The Oil Crises in the 1970s - Term Paper Example

The oil blockade had a whooping impact on the economies of US and Western nations as they had to pay high prices for their oil imports and transportation cost in those nations became more costly due to the oil embargo imposed OPEC. “OPEC and its members and OPEC's involvement in the crisis” On October 17, 1973, OPEC implemented “oil diplomacy’ which banned its member nation’s exports of oil and announced embargo on its exports to Western nations and the USA that supported the war against Israel by Egypt and Syria.

This oil embargo had been devastating impact on US economy as it put a full stop to the epoch of cheap gasoline, and the US share markets witnessed an unprecedented fall by about $97 billion followed by the worst economic recession in USA and other parts of the world. OPEC declared that it would penalize those who helped Israel in the War by slashing down the petroleum production by 5% a month till the Israel vacated the occupied provinces by reinstating the rights of the Palestinians over the region.

It cited both USA and The Netherlands as the true enemies of Islam and threatened that it would deploy an indefinite ban of export of petroleum products, which would be in operation against Western nations. Customarily, before 1973, oil prices were fixed by Petroleum companies and in December 1973, OPEC announced that henceforth, it would fix the price of the oil products. Due to this, the price per barrel of oil escalated to $11.65 per barrel in December 1973 which was 130% increase as compared 1973 October price and 387% higher than 1972 price level. (www.history.com). “The Founding of OPEC” OPEC is an intergovernmental institution established on September 10-14, 1960 at the Baghdad Conference by Venezuela, Saudi Arabia, Iraq, Kuwait and Iran.

Apart from the above five founding members , Indonesia , Qatar ,UAE , Libya , Nigeria , Algeria , Angola , Ecuador and Gabon joined the OPEC later . Initially, OPEC headquartered at Switzerland later shifted to Vienna in Austria in 1965. The core aim of OPEC is to coalesce and synchronize petroleum exploration, production and marketing strategies among Member nations so as to secure stable and just prices of oil product, an effective, viable and uninterrupted supply of petroleum products to consumer nations and to secure a just return on the capital employed on the petroleum resources by the oil-producing nations. (www.opec.org). “Yom Kippur War” This is also known as 1983 Arabs- Israeli War, or Ramadan War, which was waged against Israel by alliance of Arab nations, headed by Egypt and Syria and lasted from October 6 to 25, 1973.

In the War, the USA, UK, Netherlands and France supported Israel and aggrieved by this, the Arab nations retaliated with a revolt in 1973 through an oil embargo against Western powers. Arab coalition made a surprise attack on Israel occupied regions on Yom Kippur and Egypt, and Syrian forces entered Golden Heights and Sinai Peninsula of Israel. In the Yom Kippur War, USA and its allied supported Israel by supplying arms while USSR supported the Arab Coalition and this war paved to almost direct confrontation between two superpowers during the cold war regime.

In the War, Israel almost captured Egypt’s city of Suez by encircling the Egypt’s Army. In 1978, the Camp David Accord was signed where it was agreed to