1973 Oil Crisis: When the Black Gold Stopped Flowing

In the early 1970s, changes in the Middle East created a severe political and economic crisis that affected the entire Western world.

By Hrothsige Frithowulf - History Editor
1973 oil crisis
A "car-free Sunday" in Europe in 1973.

Early in the 1970s, the Middle East witnessed significant political and economic unrest that reverberated across the entire Western world. Israel faced mounting international pressure following the Six-Day War, which commenced in 1967. During this war, Israel gained control of the Sinai Peninsula, the Golan Heights, and occupied the Gaza Strip, the West Bank, and East Jerusalem. Arab nations swiftly demanded the return of the seized territories. However, under the leadership of Golda Meir, Israel fell into a false sense of security after the passing of its arch-enemy, Egyptian President Gamal Abdel Nasser.

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Warnings about possible retaliation from the Arab world went unheeded. Meir and the Labor government in power at the time rejected even a peace offering from the newly elected Egyptian President Anwar Sadat, who, in 1970, stated his desire to forge a peace treaty with Israel in exchange for Israel ceding the Sinai Peninsula back to Egypt.

The rejection of this offer heightened tensions in the Middle East and increased the likelihood of a coordinated Egyptian-Syrian attack on Israel. On Yom Kippur, the holiest festival for the Israelites, on October 6, 1973, Egypt and Syria ultimately launched an attack on Israel. After a temporary shock, Israel responded forcefully and, three weeks later, stood with its forces just 37 miles (60 km) from Damascus and 62 miles (100 km) from Cairo. However, the Arab states were far from defeated and were exerting a much stronger form of pressure than their troops: oil.

How Did the 1973 Oil Crisis Begin?

In response to the Yom Kippur War, which is also known as the October War, the Organization of Petroleum Exporting Countries (OPEC) made a significant decision on October 17, 1973. They decided to reduce oil output by 5% from the levels recorded in September 1973. The Arab countries’ substantial control over the oil market facilitated this decision. The oil-exporting Arab nations declared a significant reduction in their oil production, linking it to the liberation of the seized areas by Israel and the restoration of the “rights of the Palestinian people.”

Even countries like the United States and the Netherlands, traditionally seen as allies of Israel, were not spared from a comprehensive oil supply blockade. This tactic aimed to exert pressure on the West to cease further support for Israel. Consequently, the prices of oil and gasoline surged abruptly, approximately doubling in October 1973 due to the Middle East conflict. This event triggered a global reconsideration, emphasizing the need to promote nuclear energy.

However, it’s important to note that the oil price increase that coincided with the boycott was partly influenced by inflation and currency depreciation. The oil-exporting nations united to form OPEC with the hope that elevated oil prices would help them recover the escalating costs of the commodities and equipment they were acquiring from industrialized nations.

The Effects of the Crisis

The oil market rapidly saw the impact of this action. Oil rose sharply in price. Given that oil was a crucial component of industry and a major source of energy, this left Japan and the Western industrialized nations in a vulnerable position. For instance, the Federal Republic of Germany imported 75% of the oil it used to meet its energy demands, 75% of which came from Arab nations.

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Up until that point, the developed nations’ global energy sources were thought to be limitless. Now it was clear that even if they were consumed sparingly, most of the European countries’ oil reserves would only last for a few months. The populace was shocked by the abrupt oil embargo. Politicians anticipated a catastrophe of unfathomable proportions; economists foresaw the end of growth and prosperity; and journalists fueled public anxiety with ominous headlines.

On November 19, 1973, the German government under Chancellor Willy Brandt decided to impose a four-week ban on Sunday driving for all drivers as well as a 100 km/h speed limit on all roads in an effort to preserve at least some of the valuable oil. On November 25, 1973, there were almost no automobiles on the road in Luxembourg, Denmark, the Netherlands, or Switzerland. Only a small number of organizations, like taxi drivers and physicians, received exclusions. Only in Germany were 13 million automobile owners impacted.

On the first car-free Sunday, November 25, 1973, strict restrictions were implemented across the country to enforce the driving prohibition. On rural roads and highways, though, police still stopped thousands of drivers for driving without a permit. The consequence was that the legislature raised the punishment for breaking the Sunday driving restriction from 80 to 500 German marks. Only around 220 people were caught on the next car-free Sunday.

The oil weapon quickly had its first political effects. In a Middle East proclamation issued on November 5, 1973, the EC foreign ministers urged Israel to leave the areas it had been occupying since 1967. Japan joined this demand in December. Then, OPEC showed the first indications of a thaw in tensions by gradually easing the restrictions on oil tax levies. Oil delivery prices continued to be high even after things improved and oil output rose. By year’s end, the cost of a barrel of crude oil had quadrupled from what it was before the start of the Middle East conflict.

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The Results of the 1973 Oil Crisis

Crude oil prices from 1946 to 1976 (
Crude oil prices from 1946 to 1976 (data from DOE/EIA). The price of oil quadrupled from $3 to $12 in 1973. (Source: Rasoul Sorkhabi/EIA)

The effects on the economy were catastrophic. The significantly elevated cost of energy led to a catastrophic economic collapse with clear signs of a recession. However, at the same time, the high price of oil worsened inflation, causing economies to enter stagflation, a condition in which prices are increasing while the economy is in a state of stagnation. The shock to oil prices sent the Western world into the biggest economic crisis since the Great Depression.

The crisis made it abundantly evident to the Western industrialized countries how reliant their economies were on oil imports, even as the political and economic situation began to recover again from 1975 onwards. As a consequence, several nations’ quest for other energy sources (such as nuclear energy, wind energy, and solar energy) to lessen their reliance on oil was sparked by the oil scarcity.

For instance, the German government authorized a 6 billion DM initiative in December 1973 for the development of 40 nuclear power facilities. Despite this, oil is still one of the most significant sources of energy. The oil crisis encouraged the OPEC nations to keep progressively raising the price of oil from $2.83 per barrel in 1973 to $36.15 per barrel in 1980. A new set of issues for governments resulted from the widespread unemployment among the developed Western nations. The era of the European economic miracle had come to an end. But, just a few years later, a different commodity—silver—saw its price soar to previously unheard-of heights in 1980, becoming the focus of a speculative bubble.

1973 Oil Crisis at a Glance

What was the role of OPEC in the oil crisis?

OPEC, a group of oil-producing countries, played a significant role in the 1973 Oil Crisis by implementing an oil embargo against countries seen as supporting Israel during the Yom Kippur War. The embargo led to a sharp reduction in oil supply and caused a rapid increase in oil prices.

What were the consequences of the 1973 Oil Crisis?

The 1973 Oil Crisis had far-reaching consequences. It led to widespread fuel shortages, skyrocketing oil prices, and economic turmoil in many countries heavily dependent on oil imports. The crisis exposed the vulnerability of the global economy to energy disruptions.

What role did the Middle East play in the 1973 Oil Crisis?

The Middle East, as a major oil-producing region, played a pivotal role in the 1973 Oil Crisis. The crisis originated from the decision of Middle Eastern OPEC members to use their oil resources as a political leverage tool, leading to disruptions in global oil supplies.

Why did OPEC impose the oil embargo in 1973?

OPEC imposed the oil embargo as a political and economic response to Western countries’ support for Israel during the Yom Kippur War. The embargo aimed to put pressure on these nations and leverage oil as a diplomatic tool.

Which countries were most affected by the oil crisis?

Countries that were heavily dependent on oil imports, such as the United States, Western Europe, and Japan, were particularly affected by the oil crisis. These nations faced economic challenges due to the sudden increase in oil prices and supply disruptions.

How did the 1973 Oil Crisis affect the automobile industry?

The 1973 Oil Crisis led to fuel shortages and higher gasoline prices, prompting a shift in consumer preferences towards more fuel-efficient vehicles. This event accelerated the development and adoption of smaller, more economical cars.