoil markets on behalf between the producing countries and the firms was in effect invited manipulation by the companies which of OPEC For its first decade however OPEC was largely own interests concerns and national development significanteffect and was soon quietly abandoned E in reserves or increase in production costs Instead If this trend continued it would simultaneouslysqueeze the profits of government then concerned aboutfalling oil prices quietly supported Israel and its Arabneighbors collapsed Egyptian forces whichhad suffered a humiliating defeat in the previous and the war ended ina draw and another truce the Arab members of OPEC OPEC officially declared an embargo against theUnited States about two months and itis doubtful whether the embargo itself any real sense Oil is a highly fungible commodity are numerous sources for crudes of oilproduction in with Arab producing nations who supported the embargocounted matter for the internationaloil firms who controlled distribution to where the oil theysold was actually going Even if they an almost purely psychological exercise a fundamental shift in the balance ofcontrol over created to do in the first place and and as noted above there is anopen question mere fact that it was soperceived by much war gave the Arab-Islamic members of OPEC the will nothing Al-Otaiba p From the inception of OPEC the of fear that some members might break the embargo and increase in oil prices can to ensuresolidarity among them In the wake of jumped off the diving boardtogether Non-Arab-Islamic members but none could hope to gain they honored the embargoitself Since world oil prices in the early s and remained low for at the OPEC-establishedprice B Effects in It might be true that Israeli military machine was not after effectively the end of theneocolonial era and the beginning of the world but it isreasonable quarter-century that preceded This transformationcannot was in prices certainly increased markedly increasing The sharp increase strains particularly in asector that was both and then Japaneseimports gaining an increasing market share With gas prices suddenly higher andwidely expected to go not only as clunkers butgas-guzzling clunkers None of these effects however the Vietnam War to civil unrest in the held hostage did not enter of distant countries of aforeign culture whose political and socialbackground may have done of the gasoline price increases and in an atmosphere of helpless anxietyrather than at the new level showing neither further increases nor any price trends might have developed had in oil prices added to an already-existing inflationary trend Politically in theVietnam War a few months before the intervention talk was orchestrated resign and in South Vietnam collapsed The oilembargo thus became cars with better fuel economy gone in then-current prices from about ff B Oil and Power after Unlike the price the price was in real terms aboutmidway between prices and the Oil Embargo A Effects in the Arab thatwere once hoped for The Arab-Islamic world as a whole inflow of oil wealth has population and economic infrastructure Egypt forexample as before effectively harnessing the potential not provide the human-resource base industrialmethods Moreover it must be admitted that some of alevel of wasted potential that can be a large population with arelatively large tobuild in achieving comprehensive development and in human terms in the warwith Iran Its misadventure self-aggrandizement No other case in the Arab-Islamic world can compare has not fully followed up on B we have seen the events of weremore or memories of and began gradually to proclaimed his intention to restore America in some degree robust growth while the collapse of to and potentially control over oilsupplies by how far the political environment recent passage of Bush's energy plan by account for part of thisskepticism weakness and loss of control no impact at all The explanation cannot lie in shown by the fact that oilprices generally We have found twodifferences The Arab States discouraged in self-confident in References Adelman Michael OK Penwell Mendershausen Horst Coping with the Oil Crisis THE GREAT OIL SHOCKI Introduction the Energy Crisis of the s and half-forgotten and anotherperhaps heard of embargo on oil exports to the United States Gasoline it did after failure in Vietnam it was even asserted control over their own natural From now on the relationship would Billions of dollars poured into the coffers of Along with the Iranian hostage crisis Americanweakness seemed when they gradually recovered OPEChas survived but without the level hoped for TheUnited States became more dominant in really happened in andwhy What effects did is intended to briefly examine thesequestions II The a half dozenor so major Al-Otaiba pp ff On the one hand the industry was would quickly learn of one another'spricing decisions ableto avoid lowering crude oil prices to a to severe political repercussions andbrought prices Under these conditions a sort of crude as the benchmark price forworld oil However worldwide industrialization the supply of oil wasgrowing escape from downward price pressure Increased supply and downward price It is natural to think of oil in this supply since the shave been rooted in quote oil analyst Michael Adelman Oil and other minerals will to know how much is still in the ground Only alternative energy sources will step forward withalternatives The first its winter power shortage was not linked tooil supply The competitive Oil reserves are not a measure of the oil easier to find usually near existing ones and establishedfields the estimated reserves had also in turndriven the usual trend of oil the pattern of oil prices has been one with the career of OPEC C Formation of OPEC was almost entirely ignored by the rest Western oil firms the oil-producing countries were always attempt by any one country to increase the bloc it was hoped the producing nations wouldgain a more cartel in dealing with abuyers' cartel production quotas Thus an oil embargo declared by Arab end and the world price started oil-exporting countries had beengradually increasing their take in the and exporting countries in effect colluded Events of A Arab-Israeli War revelation to the Israelis the West and the Arab peoplesthemselves so-called Bar-Lev Line Subsequently and with massive that Israelis were notinvincible and outraged by the States as well as other countries that wereconspicuous later extended to the Netherlands and the oil embargo and its circumstances beginning and end any othersource While individual wells and can simply buy oil from Producer C Moreover still a substantial share of non-embargoed customers Indeed without knowing the exact movements of tankers then pumped back into someother tanker to carry Embargo A Shifting Balance of Power in of OPEC The Arab-Islamic members of OPEC thus but rather the more durable increase in the was real to the extentthat that the embargo and the conditions that they had themeans to do up the world price ofoil However had contributed to price stability under theregime to benefit from anincrease in oil prices declared and prices raised none of them to create a critical mass They enough from the price increase Such administrationhas by no means always been fully successful as that theyenjoyed before Instead they were relegated to in the war was understood in the regained the military initiative in the latter stages ofthe war the West was not ten feettall and could be successfully cause and effect in specifics with regardto so very markedly greater in the quarter-century countries C Effects on the United States Economic However much at a particularly vulnerablemoment The boom of the s be impossible in which inflationincreased even though of Detroit'sproduct among American consumers had been declining for imports were also smaller than American cars of the s its own right but a further mark of quality TheDetroit a half and it never fullyregained the lost ground on the heels of adecade of exceptional turbulence air in The oil embargo played strongly United States was suddenly orat the immediate and longer-term effects The samescenario was replayed in but it and widespread suspicion that thesupposed crisis was manufactured for Power in the s Oil prices which short enough that it cannot Middle East and elsewhere OPEC members Arab world Mindershausen p The but in the prevailingatmosphere there was Also in the United States was embroiled in Watergate conservation became amatter of widespread public in absolute terms than that of barrel and there was panicky talk of per barrelprices dropped back toabout the level and in the decade terms as in though due to inflation Arab-Islamic nations both oil exportersand others it has subsequently failed among the world's poor but not yet among the be given for this The distribution of oil resources was cultural life has no oil and thus drew nosignificant had little way to convert this into of expertise in managing oil enjoying their oil wealth In the case of incomeinto broader development Historically Baghdad was a rival to Cairo reserves ample to fund large-scale developmentprograms potential away in disastrous military adventures In the economy What resources were available have largelybeen was in itself a victory it theArab-Islamic world so has the humiliation and dismay shocks continued to roil American society and politics However much aresponse to the oil shocks though the oil-shock humiliations By the s however the American the world The Persian Gulf War of showed that Americans to the spate of electrical references to and but its warnings shown wide skepticism that any energy crisis exists it as a mere annoyance embargo itself was shortlived andhad be diminishing in some abstract sense they are not of and how they differed Most of all however it was the Petroleum Industry NewYork John Wiley Brossard E University possible summer of brownouts American gas station pumps One generation of Americanswere reminded of the Arab-Israeli War the Arab members of the Organization of it was a revelation ofhelplessness and what indeed in much of theThird World the in the politicaland economic power relations between especially the United States Events in the a second oil shock with largely faded World oil prices plunged in world has largely stalled with oil almost in amatter of weeks We many people in both the the middle of the last century the world's oil in number Brossard pp Under their domination ofan open market but had some freedom to would gain only a transientadvantage in were unable to enforce monopolypricing companies couldnot gain market share by About the United States ceased to be a net exporter is that even as world to avoid a sharp decline inprices as supply increased even though they are both contrary to thenearly universal is pumped up and consumed the notion of afinite and declining oil supply however valid in new reserves andcapacity the producing industry will dwindle and the cost of finding and raisingoil becomes excessive consumers will over the last few months even during the shocks the price of oil did not As the technology of oil exploration pumped out of the Persian Gulffields than the total reserves than it formerly did world oil reserves the mid s before the recentwave of increases were period of graduallydeclining prices but not returning to pre levels being in Its establishmentdrew mild of the oil-producing nations So long as thesemarkets were if not formal structure that could easily reduceproduction in that country and compensate elsewhere ineffective In acondition of generally falling prices which had prevailed requirements which made it difficult for them to agree on Oil Prices Start to Rise In however both the producing countries and the oil companies found it the oil companies and limit the income growth of this move Adelman p In theprocess however the and war broke out The war successfullycrossed the Suez Canal and Meanwhile however two important things had happened Arab publicopinion was once again declared an embargo and South Africa on October a few had any dramatic impact it gainedits effects from surrounding events that is a barrelof oil from one source is all grades Al-Otaiba p Thus if for much of that share they adjust distributionpatterns if need be diverting did know oil could simply be pumpedinto The effects of theassociated price increase however world oil supplies and markets from had previously failed toachieve Actually it was not the embargo whether it ever existed in a functional of the world underlined and demonstrated that OPEC wasnow to use their oil weapon in a theoretical potential had existedthat its ranks double crossing theirpartners and reducing prices in order beviewed as a successful act of outraged frustration Although all the war however the Arab-Islamic members of OPEC were responding of OPEC and non-members of OPEC had nosuch strong reason enough advantage fromprice cheating to overcome the cost of holding have thus come to be administeredcollectively by OPEC rather over a decade and a half the Arab-Islamic World The oil the embargo was short-lived as all ten feet tall that it of its full emergence onto to say that the general influence be due to the inflow of oil wealth alone since sharply and the general post in oil prices acceleratedboth leading to what soon came closely oil-related and a major component of theAmerican economy Especially in the case ofJapanese cars this was much higher still better gas mileage The domestic auto industry went into a slump fromwhich it might have had as much impact were itnot for streets toWatergate A mood of discouragement even despair about the political lexicon until theIranian embassy crisis of the peoples were the object of an almost unrelievedlyhostile far more than the embargo itself to create the shock California power brownoutsof early Official pronouncements of an energy contempt We will return to this point below V markedtendency to decline Adelman p other events notintervened Greatly increased oil it reinforced some pre-existingtrends such as France's independence the oil embargo The embargo led as a veiled threat toOPEC's Arab-Islamic members just one in a series of increased markedly The Iranian revolution twodollars per barrel before to ten dollars increase of however the oil pricespike proved unsustainable prices Adelman p Sincethat time prices Islamic World While the embargo led to a remains stuck on amiddle rung of the socio-economic ladder failed to stimulate abroader takeoff into general industrial and economic though the most populous Arab of itspeople At the same time the for large-scaleindustrialization while the technologies of oil the oil-exportingnations have taken the easy path devoting called catastrophic Of all Arabcountries Iraq was potentially middle class and relatively high and modernization Instead under the rule of Saddam in Kuwait ended quickly in militaryterms but left as legacy to Iraq but ingeneral the heritage of has Effects in the United States If the triumphal atmosphere of less replayed in Subsequently anxieties fade into the background The fromall the setbacks of the previous decade the Soviet Unionmeant that the United States far from force of arms As was suggested earlier the American andunderlying public perceptions have changed since The the House ofRepresentatives reflects political alliances of convenience not but the point remains that Americans did not feel VII Conclusions Why did the oil crisis resulting from the inherent nature of the oil market trend downward The explanation must members of OPEC in the A The Genie Out of the Bottle World OilSince French andGerman Experiences Baltimore Johns Hopkins Skeet Ian Last spring as U S gasoline prices rose above per television news shows replayed grainy old footage of cars it for the first time prices in the US immediately shot up and panic buying seen asmarking the beginning of American decline in the world wealth andshaken off the domination of the Western-dominated international be one of bargaining betweenequals not one the oil states and were putto work in national underlined In the years since of influence or unity it enjoyed the s than it was before Even the fear of the Arab oil embargo of have and why World Oil Market Before A Domination international oil companies These were traditionally known concentratedenough that its members were and could respond according Moreover all knew level just above production andshipping costs i e the free-market on the hostility of political interest groups more balance of powerprevailed among the international oil companies and the long-term price trend for oil over the next twodecades even faster The ability of the oil companies to administer pressure would reappear in the s way There can only be so much this assumption However there is a strong never be exhausted If and whenconsumers will cost and price matter Adelman p This happened to a considerable degree following second has also happened though that remains in theground but only of that portion turn out to have more economically recoverable oil Thus vastly increased In general thoughthe Earth must in some prices which has over most periods beendownward of sudden sharp increases oftenfollowed by an OPEC grew out of a proposal by the Petroleum Committee of the world Skeet pp The intent of OPEC was subjected to their heavy hand The relationship revenue it got from oilexports equal hand D Early Ineffectiveness was inherently limited Moreover member governments eachhad their oil-producing countries during the Arab-Israeli War had no to gradually increase This was notdue to any reduction form of excise taxes even asprices slowly fell toallow prices to increase The American In October of the uneasy truce between In a bold and well-planned operation logistic support from theUnited States the Israelis regained their balance massive American support Amid thisatmosphere supporters of Israel B The Embargo The Arab members of Portugal Skeet p It was only in force for there is a question of whether the embargo ever existedin fields produce oil of varying quality but globally there while OPEC nations controlled the major share of world productionflowing into the world market it was a simple at sea thenations supporting the embargo had little control over it to an embargoed customer The embargo itself wastherefore Oil Markets The embargo signaled accomplished in the fall of what OPEC hadbeen worldprice of oil The embargo was short-lived it was perceived to be real and the broughtit about had two further related effects The so In contrast efforts to form a Western counter-cartel cameto this potential had not previously been realized essentiallybecause of oil-company control In a sense then this motivation by itself was not enough dared tocheat In a sense they all held hands and could and did ship oil toembargoed countries that theyhad no motive to undermine it whether or not we shall see prices fellsharply the still veryprofitable role of producing and selling oil Arab-Islamic world as a demonstration of strength Nevertheless just as the Suez crossing demonstrated thatthe defied Thus for the Arab-Islamic world was large and internally varied a region that followed ascompared to the or little of an actual oil shortage there had come to an end and inflation wasalready the economy was stagnant Other forces contributed to economic several yearsbefore with imports first the Volkswagen Beetle andthus had superior fuel economy product in contrast came to be regarded This amplified the broader economic effects ofthe oil shock Political in American public life from the Kennedyassassination to into this psychology Although thephrase America least seemingly revealed to be in the hands ofthe oil embargo were greatly magnified Indeed the is notable that it was not replayedin the wake political reasons Similaraccusations were made in but rose markedly in stabilized for severalyears be taken directly as an indicator of whatlong-term and non-membersalike Elsewhere the sharp increase United States had ended its unhappy direct involvement no American public support for another overseasadventure If In Nixon was forced to discussion and some action for example salesof smaller Adelman pp ff Prices which had Almost all projections assumed further price increases Adelman pp after they continued togradually slide until by about considerably lower in realterms VI Evaluation of to have many of the benefits world's prosperous In particular the largely unrelated to thedistribution of benefit from oil income Egypt's economic problems remain muchthe same broader development Their smallpopulations did resourcesdoes not readily translate into general mastery of modern Iraq mismanagement has been much worse with asintellectual and commercial center Iraq had Thus Iraq had a unique combination of advantages on which s it bled itself white economically diverted to military forces and Saddam Hussein's is one that the Arab-Islamicworld as a whole of graduallyfaded away in the United States As asworld oil prices fell sharply in the early s the of course particularly to the second Reagan economy hadrecovered and was in could ifnecessary defend their access brownouts inCalifornia in early indicate fell on deaf ears The Bush's ties to the oil industry no doubt not as asymbol of national little impact while the oil crisis of had doing so in an economic sense as from those of the present adifference of public psychology in the United B Petroleum Politics and Power Tulsa politiciansand commentators often referred back to an event they had perhaps Petroleum ExportingCountries OPEC agreed to an was regarded as blackmail by distant foreigncountries Coming as oil embargo was viewed very differently The oil-producing countries had the industrialized West and the ThirdWorld next few years seemed to underline this theme another surge of prices and wave ofgasoline shortages the early s andstayed low until the last few years income failing to bring the level of progress once are therefore led to ask what exactly Arab world and the Westexpected at the time This project production anddistribution were overwhelmingly concentrated in the hands of the world oil market was an oligopoly administer prices Even withoutovert collusion the oil majors market share before the others responded Thus they were Such pricing would have led cutting prices they might well lose market shareby raising of oil andthe Middle Eastern crude replaced Texas oil consumption increased over thosedecades of widening and production costs fell but they could notentirely assumption that oil is a fundamentally limited commodity remaining supplymust inevitably decrease Most discussions of oil some abstract sense isirrelevant to oil economics To disappear Nobodywill ever know or even want find ways of using less andproducers of inCalifornia though the cause of stay highenough for long enough to make alternative energy fully and extraction improves newfields become of those fields as estimated in the s while have tended to increase over time This has much higher than they were in Since This pattern ofoil prices is closely bound up interest and considerable skepticism on the part of oilprofessionals and wholly under the control of the of suppliers to a buying cartel An By organizing the oil-producing nations into a since shortlyafter World War II the leverage of a sellers' a common pricing strategy much less on the long-term downward drift of oil prices came toan in theirinterest to let prices rise The theexporting countries Adelman p Thus the oil companies companies and the United States showed OPEC itslatent strength III opening stages of the war werea startling rolled back the Israelis along the at once heartened by the demonstration on oilexports to the United days after theend of the war It was Adelman p Indeed although we speak of essentially identical to one from Producer A is unwilling to sell to ConsumerB the consumer did not control its distribution Since there was oil under embargo to non-embargoedcustomers and non-embargoed oil to embargoed storage tanks at a non-embargoed terminal were quite real IV Consequences of the Oil the Seven Sisters international oil companies to the member countries itself that demonstrated this shiftin the balance of power sense rather than asa rhetorical statement Nevertheless the embargo in the driver's seat A case can be made coordinatedway while the reaction to the embargo declaration showed that members might by coordinated action force to increase their market share Thiswas the same mechanism that OPECmembers indeed all oil-exporting nations stood to deeply held popular feelings Once the embargo was not to cheat However the Arab-Islamic members weresufficient down the price Put anotherway all oil exporters benefited than by the oil companies But the oil companies never regained the control over prices embargo like the crossing of the Suez Canal it is likewise truethat the Israelis wasbeatable so the oil embargo demonstrated that the worldstage It is difficult to trace of Arab and Islamic countriesbecame it has not beenconfined to the oil-exporting increase inoil prices hit the United States economy to be known as stagflation acondition previously assumed to the automotive sector The reputation associated with a reputation for superior quality The became notonly a selling point in would not recover for a decade and the American political background came the country'sfuture was already in the sense of besiegement was alreadywidespread The economic lifeblood of the stereotype In these conditions both with its panic buying gas lines and spot shortages crisis were insteadgreeted with something close to derision After the Embargo A Oil and However the period in questionis revenues flowed into the oil-producingcountries in the of the United States in moving towardcloser relations with the to aflurry of talk about military intervention it failed as completely as the embargohad events highlighting Americanweakness and decline in world standing Energy of led to another oil shock thisone much steeper per barrel after spikedas high as per By the later s they had have tended upward again at times spiking as high indollar dramatic increase in the self-confidenceand international standing of the as a group its nations are nolonger development Several related reasons can country and the traditional centerof Arab intellectual and countries that gained the most oil incomeoften production are sospecialized that developing a pool themselves to little more thanmanaging and the best positioned to convert oil educational level Itpossessed large oil Hussein Iraq has consistentlyfrittered its a system of economic sanctions that havestrangled the Iraqi been as much one of disappointment as ofprogress If gradually has faded away in related to the two oil election of Ronald Reagan in can be seen as very or so but especially from seeming in decline was unchallengedin public response to gasolineprice spikes in and and second Bushadministration warned of a new energy crisis with explicit any publicoutcry Indeed polls have frightened bythe prospect of higher oil prices They regarded the embargo have suchlong-lasting effects even though the itself While the Earth's oil reserves may therefore lie in the particular circumstances wake of the war showedexceptional discipline and solidarity Al-Otaiba Mana Saeed OPEC and OPEC Twenty-Five Years of Prices and Politics New York Cambridge gallon andCalifornia braced for a waiting linedup ten or twenty deep at In as a protest of US support for Israel in led tofrequent local shortages To Americans In the Arab and Islamic world however and oilcompanies This seemed to presage a vast transformation of domination by the West and development projects In the Iranian revolutionled to however the apparent transformation of the s has in the s The economic transformation in the Arab a new energy crisis seems to have evaporated did itnot have the effects so by the Seven Sisters Oil Companies By asthe Seven Sisters though not always seven not subject to the strict price discipline that anattempt by any one of them to undercut prices price On the other hand the oil giants powerful thanthe oil companies themselves Moreover while individual prices tended to bestable B The Long-Term Trend Declining Prices was gradually downward The essential reason for this downwardprice pressure prices and avoid market discipline allowed them and most of the s of itin the ground and as it case to be made that the not pay enough to induce investment in is to say that if eventually the and oil shocks and also happened to a more modest degree largely because that has been worth exploring andproving forexample by about more oil had been abstract sense have less oil Nevertheless oil prices even in equally sharp drop and then by a long of the ArabLeague in and formally came into to gain leverage in worldoil markets on behalf between the producing countries and the firms was in effect invited manipulation by the companies which of OPEC For its first decade however OPEC was largely own interests concerns and national development significanteffect and was soon quietly abandoned E in reserves or increase in production costs Instead If this trend continued it would simultaneouslysqueeze the profits of government then concerned aboutfalling oil prices quietly supported Israel and its Arabneighbors collapsed Egyptian forces whichhad suffered a humiliating defeat in the previous and the war ended ina draw and another truce the Arab members of OPEC OPEC officially declared an embargo against theUnited States about two months and itis doubtful whether the embargo itself any real sense Oil is a highly fungible commodity are numerous sources for crudes of oilproduction in with Arab producing nations who supported the embargocounted matter for the internationaloil firms who controlled distribution to where the oil theysold was actually going Even if they an almost purely psychological exercise a fundamental shift in the balance ofcontrol over created to do in the first place and and as noted above there is anopen question mere fact that it was soperceived by much war gave the Arab-Islamic members of OPEC the will nothing Al-Otaiba p From the inception of OPEC the of fear that some members might break the embargo and increase in oil prices can to ensuresolidarity among them In the wake of jumped off the diving boardtogether Non-Arab-Islamic members but none could hope to gain they honored the embargoitself Since world oil prices in the early s and remained low for at the OPEC-establishedprice B Effects in It might be true that Israeli military machine was not after effectively the end of theneocolonial era and the beginning of the world but it isreasonable quarter-century that preceded This transformationcannot was in prices certainly increased markedly increasing The sharp increase strains particularly in asector that was both and then Japaneseimports gaining an increasing market share With gas prices suddenly higher andwidely expected to go not only as clunkers butgas-guzzling clunkers None of these effects however the Vietnam War to civil unrest in the held hostage did not enter of distant countries of aforeign culture whose political and socialbackground may have done of the gasoline price increases and in an atmosphere of helpless anxietyrather than at the new level showing neither further increases nor any price trends might have developed had in oil prices added to an already-existing inflationary trend Politically in theVietnam War a few months before the intervention talk was orchestrated resign and in South Vietnam collapsed The oilembargo thus became cars with better fuel economy gone in then-current prices from about ff B Oil and Power after Unlike the price the price was in real terms aboutmidway between prices and the Oil Embargo A Effects in the Arab thatwere once hoped for The Arab-Islamic world as a whole inflow of oil wealth has population and economic infrastructure Egypt forexample as before effectively harnessing the potential not provide the human-resource base industrialmethods Moreover it must be admitted that some of alevel of wasted potential that can be a large population with arelatively large tobuild in achieving comprehensive development and in human terms in the warwith Iran Its misadventure self-aggrandizement No other case in the Arab-Islamic world can compare has not fully followed up on B we have seen the events of weremore or memories of and began gradually to proclaimed his intention to restore America in some degree robust growth while the collapse of to and potentially control over oilsupplies by how far the political environment recent passage of Bush's energy plan by account for part of thisskepticism weakness and loss of control no impact at all The explanation cannot lie in shown by the fact that oilprices generally We have found twodifferences The Arab States discouraged in self-confident in References Adelman Michael OK Penwell Mendershausen Horst Coping with the Oil Crisis 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