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1. What did you learn about your topic that surprised you the most?
- What surprised me the most was how extensive this crisis was as I had never heard about it prior to this project, and I also did not know how it related to the events in the Yom Kippur war

2. Provide a real-life example of how this topic is relevant or interesting
for you.
As a vehicle owner it is interesting to see how the middle east can directly affect the price of gas and affect my day to day life.
3. If you could pass on your knowledge to a family member or friend, what
do you think is the most important thing to pass on?
I would tell them that our way of life can change based on events thousands of miles away and that we should always appreciate what we have

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A very similar situation that happened with Yom Kippur war unfolded with rising tensions between America and Iran earlier this year. A conflict almost broke out with minor clashes between the 2 nations. This report talks about the event directly relating it the oil crisis and how nowadays thankfully north America is significantly less reliant on foreign oil importers.

I chose to include this content because of requirements for Canadian content and because it very nicely contrasts the effects of a crisis today vs the crisis in 1973.

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How the U.S.-Iran crisis could affect Canada's energy sector

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Here is a interesting video showing Canadian leaders discussing the crisis as it was happening. It is also interesting to see the partisanship of government retroactively during a historical crisis.

I included this video because of the requirements of Canadian content, and I also thought it was interesting to see our own government acting as the crisis was unfolding

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In the early 1970's, when the factors that caused the Oil crisis were beginning to unfold, the Alberta oil rush began. The image of the bible belt in Alberta was replaced by the entrepreneurial spirit that likened the gold rush transformed the province. Soaring oil prices allowed for a rapid transformation of the province and helped it shape it into what we see today. However over-expansion and greed caused the 1980's recession in Alberta and within 2 more years the effect of this was felt in other parts of the country.

I elected to include this source because it talks about how Alberta actually prospered during this time when a lot of other parts if the world were suffering form the effects of the crisis. In addition, this also satisfies the requirements of Canadian content.

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Canada, suffered like America during this crisis and subsequently affected policy for decades to come. In the year that followed the initial embargo, there was a exponential increase in oil and other energy exports to the US market which threatened national markets. 2 organizations which were created in wake of this was PETRO-CANADA, which aimed to increase exploration of off-shore areas likely to have oil reserves, and another organization was the Alberta Petroleum Marketing Commission which has large influence over provincial oil.

This website is included because it shows that Canada was also significantly impacted by this crisis, several important organizations that have fairly large influence in the Canadian economy today have their roots in this crisis, and in addition to satisfy the requirements of Canadian content.

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Energy Policy

Energy policy comprises government measures concerned with the production, transportation and use of energy commodities. Governments may adopt energy policies to meet goals such as economic growth, the distribution of income, industrial diversification and the protection of the ENVIRONMENT. Since the large jump in energy prices in the early 1970s, governments around the world have played an increasingly active role in energy policy.

Although Canada appears to be generously endowed with major forms of ENERGY, eg, COAL, OIL AND NATURAL GAS, URANIUM and HYDROELECTRICITY, and although its production of certain fuels has occasionally exceeded domestic requirements, it has never been entirely self-sufficient in energy. Historically, Canada has been dependent on energy imports largely because of the great distances separating indigenous sources of supply from markets. It is therefore primarily as a result of geography, rather than geology, that questions concerning the importation, export and particularly the transportation of energy have preoccupied energy policymakers.

The attempt to reconcile diverse economic interests in overcoming the transportation challenge has been a central theme of Canadian energy policy. These interests have traditionally pitted energy producers - whether of Nova Scotia coal before WWI, of Nova Scotia and Alberta coal between the 2 wars, or Alberta oil and gas since WWII - against energy consumers, the majority of whom live in Ontario and Québec.

A second major determinant of Canadian energy policy derives from Canada's system of government. As a result of the constitutional DISTRIBUTION OF POWERS, strong powers over resource management ( see RESOURCE RIGHTS) are vested in both levels of government. Section 109 of the CONSTITUTION ACT, 1867, grants the provinces control over all the natural resources within their territory. A province also has the right to levy direct taxes (royalties) on these resources.

The federal government, however, enjoys broad taxation powers and has jurisdiction over all aspects of interprovincial and international trade. The federal government also has the constitutional power to void provincial legislation and to assume control over provincial works "for the general advantage of Canada," although neither power has been invoked in recent years.

Because this division of power gives the 2 levels of government overlapping responsibilities, Canadian energy policy has often been the product of federal-provincial bargaining. The bargaining can become acrimonious when the federal government and the producing provinces diverge in their views, as they did for most of the 1970s and early 1980s (Canada is perhaps unique in encompassing in a single country the interests that globally divide energy producers and consumers).

The influence exerted by the US constitutes a third major element that has shaped Canadian energy policy. Over the years, the US has both supplied and bought energy from Canada; Canadian-American energy trade exceeded $10.7 billion in 1985. The US has also represented an important source of investment capital and has consequently played a large role in the development of Canada's oil and gas resources.

Canadian Energy Policy to 1973

After Confederation in 1867, Canadian energy policy was designed to promote the greater use of domestic coal reserves by the imposition of a tariff on American imports. This tariff was part of the 1879 NATIONAL POLICY. Nevertheless, Canadian coal rarely comprised more than 50% of the domestic market. Ontario, the largest consumer, was (and still is) supplied by Pennsylvania mines, while Nova Scotia and Alberta producers supplied the eastern and western provinces, respectively.

Following WWI, as a result of the increased penetration of American imports and growing concerns about energy security, new policies (including the subsidy of transportation costs) were introduced to protect the Canadian coal industry. These policies had limited success in relieving the industry's chronic productive overcapacity, a problem that was aggravated by the discovery of oil in 1947 at Leduc, Alberta. After WWII, government policy was aimed at sustaining coal communities.

The importance of coal as a dominant source of energy declined (which deeply affected New Brunswick and Nova Scotia) until Canadian domestic consumption rose between the mid-1960s and late 1970s by some 150%. The US has increased its coal consumption as well, and the expanded use of coal in both countries has contributed to environmental problems, particularly that of acid rain. As a result, some Alberta coal producers have demanded that they supply central Canada, partly because Alberta coal contains 8 times less sulphur (the main ingredient of acid rain) than American coal. However, as in the 1920s, the counterargument is that Alberta coal is too expensive.

Oil and Gas

Although oil was being produced in southern Ontario as early as 1857, reserves and domestic consumption were small. The modern oil era was triggered by the 1947 strike in Leduc and by several subsequent oil and gas finds in the 3 western provinces. Coincidentally, demand for oil in Canada and internationally had increased rapidly as a result of the war and the subsequent economic boom.

The overriding objective of Canadian energy policy for the next 20 years was to stimulate the growth of the domestic PETROLEUM INDUSTRIES. As a result, major oil and gas PIPELINES were built from the producing provinces to markets in both Canada and the US, encouraging investment and promoting exports.

From the beginning, the US played a large role in the development of Canada's oil and gas reserves, not only because the industry was largely American owned but because of the distribution of Canada's petroleum resources. Economic efficiency dictated that Alberta supply the markets closest to itself, ie, the American Pacific Northwest and Midwest, while eastern Canada continued to rely on American imports.

When pipelines were finally built from the western provinces to domestic markets, the western provinces exported part of the throughput to amortize the costs of transporting oil over these considerable distances. As a result of Canada's reliance on the export of oil and gas, first to serve its own energy needs and then to spur the growth of the oil industry, an increasing share of domestic oil and gas production was dedicated to the American market. This share peaked in 1971, when Canada exported to the US 57% of its oil production and 47% of its gas production.

The oil industry's rapid growth in the 1950s, the controversy surrounding the construction of Canada's first 2 major gas pipelines (the 1956 TransCanada PIPELINE DEBATE contributed to the electoral defeat of the Liberal government the following year), and an acknowledgement that the government's information concerning energy matters was inadequate led in 1957 to the creation of the Borden Commission ( see ENERGY, ROYAL COMMISSION ON) to study Canadian energy policy. The commission's recommendations resulted in the creation of the NATIONAL ENERGY BOARD (1959) to regulate the interprovincial pipelines and the interprovincial marketing of energy resources, and to advise the federal government on energy matters.

The commission also championed the establishment of a national oil policy (NOP) to shelter the Canadian oil industry against imports of cheaper foreign oil. This policy, introduced in 1961, established a protected market for domestic oil west of the Ottawa Valley, which freed the industry from foreign competition, while the 5 eastern provinces continued to rely on imports. The NOP remained the cornerstone of Canadian energy policy for the next decade.

The 1960s were a period of consolidation; no new major policy initiatives were launched until the early 1970s. Canadian oil and gas consumption grew steadily, prices were stable, and the country's hydrocarbon potential appeared virtually unlimited. This uneventful decade made the adjustment to the energy crisis of the early 1970s traumatic.

Hydroelectrical and Nuclear Policy

The public sector has played an important role in the development of Canada's electricity resources since the early 1900s, when the Hydro-Electric Power Commission of Ontario was created. Today, every province except Alberta and PEI manages its own power utility. The federal government's involvement in hydroelectricity, however, has historically been limited, partly because electricity-generating sources are more evenly distributed across the country and the interprovincial trade in electricity has therefore been on a smaller scale.

Nevertheless, in 1907 Parliament passed the Electricity and Fluid Exportation Act to regulate the export of electricity and natural gas, a function that was transferred to the National Energy Board in 1959. In 1963 the federal government announced a National Power Policy (the basic tenets of which still endure) to encourage development of power resources, the greater interconnection of provincial transmission systems and the export of surplus power to the US.

Hydropower in the 1980s provided fully 70% of Canada's electricity needs. Expansion of hydroelectrical power presents significant difficulties, as most remaining potential hydro sites are far from centres of population and long-distance transmission lines are costly to build. The building of dams can also cause severe environmental damage. The federal government was deeply involved in the development of NUCLEAR ENERGY, largely as a result of its expropriation in 1944 (for military reasons) of Canada's only (at the time) uranium mine.

The government strengthened its control over uranium resources in 1946 with the passage of the Atomic Energy Control Act, which transferred jurisdiction over uranium from provincial to federal authorities and regulated the production and uses of uranium in Canada. Two important federal crown corporations have been involved in atomic energy: ATOMIC ENERGY OF CANADA LTD (AECL) and ELDORADO Nuclear Ltd. The former is responsible for nuclear research; the latter for the mining and refining of uranium.

Canada's nuclear energy program was born in 1953 when feasibility studies on the CANDU reactor design were initiated. Although the first commercial CANDU reactor began operations only in 1971 in Pickering, Ontario, by 1980 nuclear energy accounted for 38% of Ontario's electricity consumption. In 1985 there were NUCLEAR POWER PLANTS in Ontario, Québec and New Brunswick.

Canadian Energy Policy after OPEC

Canada, like most industrialized countries, was unprepared for the consequences of the 4-fold increase in international oil prices and the partial oil embargo imposed by the Arab members of the Organization of Petroleum Exporting Countries (OPEC) in the wake of the 1973 Middle East war. Canadian energy policy entered a decade of unprecedented turmoil as a result of the fight between the western provinces and the federal government for control over growing energy revenues and over the issue of whether domestic oil and gas prices should track world levels.

Some of the federal government's initiatives between 1973 and 1974 provoked forceful provincial reaction. In March 1973 Ottawa moved to control the export of oil when a rapid jump in shipments to the United States threatened to disrupt domestic supplies. Then, in September, Ottawa froze the domestic price of oil for 6 months and imposed an export tax on oil to ensure fair returns from US sales and to help subsidize eastern Canadians dependent on oil imports. Interpreting these actions as federal intrusions into their traditional areas of responsibility, the western provinces retaliated through new legislation that purported to control the production, regulation, marketing and pricing of their resources. Included were new royalty schemes designed to capture a larger share of revenues.

Alberta also created the Alberta Petroleum Marketing Commission, with broad powers over the production, pricing and provincial marketing of oil. The federal government responded by amending the Income Tax Act to disallow the deductibility of provincial royalties from corporate income tax, and by enacting the Petroleum Administration Act, under which Ottawa assumed broader powers to control oil and gas pricing in Canada.

In December 1973, as part of its response to the "energy crisis," the federal government announced the creation of PETRO-CANADA - to boost oil and gas exploration in the North and offshore, to assist in the development of the tar sands ( see BITUMEN) and to secure reliable oil imports. By the 1980s Petro-Canada had become one of Canada's largest petroleum companies. As the federal government's "window on industry," it has both acted as a source of information to the government about oil and gas and served as a policy instrument, eg, in frontier drilling.

Between 1973 and 1978, the price of oil and natural gas in Canada rose quickly through agreements reached between the federal government and the producing provinces, but did not reach world levels. By mid-1978 the gap between domestic and international prices had closed to less than $3 per barrel. In the wake of the 1979 Iranian Revolution, however, world prices increased by 150%and the federal government renounced its intention of ensuring eventual parity between domestic and world prices. This left Canadian prices far below international ones and created difficult strains between Alberta and the federal government.

The 1980 National Energy Program

The 1979 increase in world oil prices aggravated some of the problems Canada already faced. First, it represented a large transfer of wealth from consumers to producers. In Canada this wealth transfer had 2 significant dimensions: a large interregional transfer of wealth from Ontario and Québec (which together accounted for 58% of domestic oil consumption in 1980) to Alberta (which produced 86% of Canada's oil), and an international transfer of wealth from Canada to the US as a result of the high level of American ownership of the oil and gas industry ( see FOREIGN INVESTMENT).

Second, the rapid increase in international prices made it difficult for the federal government to manage the national economy. It aggravated inflation and strained the EQUALIZATION PAYMENTS system. It contributed to the federal deficit as well, because the federal government continued to subsidize oil imports to maintain a uniform domestic price across the country. The increase in the world oil price, however, also represented an opportunity to achieve a higher level of oil self-sufficiency through the development of high-cost oil in the frontier and increased synthetic production from the tar sands.

In 1980 the federal government introduced the National Energy Program. Its objectives were to increase Canadian ownership of the oil industry, to achieve oil self-sufficiency and gain a greater share of energy revenues. Although all 3 objectives were controversial to some degree, the third aroused the most debate because it raised the concerns of the producing provinces and the oil industry that "their" revenues would be reduced if the federal government increased its share. The means chosen to advance the NEP's objectives also proved contentious because they represented an unprecedented degree of federal intervention and were imposed without prior consultation with industry or with the producing provinces.

For example, to "Canadianize" the industry, the federal government introduced a tax to fund acquisitions by Petro-Canada and favoured Canadian-owned companies when distributing exploration grants. In addition, the federal government continued to hold domestic oil prices below international ones. Finally, to achieve oil self-sufficiency, the government sponsored expensive frontier exploration and instituted a system of grants to encourage consumers to conserve energy and switch to alternative fuels.

Previously, energy policy had reflected the assumption that demand can only rise and that new supplies must therefore be developed continually. But the NEP's recognition that the solution to a "shortfall" in energy lay in controlling demand and supply was an innovation. Although most conservation and "off-oil" programs have been eliminated since the NEP came into being, the government still encourages conservation.

Coming after 2 years of unsuccessful negotiations with Alberta, however, the NEP precipitated an intense confrontation between the province and the federal government. Alberta cut back its oil production and withheld approval of 2 large tar-sand and heavy-oil projects, and challenged in court the legality of the proposed federal tax on gas exports. As energy producers, Saskatchewan and BC also denounced the NEP without, however, retaliating directly against the federal government. An understanding between Alberta and Ottawa was only reached when the federal government substantially altered the NEP's pricing and taxation provisions to bring domestic prices closer to world levels. Although this agreement put an end to the political conflict, it failed to bring stability in energy policy.

Adjustments to the NEP and provincial fiscal regimes were required almost immediately in response to the 1983 drop in world oil prices, the fall in gas exports and the recession. The 1984 election of a market-oriented Conservative government led to more dramatic changes as most of the NEP's interventionist policies - price controls, consumer subsidies, exploration incentives, production taxes and the 25% crown share on federal lands, or "back-in" - were gradually eliminated.

Although both the oil industry and the western provinces welcomed these changes, they soon had to confront an even greater threat than the NEP: the 50% drop in world oil prices in 1986. The collapse in international prices forced the cancellation of energy investments across the country and battered the economy of the western provinces. It also led to renewed calls for government intervention to stabilize prices and revenues.

As 1987 drew to a close, the oil industry's prospects improved: oil prices had rebounded from the previous year's low and revenues were up. More important still was the FREE TRADE agreement negotiated between Canada and the US. By committing both countries to let market forces dictate the pattern of energy development, the free trade agreement represented a far-reaching commitment to energy deregulation and the integration of continental markets.

Conclusion

Oil and gas will continue to fill a large share of Canadian energy requirements into the next century, although oil's importance is already declining. The depletion of western conventional reserves will force Canada to become dependent on imports as well as on oil from the tar sands, on heavy oils, and on arctic and offshore oils. New domestic sources of oil will be more expensive to find, will in some instances pose new environmental risks, and will often require the development of new technology.

The rising cost of energy - oil, gas, electricity - has already led to a greater emphasis on conservation and to a search for alternative sources of energy particularly liquid fuels and renewable forms of energy, such as SOLAR ENERGY, WIND ENERGY and BIOMASS ENERGY. These and other forms may eventually replace many contemporary oil and gas uses, although hydrocarbons are likely to remain important in transportation fuels and as components of petrochemical products.

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Energy policy comprises government measures concerned with the production, transportation and use of energy commodities. Governments may adopt energy policies to meet goals such as economic growth, the distribution of income, industrial diversification and the protection of the ENVIRONMENT.

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Americans wont be held hostage by oil imports

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Americans wont be held hostage by oil imports

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This Website, discusses how that one of the ramifications of this crisis is why today fuel efficiency is one of the main selling points in a vehicle. Prior to the 1970's, fuel efficiency was not a primary consideration, or a consideration at all to some, and now when buying a vehicle it is one of the top priorities for many when buying a vehicle. In addition, this resource also talks about some was it has impacted the American lifestyle, such as decreased travel, more cognizant of heating their homes, lowering the legal speed limit to 55 miles per hour and even lowering the standard temperature in federal office spaces. This shift in thinking comes from the idea that many Americans at the time never wanted to be held hostage again by foreign importers.

This resource was included because it very nicely summarized the shift in American thinking after the crisis and points to the date and time when people started realizing that resources must be conserved because they will run out and when they do our way of life will change.

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In the fall of 1973, Buick offered "the man with a family" his choice of a new Century Regal coupe or four-door sedan, either of which, it would later be noted, guzzled gas like there was no tomorrow.

The ad, which ran in the Oct. 22, 1973, edition of Newsweek, didn't bother to mention the car's gas mileage, because who cared? (It likely ranged from less than 10 to 15 miles per gallon, depending on the selected drivetrain.)

Within a few short weeks, such details would indeed matter very much. By the end of October, Buick's targeted customer would join millions of Americans waiting in line for gas that was in short supply, watching as something they had long taken for granted -- cheap gas -- evaporated before his eyes.

Here's what took the fun out of wasteful gas consumption: An oil embargo imposed by Arab nation members of the Organization of Petroleum Exporting Countries (OPEC), which used its valuable commodity as a weapon to harm countries supporting Israel in the Yom Kippur War that had begun in early October when Egyptian and Syrian forces staged a surprise attack on Israel in the Suez region and Golan Heights, respectively. OPEC retaliated against the United States and its European allies for their backing of Israel by cutting oil production, limiting exports of crude and raising prices -- in short, forever changing trade and automotive fuel dynamics across the globe.

The resulting oil crisis could not have come at a worse time for beleaguered U.S. President Richard Nixon, who was reeling from the Watergate scandal that would soon lead to his resignation. He had to deal with the conflicting demands of Israel, which needed military supplies to hold off the Arabs, and of Americans, many of whom just wanted inexpensive gasoline and plenty of it.

In warning of the impending oil embargo against the West and Japan, Kuwait's U.S. ambassador, Salem al-Sabah, told Newsweek, "We will use oil as a means of putting pressure on countries that take a side with Israel. If we have any evidence of any country taking a side there will be an embargo. We'd make sure our oil did not get to that country, either as a refined product or crude."

Soon after, OPEC went through with this threat, while simultaneously cutting oil production by 5 percent from September 1973 output and warning of continued production reductions in 5 percent increments until the Arab members' economic and political objectives were met, which included reformulating pricing structures and the withdrawal of support for Israel in the war. OPEC simultaneously announced it would increase the posted price of oil by 70 percent, to $5.11 a barrel, from an average of $1.68 in 1972 (it would rise to $8.54 in 1974).

The effects were immediate and widespread: Long gas lines formed in cities and towns across the U.S. as Americans panicked and created greater demand for a product that was in short supply; gas prices skyrocketed by 40 percent; NASCAR reduced all races by a distance of 10 percent (and canceled the Sebring race in 1974); and gas stations closed between 9 p.m. Saturday night and midnight Sunday, every weekend. Making matters worse, the embargo came at a time of high inflation and a devalued dollar.

Initially, the energy crisis was relegated in the news to the unfolding Watergate saga, highlighted on the cover of the Oct. 22 edition of Newsweek with the headline "The Tape Crisis" -- a reference to secret recordings in which Nixon and his political team allegedly discussed possible illegal activities, such as bugging opponents' offices, undermining FBI investigations, using the IRS to harm enemies and a litany of lesser and greater abuses of power. Elsewhere in the magazine, ads for longer, lower, wider and more powerful Cadillacs, Buicks and other American cars provided a strange counterpoint to the article about the oil crisis buried toward the back. In hindsight, though, it is evident that anxiety was mounting: A Mobil Oil ad warned, "Someday, all the wells in the United States will run dry and die," though the company added, on a more positive note, that, "Our crews are working 24 hours a day all over the world to find oil."

At the time, the U.S. imported less than 10 percent of its overall oil mix from the Middle East, but the embargo was a shock to the system and led to an economic downturn that threatened to spark a full-blown recession. Once the full ramifications became apparent, the crisis finally made the cover of Newsweek, on Dec. 3, 1973, with a picture of a gas pump nozzle and the headline, "How Bad A Slump?"

The Arab-Israeli war ended on Oct. 25, 1973, with little change in the Middle East map. That eliminated the reason for the embargo although OPEC sustained the action until March 1974. By then the die was cast. Americans were determined to never again be "held hostage" to oil imports. Citizens reduced lighted Christmas displays, cut back on travel, and became more cognizant of settings on thermostats. U.S. policymakers began to talk in more serious tones about energy independence and the government lowered the legal speed limit to 55 mph on major highways and reduced daytime temperatures in Federal offices to between 65 and 68 degrees.

In the 40 years since the embargo began, automobile gas mileage has become a major selling point -- and has risen steadily higher to numbers that would have been unimaginable in 1973, routinely above 20 miles per gallon and often enough more than 30 mpg. The U.S., meanwhile, has surpassed Saudi Arabia as the top oil and natural gas producer, according to a new report released by the New York-based PIRA Energy Group.

"Compared to 40 years ago, today the United States is in a growing position of strength with respect to the global energy landscape," Sen. Ron Wyden, D-Ore., chair of the Energy and Natural Resources Committee, told the International Business Times. "Thanks to today's expanding wealth of energy resources, falling dependence on foreign oil, and the emergence of cleaner and renewable energy sources, we're headed toward a more secure energy future. For the 50 th anniversary of the oil embargo, our goal should be not just energy security, but to end dependence on overseas petroleum imports."

Here's an interactive map of gasoline prices at the pump in 60 countries. Click on any country to see how much gas costs, and what that means for the people who live there:

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Four Decades After The Arab Oil Embargo, The US Outperforms Saudi Arabia; How The 1973 Crisis Changed US Energy Policy And Habits

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In the fall of 1973, Buick offered "the man with a family" his choice of a new Century Regal coupe or four-door sedan, either of which, it would later be noted, guzzled gas like there was no tomorrow. The ad, which ran in the Oct.

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This image has a focus on the processes that affects the cost of fuel, and is applicable to the Oil Crisis, but is more general in nature.

I elected to include this image because it breaks down some of the factors that affect fuel prices in a simple way.

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In 1971, President Nixon is believed to have played a critical role in setting the stage for the crisis when he took the United States off of the gold standard. The ramifications of this meant the US dollar dropped dramatically and hurt OPEC nations whose petroleum contracts were in US dollars. This meant that millions of dollars were vanishing from OPEC treasury revenue

I chose to include this website as it provides and excellent explanation of some of the events that helped set the stage.

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The OPEC oil embargo was a decision to stop exporting oil to the United States. On October 19, 1973, the 12 OPEC members agreed to the embargo. Over the next six months, oil prices quadrupled. Prices remained at higher levels even after the embargo ended in March 1974.﻿﻿

A review of the history of oil prices reveals they've never been the same since. The chart below tracks both nominal and inflation-adjusted oil prices since 1946. During the OPEC oil embargo, inflation-adjusted oil prices went up from $25.97 per barrel (bbl) in 1973 to $46.35 per barrel (bbl) in 1974.

Since the embargo, OPEC has continued to use its influence to manage oil prices. Today, OPEC controls about 42% of the world's oil supply. It also controls 60% of oil exports and 72% of proven oil reserves.﻿﻿ ﻿﻿

Key Takeaways

In 1971, President Richard Nixon prompted the embargo when he decided to take the United States off of the gold standard. As a result, countries could no longer redeem U.S. dollars in their foreign exchange reserves for gold. With this action, Nixon went against the 1944 Bretton Woods Agreement. His move sent the price of gold skyrocketing. The history of the gold standard reveals this was inevitable. But Nixon's action was so sudden and unexpected that it also sent the value of the dollar down.﻿﻿

The plummeting value of the dollar hurt OPEC countries. They depend on the petrodollar for their government revenues. Their oil contracts were priced in U.S. dollars. That meant their revenue fell along with the dollar. The cost of imports that were denominated in other currencies stayed the same or rose. OPEC even considered pricing oil in gold, instead of dollars, to keep revenue from disappearing.﻿﻿

On October 19, 1973, Nixon requested $2.2 billion from Congress in emergency military aid for Israel. The Arab members of OPEC responded by halting oil exports to the United States and other Israeli allies. Egypt, Syria, and Israel declared a truce on October 25, 1973. OPEC continued the embargo until March 1974. By then, oil prices had skyrocketed from $2.90/barrel to $11.65/barrel.﻿﻿

The oil embargo is widely blamed for causing the 1973-1975 recession.﻿﻿ U.S. government policies helped cause the recession and the stagflation that accompanied it. They included Nixon's wage-price controls and the Federal Reserve's stop-go monetary policy. Wage-price controls forced companies to keep wages high, which meant businesses laid off workers to reduce costs. At the same time, they couldn't lower prices to stimulate demand. It had fallen when people lost their jobs.

To make matters worse, the Fed raised and lowered interest rates so many times that businesses were unable to plan for the future. As a result, companies kept prices high which worsened inflation. They were afraid to hire new workers, worsening the recession. Fed officials learned through the history of U.S recessions, they had to manage businesses' expectations of inflation. Since then, they've been consistent in their actions. More important, they clearly signal their intentions well ahead of time.﻿﻿

The oil embargo aggravated inflation by raising oil prices.﻿﻿ It came at a vulnerable time for the U.S. economy. Domestic oil producers were running at full tilt. They were unable to produce more oil to make up the slack. Furthermore, non-OPEC oil production had declined as a percentage of world output.﻿﻿

It also worsened the recession. First, higher gas prices meant consumers had less money to spend on other goods and services. This lowered demand. It also weakened consumer confidence. People were forced to change habits, making it feel like a crisis that the government tried unsuccessfully to resolve. This lack of confidence made people spend less.

For example, drivers were forced to wait in lines that often snaked around the block. They woke up before dawn or waited until dusk to avoid the lines. Gas stations posted color-coded signs: green when gas was available, yellow when it was rationed, and red when it was gone. States introduced odd-even rationing: drivers with license plates ending with odd numbers could get gas on odd-numbered days.

It also reduced the national speed limit to 55 miles per hour to conserve gas.﻿﻿﻿ Nixon instituted daylight savings time year-round for 1974 and 1975.﻿﻿

The oil embargo gave OPEC new power to achieve its goal of managing the world's oil supply and keeping prices stable. By raising and lowering supply, OPEC tries to stabilize the price of oil. If the price drops too low, they would be selling their finite commodity too cheap. If too high, the development of shale oil would look attractive.﻿﻿

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The Truth About the 1973 Arab Oil Crisis

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The OPEC oil embargo was a decision to stop exporting oil to the United States. On October 19, 1973, the 12 OPEC members agreed to the embargo. Over the next six months, oil prices quadrupled. Prices remained at higher levels even after the embargo ended in March 1974.﻿﻿ A review of the history of oil prices reveals they've never been the same since.

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The Yom Kippur war was an invasion of Israel by the Federation of Arab republics whose main belligerents were Egypt and Syria leading the invasion. Expeditionary forces supporting them were many other oil producing nations of the Arab world such as Jordan and Iraq. This event is important because the ultimate Israeli victory that resulted was won with American material and support and highlights why the United States was the target of such an embargo.

Since the focus of this project is economic and not so much world history I have decided to not include a lengthy documentary about this subsection. However, this event is defined as the final straw causing the energy crisis, and I feel an understanding of this event is helpful to understanding the crisis itself.

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This chart very clearly indicates the price of oil before, during and after the crisis. As of 2013 this chart indicates that the price at that time was $18.46 less than the 1980 peak 33 years into the future.

I choose to include this as visual representation of the cost over time is significantly easier to visualize the problem. Imagine if gas suddenly rose to $4 - $5/L, which would be roughly be equivalent to what prices would be if these same events were to happen today.

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America has reached the bottom of the Barrel 

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America has reached the bottom of the Barrel 

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This is a news report originally aired 06/12/1973, interviewing American citizens during the peak of the energy crisis and how it has been impacting them in their daily lives.

I chose to include this as getting that first hand information as it was being experienced at the time is extremely illuminating and helps us to realize how massively this disrupted everyone's lives.

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Oil Crisis | Stock market Crash | OPEC | This Week| 1973

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This intent of this project is to highlight the conditions that ultimately built up to, and boiled over into a global crisis.