Origins of the 1973 world oil shock
World competition over resources
The Arab-Israeli conflict triggered an energy crisis in the making. Before the embargo, the industrialized West, especially the United States, had taken cheap and plentiful petroleum for granted. (Indeed, the form American cities took after World War II - with expansive suburbs full of detached, single-family homes - depended on the automobile as the principal means of transportation - a form that consumes oil en masse as fuel.) Between 1945 and the late 1970s, the West and Japan consumed more oil and minerals than had been used in all previous recorded history. Oil consumption in the United States had more than doubled between 1950 and 1974. With only 6 percent of the world's population, the U.S. was consuming 33 percent of the world's energy. At the same time, America's economy accounted for a quarter of total global production, meaning US workers were over 5 times more productive than the global average (because of their advanced industrial sector, which accounts for the bulk of energy usage).
The fall of the dollar
U.S. economic policies had an important effect on the crisis. While the OPEC boycott was an immediate trigger, historians increasingly see the crisis as being rooted in American economic policies.
Oil, especially from the Middle East, was paid for in United States dollars, at prices fixed in dollars. U.S. President Richard Nixon had inherited an economy in which growth was already sluggish, in which inflation was already troubling. By the summer of 1971, the president was under strong public pressure to act decisively to end the dilemma of rising prices and general economic stagnation (see "stagflation"). Nixon thus released the dollar from the fluctuating gold standard that had controlled its worth since the signing of the Bretton Woods pact at the end of World War II, allowing its value to fall in world markets. The United States suspended convertibility of the...
Please join StudyMode to read the full document