What happened 1970-1976 to the oil price and what were the reasons for that?

What happened 1970-1976 to the oil price and what were the reasons for that?What happened 1970-1976 to the oil price and what were the reasons for that?
The 1973 Oil Crisis began in earnest on October 17, 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced, as a result of the ongoing Yom Kippur War, that they would no longer ship petroleum to nations that had supported Israel in its conflict with Syria and Egypt (i.e., to the United States, its allies in Western Europe, and to Japan).





About the same time, OPEC members agreed to use their leverage over the world price-setting mechanism for oil in order to raise world oil prices, after attempts at negotiation with the ';Seven Sisters'; earlier in the month failed miserably. Due to the dependence of the industrialized world on crude oil, and the predominant role of OPEC as a global supplier, these price increases were dramatically inflationary to the economies of the targeted countries, while at the same time suppressive of economic activity. The targeted countries responded with a wide variety of new, and mostly permanent, initiatives to contain their further dependency. August 23, 1973 - In preparation for the Yom Kippur War, Saudi King Faisal and Egyptian president Anwar Sadat meet in Riyadh and secretly negotiate an accord whereby the Arabs will use the ';oil weapon'; as part of the upcoming military conflict[4].


Sept. 15, 1973 - 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鈥?0 - 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% to $3.65 a barrel and announce production cuts.


Oct. 17 - OAPEC 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鈥?8 - The Arab oil embargo is extended to the Netherlands.


Nov. 5 - Arab producers announce a 25% 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. Saudi oil minister Yamani promises a 10% OPEC production rise.


Jan. 7鈥?, 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鈥?4 - 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.


Apr. 15 - The price at the pump in the United States was US$3.20 per gallon (US$0.85 per litre) at the end of 1973. The effects of the embargo were immediate. OPEC forced the oil companies to increase payments drastically. The price of oil quadrupled by 1974 to nearly US$12 per US barrel (75 US$/m鲁).[5]





This increase in the price of oil had a dramatic effect on oil exporting nations, for the countries of the Middle East who had long been dominated by the industrial powers were seen to have acquired control of a vital commodity. The traditional flow of capital reversed as the oil exporting nations accumulated vast wealth. Some of the income was dispensed in the form of aid to other underdeveloped nations whose economies had been caught between higher prices of oil and lower prices for their own export commodities and raw materials amid shrinking Western demand for their goods. Much of it, however, fell into the hands of elites who reinvested it in the West or enhanced their own well-being. Much was absorbed in massive arms purchases that exacerbated political tensions, particularly in the Middle East.





OPEC-member states in the developing world withheld the prospect of nationalization of the companies' holdings in their countries. Most notably, the Saudis acquired operating control of Aramco, fully nationalizing it in 1980 under the leadership of Ahmed Zaki Yamani. As other OPEC nations followed suit, the cartel's income soared. Saudi Arabia, awash with profits, undertook a series of ambitious five-year development plans, of which the most ambitious, begun in 1980, called for the expenditure of $250 billion. Other cartel members also undertook major economic development programs.





Meanwhile, the shock produced chaos in the West. In the United States, the retail price of a gallon of gasoline rose from a national average of 38.5 cents in May 1973 to 55.1 cents in June 1974. Meanwhile, New York Stock Exchange shares lost $97 billion in value in six weeks.





With the onset of the embargo, U.S. imports of oil from the Arab countries dropped from 1.2 million barrels (190,000 m鲁) a day to a mere 19,000 barrels (3,000 m鲁). Daily consumption dropped by 6.1% from September to February, and by the summer of 1974, by 7% as the United States suffered its first fuel shortage since the Second World War.[citations needed]





Underscoring the interdependence of the world societies and economies, oil-importing nations in the noncommunist industrial world saw sudden inflation and economic recession. In the industrialized countries, especially the United States, the crisis was for the most part borne by the unemployed, the marginalized social groups, certain categories of aging workers, and increasingly, by younger workers.[citation needed] Schools and offices in the U.S. often closed down to save on heating oil; and factories cut production and laid off workers.[citation needed] In France, the oil crisis spelt the end of the Trente Glorieuses, 30 years of very high economic growth, and announced the ensuing decades of permanent unemployment.





The embargo was not uniform across Europe. Of the nine members of the European Economic Community, the Dutch faced a complete embargo (having voiced support for and supplied arms to Israel and allowed the Americans to use Dutch airfields for supply runs to Israel), the United Kingdom and France received almost uninterrupted supplies (having refused to allow America to use their airfields and embargoed arms and supplies to both the Arabs and the Israelis), whilst the other six faced only partial cutbacks. The UK had traditionally been an ally of Israel, and Harold Wilson's government had supported the Israelis during the Six Day War, but his successor, Ted Heath, had reversed this policy in 1970, calling for Israel to withdraw to its pre-1967 borders. The members of the EEC had been unable to achieve a common policy during the first month of the Yom Kippur War. The Community finally issued a statement on 6 November, after the embargo and price rises had begun; widely seen as pro-Arab, this statement supported the Franco-British line on the war and OPEC duly lifted its embargo from all members of the EEC. The price rises had a much greater impact in Europe than the embargo, particularly in the UK (where they combined with industrial action by coal miners to cause an energy crisis over the winter of 1973-74, a major factor in the breakdown of the post-war consensus and ultimately the rise of Thatcherism).[citations needed]





Despite being a target of the embargo as well, Japan fared particularly well in the aftermath of the world energy crisis of the 1970s compared to other oil-importing developed nations. Japanese automakers led the way in an ensuing revolution in car manufacturing. The large automobiles of the 1950s and 1960s were replaced by far more compact and energy efficient models. (Japan, moreover, had cities with a relatively high population density and a relatively high level of transit ridership.) [citations needed]





A few months later, the crisis eased. The embargo was lifted in March 1974 after negotiations at the Washington Oil Summit, but the effects of the energy crisis lingered on throughout the 1970s. The price of energy continued increasing in the following year, amid the weakening competitive position of the dollar in world markets; and no single factor did more to produce the soaring price inflation of the 1970s in the United States.[What happened 1970-1976 to the oil price and what were the reasons for that?
2 words: opec, monopoly