October 17 was the fortieth anniversary of the oil embargo slapped on America by the Organization of Petroleum Exporting Countries (OPEC). That action changed the entire geopolitical map—taking the power from the United States and giving it to the Middle East. As a result of the embargo, the price of gasoline quadrupled, gas stations had multi-hour long lines, and the stock market plummeted—kicking off a serious recession.
My entire driving life has been impacted by OPEC’s actions. On October 17, 1973, I was 15—days away from turning 16. I got my driver’s license on my sixteenth birthday.
It was a different world prior to the embargo. America was the dominant player in the energy market—supplying 63 percent of the world’s oil at the beginning of World War II—and had surplus supply. The surplus neutered OPEC’s previous embargo attempts in 1956 and 1967, as the U.S. was able to fill the demand gap OPEC created.
It wasn’t the embargo itself that changed the dynamic, but the timing of it.
U.S. oil production peaked in 1970 and declined sharply in the subsequent years. When OPEC chose to use oil as a diplomatic weapon in 1973, America was no longer the swing producer with the ability to fill in the gaps. We’d become increasingly dependent on suppliers from the oil-rich Middle East. Scarcity was our reality.
To punish the U.S. for supporting Israel in the Yom Kippur War, OPEC banned oil exports to the U.S. and, eventually, other countries. OPEC then reduced production by 5 percent per month until the embargo ended in March of 1974.
For the past forty years, OPEC has controlled the geopolitical equation. Every president since Richard Nixon has urged the country to strive for energy independence so that we don’t face another energy crisis like 1973.
Remembering the embargo, Henry Kissinger, who was Secretary of State during the 1973 oil shock, said at a national summit on energy security: “You could not make plans in the Middle East or involving the Middle East, without keeping in mind the considerations of the oil market.”
While the social, political, and economic impacts of the embargo have been harsh, there’s also a silver lining: North American producers were forced to find new ways to explore for and produce hydrocarbons—and those technologies and techniques developed by individuals and industry have, once again, changed the geopolitical equation.
The 1973 OPEC oil embargo revealed a serious weakness in America’s energy and national security.
NEW TIME Today, at 9:30 AM PT: Get the Market Movements in Advance: William's Edge Webinar for November 21st, 2014 | John Ransom
NEW TIME Today, at 9:30 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for November 17th, 2014 | John Ransom