In October of 1973 OPEC decided to use oil as a political weapon. The results turned out badly for everyone. Including OPEC.
What’s changed since then is that OPEC is older and wiser, and now operates more like a Central Bank of oil. They’ve become in many respects a useful organization which, despite criticism, attempts to keep oil prices stable. And rising, of course.
What’s not changed is that non-OPEC still struggles to increase production, as it inherited the harder to lift oil, the harder to find oil. OPEC has the cheap oil. We have the expensive.
I’ve often wondered if OPEC has a newsreel to kick off their meetings. Surely, tomorrow’s meeting in Vienna would look back on such moments as the video clip below.
John Chancellor reporting for NBC News (video)
In October 1973, OPEC ministers were meeting in Vienna when Egypt and Syria (non-OPEC nations) launched a joint attack on Israel. After initial losses in the so-called Yom Kippur War, Israel began beating back the Arab gains with the help of a U.S. airlift of arms and other military assistance from the Netherlands and Denmark. By October 17, the tide had turned decisively against Egypt and Syria, and OPEC decided to use oil price increases as a political weapon against Israel and its allies. Israel, as expected, refused to withdraw from the occupied territories, and the price of oil increased by 70 percent. At OPEC’s Tehran conference in December, oil prices were raised another 130 percent, and a total oil embargo was imposed on the United States, the Netherlands, and Denmark. Eventually, the price of oil quadrupled, causing a major energy crisis in the United States and Europe that included price gouging, gas shortages, and rationing.
-Gregor