history of international relations

Algeria, Kuwait, Libya and the Arab United- Emirates were members of both OPEC and OAPEC, they contributed both to OPEC's price hike and to OAPEC's "embargo". The chronological overlap between the two processes added to the psychology of the "shock" (particularly in the US and Japan).

And yet... While this is all there was to it, many people in and out of government in the "western world" remained with the die-hard impression that "OPEC put an embargo on oil sales and raised oil prices" in connection with the war in the Middle East. So, we have to keep in mind that while we know that the oil price shock was only marginally connected to the Middle East conflict, a lot of people acted then upon that belief (and elaborated stereotypes based in it).

For example: EEC (western European allies of US) countries did not allow US war planes to refill in Western Europe in 1973. EEC launched the "Euro-Arab Dialogue" in early 1974.

Western Europe rediscovered the "Mediterranean" as a common space for its Northern and Southern shores.

To be sure, this was not the only "wrong" perception that oriented action in those days: many believed that "oil was about to end".

Did the oil shock/oil revolution have long-term consequences?

All the different countries reacted in a different way to the oil shock, so some countries started from a particular situation depending on the mix of the original situation and the policy that were taken that have very different outcomes.

Western Europe started to diminish its oil importation and also consumption. With the US, the price quadrupled and imports more than doubled.

Embargo raised against US by a specific group of oil exporting countries. That contributed with the quadruplication of oil prices to create in US this psychologic notion of oil shock, that is called oil revolution in the countries that promoted the quadrupling of oil price (OPEC).

1. The origins of oil shock: the oil shock is an event that had long term consequences, sometimes represented as a kind of asteroid that hits the Earth and after that everything changed because it had global consequences. However, what happens depends on where we're looking and this difference depends on two broad differences:
   • Pre-existing difference: Kind of Country - industrialized, rural, socialist, capitalist, imports oil or independent country in terms of oil consumption
   • Decisions enacted both by citizens and governments of each specific country consisting on how to cope with this oil shock - policies or individual decisions, global consequences that come from local decisions. How governments and citizens react because this could set up specific energy policies or policies beyond the field of energy which also affect energy consumption, monetary policy, economic policy and industrial policy. And citizens because of the everyday rules at home and culture.
2. Yes, but it

It is not possible to give a globally valid answer on what these consequences were. Or perhaps, the globally valid answer is that individuals and governments had to cope everywhere. But…

• It is difficult to isolate the "oil shock" from other processes at work: for example, the price rise had inflationary effects, but we know inflation had a longer story. As Arrighi has reminded us, OPEC governments actually claimed that they raised prices to recover the purchasing power they had lost due to the dollar's devaluation
• What actually happened in each country depended on specific national conditions, national political priorities, and other variables. For example:
• Italy in 1973 depended on imported oil for around 80% of its energy needs, was experiencing great social struggles and growing inflation and needed "hard currency" for oil imports; the government's priority was to contain unemployment and conserve energy; nuclear plants were projected and

a EEC "Mediterranean dialogue" with Arab countries was sought; inflation eventually jumped to 20% and unemployment grew to around 7-8% by the end of the 1970s – the Soviet Union in 1973 was a stable country, an oil exporter and had large oil reserves in Siberia; the Party's priority was to promote détente and import western technologies by selling oil and gas exports at world prices (but caused COMECON countries to complain for lack of "socialist solidarity"); consumer goods flowed into the country but the economy came to depend largely on energy exports by the end of the 1970s – Brazil in 1973 was a large oil importer with no national reserves in sight and needed "hard currency" for its imports; the military dictatorship opted for international loans to finance nuclear and bio-ethanol projects; inflation was around 20% in 1970 and jumped to 40% in the second half of the year; when interest rates peaked and oil prices collapsed in the 1980s,

Brazil found itself unable to repay the loans – The US depended in 1973 on oil imports for 14% of energy needs, had great coal reserves and could pay in US$ for any additional import; higher prices allowed use of Alaskan oil fields; it was experiencing rising inflation and unemployment since the 1960s; the Republican Ford administration prioritized fighting inflation; the Democratic Carter administration in its first years prioritized fighting unemployment; by 1979, unemployment stood around 6% and inflation at 11% – Etc.

Claims Peter Gowan takes the view that the price hike was orchestrated by Washington! This is rather startling, given that President Nixon publicly claimed that "Oil without a market, as Mr. Mossadeq learned many, many years ago, does not do a country much good. We and Europe are the market, and I think that the responsible Arab leaders will see to it that if they continue to up the price, if they continue to expropriate, if they do expropriate without fair compensation,

"The inevitable result is that they will lose their markets, and other sources will be developed." [Nixon press conference, 5 September 1973]

Page of Gowan he claimed that the Nixon administration was planning with OPEC to increase oil prices 2 years before that OPEC did so. We have to take this claim with caution: the notion which says that the oil shock was originated from the very beginning by the deeds of the Nixon's administration.

Testing claims against available evidence

If I read Terzian's 1985 book, I am not sure I find evidence of "planning" for higher prices in the US administration. I do find evidence of attitudes by some members of the Nixon administration, showing "tolerance" or even a favourable attitude for the kind of price growth that was developing in 1971-73 (after the Tripoli and Teheran agreements between OPEC and the oil companies).

But are these people actually talking of the fourfold price increase that would take place in late

1973? And are these opinions evidence of a "plan" by the administration? This is a claim that relies on Terzian's book "OPEC, the inside story" - a big kind of claim, so what we have to do is to verify the sources that Terzian has used. Terzian puts some evidence that may allow us to think that the US government wasn't completely against higher oil prices, it was not seen like a national tragedy if oil prices were raising. You have the testimony of the undersecretary of the treasury, Atkins, and several public evidence that thought that higher oil prices were not seen as a tragedy for the US by the Nixon administration. If this was really a plan, I expect to find evidence saying now we do this in order to have the raise of oil prices - that will be the demonstration of that plan, some form of evidence/documents that stated that the US government wanted higher oil prices to quadruple - there is not so in Terzian's book.