The OPEC Oil Crisis: Before the Beginning to After the End

Overview

During the 1973 OPEC Oil Price Shock, oil prices skyrocketed to an impossible level to the point where driving was banned on weekend nights.

Why it happened: Yom Kippur War

OPEC stands for Organization of the Petroleum Exporting Countries, an organization led by Arabs. An oil embargo was placed on the US after the events of the Yom Kippur War. During the Yom Kippur War, Israel was able to claim the Gaza Strip and other land, becoming a stronger militia power. In revolt, Egypt, Syria, and their allies set up a surprise attack on the holiest day of the Jewish Calendar. Because America supported Israel in this conflict, OPEC retaliated by placing an oil embargo.

American Consequences

For the average citizen, this made a huge impact on their lifestyles. Barrel prices rose by an outstanding 350% meaning the price of a barrel of oil went from three dollars to eleven dollars. This seems like a supply-side issue, but as one can predict without much thought, the demand side was hurt without a doubt. The price of oil for the average citizen became impossible with impossible waiting lines at gas stations with impossibly little supply of the good in the first place. Limited mobility. Unemployment. Frustration. Dollar devaluation. It seemed as though the hole grew wider and wider.

The graph below demonstrates the spike in the price of oil during times of this crisis.

Solution: Regulation

Like in most other times of economic crisis, the government stepped in and placed regulations. Driving limits were introduced and enforced, at a maximum of 55 MPH to use less gas. Weekend gas sales were banned. 20% of preexisting gas stations had not been able to purchase the goods and ran out. It was so severe that certain state governments banned the usage of Christmas lights. With regulations and limitations, average citizens had no choice but to eventually ration their resources and adapt to a struggling economy which eventually recovered as political tensions diminished.

Today this crisis is referred to as an energy crisis more than anything else. Although the economic state was detrimental at the time, many lessons can be learned from economic crises such as the OPEC Oil Crisis.