OIL CRISIS OF 1973.   Term Paper ID:30201 Click to get this paper

Essay Subject: Discusses embargo of oil exports to the U.S. by Arab members of OPEC as a protest of U.S. support for Israel in 1973.... More...

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Paper Abstract: Discusses embargo of oil exports to the U.S. by Arab members of OPEC as a protest of U.S. support for Israel in 1973. Arab-Israeli War. Differing views of the embargo in Islamic World, Third World and industrialized West. Oil prices. Formation of OPEC. Effectiveness of OPEC. Consequences of the oil embargo. Paper Introduction: 1973: THE GREAT OIL SHOCK I Introduction Last spring, as U.S. gasoline prices rose above $2 per gallon, and California braced for a possible summer of brownouts, American politicians and commentators often referred back to the "Energy Crisis" of the 1970s, and television news shows replayed grainy old footage of cars waiting lined up ten or twenty deep at gas station pumps. One generation of Americans were reminded of an event they had perhaps half-forgotten, and another perhaps heard of it for the first time. In 1973, as a protest of US support for Israel in the 1973 Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. The reputation of Detroit'sproduct among American consumers had been declining for several yearsbefore 1973, with imports -- first the Volkswagen Beetle and then Japaneseimports -- gaining an increasing market share. In acondition of generally falling prices, which had prevailed since shortlyafter World War II, the leverage of a sellers' cartel in dealing with abuyers' cartel was inherently limited. Iraq had a large population, with arelatively large middle class and relatively high educational level. B. The imports were also smaller than American cars of the 197 s, andthus had superior fuel economy. With gas prices suddenly higher -- andwidely expected to go much higher still -- better gas mileage became notonly a selling point in its own right, but a further mark of quality. gasoline prices rose above $2 per gallon, andCalifornia braced for a possible summer of brownouts, American politiciansand commentators often referred back to the "Energy Crisis" of the 197 s,and television news shows replayed grainy old footage of cars waiting linedup ten or twenty deep at gas station pumps. Non-Arab-Islamic members of OPEC, and non-members of OPEC, had nosuch strong reason not to cheat. Since 1973, world oil prices have thus come to be administeredcollectively by OPEC rather than by the oil companies. The economic lifeblood of the United States was suddenly (orat least seemingly) revealed to be in the hands of distant countries of aforeign culture, whose peoples were the object of an almost unrelievedlyhostile stereotype. Tulsa, OK:Penwell. 2) At the same time, the countries that gained the most oil incomeoften had little way to convert this into broader development. Meanwhile, however, two important things had happened. Egypt's economic problems remain muchthe same as before 1973: effectively harnessing the potential of itspeople. OPEC: Twenty-Five Years of Prices and Politics.New York: Cambridge University.----------------------- 23 What resources were available have largelybeen diverted to military forces and Saddam Hussein's self-aggrandizement. We have found twodifferences. The ability of the oil companies to "administer"prices and avoid market discipline allowed them to avoid a sharp decline inprices as supply increased and production costs fell, but they could notentirely escape from downward price pressure. 2. One generation of Americanswere reminded of an event they had perhaps half-forgotten, and anotherperhaps heard of it for the first time. The samescenario was replayed in 1979, but it is notable that it was not replayedin the wake of the gasoline price increases and California power brownoutsof early 2 1. However, the Arab-Islamic members weresufficient to create a critical mass. Since 1973,the pattern of oil prices has been one of sudden, sharp increases, oftenfollowed by an equally sharp drop, and then by a long period of graduallydeclining prices -- but not returning to pre-1973 levels. Actually it was not the embargo itself that demonstrated this shiftin the balance of power, but rather the more durable increase in the worldprice of oil. In the years since 1979, however, the apparent transformation of the197 s has largely faded. Politically it reinforced some pre-existingtrends, such as France's independence of the United States in moving towardcloser relations with the Arab world (Mindershausen, 1976, p. World oil prices plunged in the early 198 s, andstayed low until the last few years, when they gradually recovered. By the 199 s, however, the American economy hadrecovered and was in robust growth, while the collapse of the Soviet Unionmeant that the United States, far from seeming in decline, was unchallengedin the world. Oil and Power in the 197 s Oil prices, which rose markedly in 1973-74, stabilized for severalyears at the new level, showing neither further increases nor any markedtendency to decline (Adelman, 1995, p. TheUnited States became more dominant in the 199 s than it was before 1973.Even the fear of a new energy crisis seems to have evaporated, almost in amatter of weeks. By organizing the oil-producing nations into a bloc, it was hoped, the producing nations wouldgain a more equal hand. The Persian Gulf War of 1991 showed that Americans could, ifnecessary, defend their access to (and potentially control over) oilsupplies by force of arms. Thus Iraq had a unique combination of advantages on which tobuild in achieving comprehensive development and modernization. Moreover, all knew that anattempt by any one of them to undercut prices would gain only a transientadvantage in market share before the others responded. In contrast, efforts to form a Western counter-cartel cameto nothing (Al-Otaiba, 1975, p. Thus the oil companies and exporting countries in effect colluded toallow prices to increase. From now on, the relationship would be one of bargaining betweenequals, not one of domination by the West and especially the United States. (1983). Bush's ties to the oil industry no doubt account for part of thisskepticism, but the point remains that Americans did not feel frightened bythe prospect of higher oil prices. The relationship between the producing countries and the firms was,in effect if not formal structure, that of suppliers to a buying cartel.An attempt by any one country to increase the revenue it got from oilexports invited manipulation by the companies, which could easily reduceproduction in that country and compensate elsewhere. Arab publicopinion was at once heartened by the demonstration that Israelis were notinvincible, and outraged by the massive American support. Indeed, although we speak of the oil embargo, and its circumstances,beginning, and end, there is a question of whether the embargo ever existedin any real sense. NewYork: John Wiley. Most discussions of oil supply since the 197 shave been rooted in this assumption. Events in the next few years seemed to underline this theme.Billions of dollars poured into the coffers of the oil states, and were putto work in national development projects. Shifting Balance of Power in Oil Markets The 1973 embargo signaled a fundamental shift in the balance ofcontrol over world oil supplies and markets, from the "Seven Sisters"international oil companies to the member countries of OPEC. The first happened to a considerable degree following the1973 and 1979 "oil shocks," and also happened over the last few months inCalifornia (though the cause of its winter power shortage was not linked tooil supply). 1973 came on the heels of adecade of exceptional turbulence in American public life, from the Kennedyassassination to the Vietnam War to civil unrest in the streets toWatergate. Although thephrase "America held hostage" did not enter the political lexicon until theIranian embassy crisis of 1979-8 , the sense of besiegement was alreadywidespread. B. 18 ). Instead,both the producing countries and the oil companies found it in theirinterest to let prices rise. Effects in the Arab/Islamic World While the embargo led to a dramatic increase in the self-confidenceand international standing of the Arab-Islamic nations, both oil exportersand others, it has subsequently failed to have many of the benefits thatwere once hoped for. Domination by the "Seven Sisters" Oil Companies By the middle of the last century, the world's oil production anddistribution were overwhelmingly concentrated in the hands of a half dozenor so major international oil companies. 68). The second has also happened, though to a more modest degree,largely because even during the shocks the price of oil did not stay highenough for long enough to make alternative energy fully competitive. The domestic auto industry went into a slump fromwhich it would not recover for a decade and a half (and it never fullyregained the lost ground). Instead they were relegated to the (still veryprofitable) role of producing and selling oil at the OPEC-establishedprice. Subsequently, anxieties related to the two"oil shocks" continued to roil American society and politics. Indeed, the political and socialbackground may have done far more than the embargo itself to create the"shock," with its panic buying, gas lines, and spot shortages. Put anotherway, all oil exporters benefited enough from the price increase that theyhad no motive to undermine it, whether or not they honored the embargoitself. 69-7 ). Its 199 -91 misadventure in Kuwait ended quickly in militaryterms, but left as legacy a system of economic sanctions that havestrangled the Iraqi economy. This was notdue to any reduction in reserves or increase in production costs. Petroleum Politics and Power. 1). Also in 1973, the United States was embroiled in Watergate. Nevertheless, just as the Suez crossing demonstrated thatthe Israeli military machine was not after all ten feet tall -- that it wasbeatable -- so the oil embargo demonstrated that the West was not ten feettall, and could be successfully defied. It was later extended to the Netherlands and Portugal(Skeet, 1988, p. The Arab members of OPEC, in the wake of the 1973 war, showedexceptional discipline and solidarity. The oil-producing countries had asserted control over their own natural wealth, andshaken off the domination of the Western-dominated international oilcompanies. The explanation must therefore lie in the particular circumstances of1973, and how they differed from those of the present. On the one hand, the industry was concentratedenough that its members were not subject to the strict price discipline ofan open market, but had some freedom to "administer" prices. Historically, Baghdad was a rival to Cairo asintellectual and commercial center. This transformationcannot be due to the inflow of oil wealth alone, since it has not beenconfined to the oil-exporting countries. The American government, then concerned aboutfalling oil prices, quietly supported this move (Adelman, p. Instead, under the rule of Saddam Hussein, Iraq has consistentlyfrittered its potential away in disastrous military adventures. Coping with the Oil Crisis: French andGerman Experiences. Political None of these effects, however, might have had as much impact were itnot for the American political background. If and whenconsumers will not pay enough to induce investment in new reserves andcapacity, the producing industry will dwindle and disappear. E. In 1973, as a protest of US support for Israel in the 1973 Arab-Israeli War, the Arab members of the Organization of Petroleum ExportingCountries (OPEC) agreed to an embargo on oil exports to the United States.Gasoline prices in the US immediately shot up, and panic buying led tofrequent local shortages. Moreover, it must be admitted that some of the oil-exportingnations have taken the easy path, devoting themselves to little more thanmanaging (and enjoying) their oil wealth. (1995). 197 : Oil Prices Start to Rise In 197 , however, the long-term downward drift of oil prices came toan end, and the world price started to gradually increase. Effects in the United States If the triumphal atmosphere of 1973 gradually has faded away in theArab-Islamic world so has the humiliation and dismay of 1973 graduallyfaded away in the United States. The Long-Term Trend: Declining Prices About 1948, the United States ceased to be a net exporter of oil, andthe Middle Eastern crude replaced Texas crude as the benchmark price forworld oil. Thus, forexample, by about 197 , more oil had been pumped out of the Persian Gulffields than the total reserves of those fields as estimated in the 194 s,while the estimated reserves had also vastly increased. Egypt, forexample, though the most populous Arab country and the traditional centerof Arab intellectual and cultural life, has no oil, and thus drew nosignificant benefit from oil income. In the Arab and Islamic world, however, and indeed in much of theThird World, the 1973 oil embargo was viewed very differently. In theprocess, however, the companies and the United States showed OPEC itslatent strength.III Events of 1973-74 A. Itpossessed large oil reserves, ample to fund large-scale developmentprograms. 69). In these conditions, both the immediate and longer-term effects ofthe oil embargo were greatly magnified. The intent of OPEC was to gain leverage in worldoil markets on behalf of the oil-producing nations. Sincethat time, prices have tended upward again, at times spiking as high indollar terms as in 198 , though due to inflation considerably lower in realterms.VI Evaluation of the Oil Embargo A. This pattern ofoil prices is closely bound up with the career of OPEC. Greatly increased oil revenues flowed into the oil-producingcountries, in the Middle East and elsewhere, OPEC members and non-membersalike. The second Bushadministration warned of a new energy crisis, with explicit references to1973 and 1979, but its warnings fell on deaf ears. We are therefore led to ask what exactly really happened in 1973, andwhy? Official pronouncements of an energy crisis were insteadgreeted with something close to derision, and widespread suspicion that thesupposed crisis was manufactured for political reasons. The embargo was short-lived, and as noted above, there is anopen question whether it ever existed in a functional sense, rather than asa rhetorical statement. However, the long-term price trend for oil over the next twodecades was gradually downward. Nobodywill ever know, or even want to know, how much is still in the ground.Only cost and price matter (Adelman, 1995, p. Indeed, without knowing the exact movements of tankers at sea, thenations supporting the embargo had little control over where the oil theysold was actually going. Effects on the United States 1. While the Earth's oil reserves may be diminishing in some abstract sense,they are not doing so in an economic sense, as shown by the fact that oilprices generally trend downward. Subsequently -- and with massive logistic support from theUnited States -- the Israelis regained their balance, and the war ended ina draw and another truce. Under their domination, the world oil market was an oligopoly (Al-Otaiba, 1975, pp. 1 ). The Embargo The Arab members of OPEC officially declared an embargo against theUnited States and South Africa on October 2 , 1973, a few days after theend of the war. To quote oil analyst Michael Adelman, Oil and other minerals will never be exhausted. Other forces contributed to economic strains, particularly in asector that was both closely oil-related and a major component of theAmerican economy: the automotive sector. 1973: THE GREAT OIL SHOCKI Introduction Last spring, as U.S. In 1979, the Iranian revolutionled to a second "oil shock," with another surge of prices and wave ofgasoline shortages. Such pricing would have led to severe political repercussions andbrought on the hostility of political interest groups more powerful thanthe oil companies themselves. Such administrationhas by no means always been fully successful, as we shall see; prices fellsharply in the early 198 s and remained low for over a decade and a half.But the oil companies never regained the control over prices that theyenjoyed before 1973. They could and did ship oil toembargoed countries, but none could hope to gain enough advantage fromprice cheating to overcome the cost of holding down the price. In a bold and well-planned operation, Egyptian forces, whichhad suffered a humiliating defeat in the previous 1967 war, successfullycrossed the Suez Canal and rolled back the Israelis along the so-called Bar-Lev Line. Mendershausen, Horst (1975). Even withoutovert collusion, the oil majors would quickly learn of one another'spricing decisions and could respond according. Its establishmentdrew mild interest and considerable skepticism on the part of oilprofessionals, and was almost entirely ignored by the rest of the world(Skeet, 1988, pp. B. The Genie Out of the Bottle: World OilSince 197 . OPEC and the Petroleum Industry. It was only in force for about two months, and itis doubtful whether the embargo itself had any dramatic impact; it gainedits effects from surrounding events (Adelman, 1995, p. Effects in the Arab-Islamic World The oil embargo, like the crossing of the Suez Canal in the 1973 war,was understood in the Arab-Islamic world as a demonstration of strength.It might be true that the embargo was short-lived, as it is likewise truethat the Israelis regained the military initiative in the latter stages ofthe 1973 war. As the technology of oil exploration and extraction improves, newfields become easier to find (usually near existing ones), and establishedfields turn out to have more economically recoverable oil. Brossard, E.B. Especially in the case ofJapanese cars this was associated with a reputation for superior quality. The 1973 war gave the Arab-Islamic members of OPEC the will to use their "oil weapon" in a coordinatedway, while the reaction to the embargo declaration showed that they had themeans to do so. However, asworld oil prices fell sharply in the early 198 s, the memories of 1973 and1979 began gradually to fade into the background. In the198 s it bled itself white, economically and in human terms, in the warwith Iran. This amplified the broader economic effects ofthe 1973 oil shock. The oil embargo played strongly into this psychology. By the later 198 s they had dropped back toabout the 1974-79 level, and in the decade after they continued togradually slide, until by about 1995 the price was in real terms aboutmidway between 197 prices and 1974 prices (Adelman, 1995, p. Indeed, polls have shown wide skepticism that any "energy crisis"exists. The United States had ended its unhappy direct involvement in theVietnam War a few months before the oil embargo. Their smallpopulations did not provide the human-resource base for large-scaleindustrialization, while the technologies of oil production are sospecialized that developing a pool of expertise in managing oil resourcesdoes not readily translate into general mastery of modern industrialmethods. (Similaraccusations were made in 1973, but in an atmosphere of helpless anxietyrather than contempt.) We will return to this point below.V After the Embargo A. B. However, this potential had not previously been realized, essentiallybecause of fear that some members might break ranks, double crossing theirpartners and reducing prices in order to increase their market share. There can only be so much of itin the ground, and as it is pumped up and consumed, the remaining supplymust inevitably decrease. Economic However much or little of an actual oil shortage there was in 1973,prices certainly increased sharply, and the general post-1973 increase inoil prices hit the United States economy at a particularly vulnerablemoment. Moreover, while individual companies couldnot gain market share by cutting prices, they might well lose market shareby raising prices. From the inception of OPEC, the theoretical potential had existedthat its members might, by coordinated action, force up the world price ofoil. 1973 Arab-Israeli War In October of 1973, the uneasy truce between Israel and its Arabneighbors collapsed, and war broke out. Thus, an oil embargo declared by Arab oil-producing countries during the 1967 Arab-Israeli War had no significanteffect, and was soon quietly abandoned. OPEChas survived, but without the level of influence or unity it enjoyed in the197 s. The embargo led to aflurry of talk about military intervention, but in the prevailingatmosphere there was no American public support for another overseasadventure. In general, thoughthe Earth must in some abstract sense have less oil than it formerly did,world oil reserves have tended to increase over time. Most of all, however, it was adifference of public psychology in the United States, discouraged in 1973,self-confident in 2 1. The effects of theassociated price increase, however, were quite real.IV Consequences of the Oil Embargo A. The essential reason for this downwardprice pressure is that, even as world oil consumption increased over thosedecades of widening worldwide industrialization, the supply of oil wasgrowing even faster. If this trend continued, it would simultaneouslysqueeze the profits of the oil companies and limit the income growth of theexporting countries (Adelman, p. D. Oil reserves are not a measure of "the oil that remains in theground," but only of that portion that has been worth exploring andproving. Although all OPECmembers (indeed all oil-exporting nations) stood to benefit from anincrease in oil prices, this motivation by itself was not enough to ensuresolidarity among them. Prices, which had gone (in then-current prices) from about twodollars per barrel before 1973 to ten dollars per barrel after 1973, spikedas high as $35 per barrel, and there was panicky talk of $1 per barrelprices. C. Of all Arabcountries, Iraq was potentially the best positioned to convert oil incomeinto broader development. However, the period in questionis short enough that it cannot be taken directly as an indicator of whatlong-term price trends might have developed had other events notintervened. A case can be made that the embargo, and the conditions that broughtit about, had two further, related effects. Thiswas the same mechanism that had contributed to price stability under theregime of oil-company control. 12). On the other hand, the oil giants were unable to enforce monopolypricing. Under these conditions, a sort of balance of powerprevailed among the international oil companies, and prices tended to bestable. The oil-exporting countries had beengradually increasing their "take," in the form of excise taxes, even asprices slowly fell. Thus, if Producer A is unwilling to sell to ConsumerB, the consumer can simply buy oil from Producer C. References Adelman, Michael A. Oil is a highly fungible commodity: that is, a barrelof oil from one source is essentially identical to one from any othersource. In the wake of the 1973 war, however, the Arab-Islamic members of OPEC were responding to deeply held popular feelings.Once the embargo was declared and prices raised, none of them dared tocheat. Even if they did know, oil could simply be pumpedinto storage tanks at a non-embargoed terminal, then pumped back into someother tanker to carry it to an embargoed customer. Amid thisatmosphere, the Arab members of OPEC once again declared an embargo on oilexports to the United States, as well as other countries that wereconspicuous supporters of Israel. Early Ineffectiveness of OPEC For its first decade, however, OPEC was largely ineffective. It is difficult to trace cause and effect in specifics with regardto so large and internally varied a region of the world, but it isreasonable to say that the general influence of Arab and Islamic countriesbecame very markedly greater in the quarter-century that followed ascompared to the quarter-century that preceded 1973. In a sense, they all held hands and jumped off the diving boardtogether. The recent passage of Bush's energy plan by the House ofRepresentatives reflects political alliances of convenience, not any publicoutcry. These were traditionally known asthe Seven Sisters, though not always seven in number (Brossard, 1983, pp.17, 131). TheDetroit product, in contrast, came to be regarded not only as clunkers, butgas-guzzling clunkers. 11). What effects did the Arab oil embargo of 1973-74 have, and why did itnot have the effects so many people in both the Arab world and the Westexpected at the time? A mood of discouragement, even despair about the country'sfuture was already "in the air" in 1973. This is to say that if, eventually, the cost of finding and raisingoil becomes excessive, consumers will find ways of using less, andproducers of alternative energy sources will step forward withalternatives. Energy conservation became amatter of widespread public discussion, and some action; for example, salesof smaller cars with better fuel economy increased markedly. The sharp increase in oil prices acceleratedboth, leading to what soon came to be known as "stagflation" -- acondition, previously assumed to be impossible, in which inflationincreased even though the economy was stagnant. Elsewhere, the sharp increase in oil prices added to an already-existing inflationary trend. No other case in the Arab-Islamic world can compare to Iraq, but ingeneral the heritage of 1973 has been as much one of disappointment as ofprogress. Oil and Power after 198 Unlike the price increase of 1973-74, however, the 1979-8 oil pricespike proved unsustainable. The Arab-Islamic members of OPEC thus accomplished in the fall of 1973 what OPEC hadbeen created to do in the first place, and had previously failed toachieve. Thus, for the Arab-Islamic world, 1973 was effectively the end of theneocolonial era, and the beginning of its full emergence onto the worldstage. This project is intended to briefly examine thesequestions.II The World Oil Market Before 1973 A. They regarded it as a mere annoyance,not as asymbol of national weakness and loss of control.VII Conclusions Why did the "oil crisis" resulting from the 1973 embargo have suchlong-lasting effects -- even though the embargo itself was shortlived andhad little impact -- while the "oil crisis" of 2 1 had no impact at all?The explanation cannot lie in the inherent nature of the oil market itself. While individual wells and fields produce oil of varying quality,but globally there are numerous sources for crudes of all grades (Al-Otaiba, 1975, p. Moreover, while OPEC nations controlled the major share of world oilproduction in 1973, with Arab producing nations who supported the embargocounted for much of that share, they did not control its distribution.Since there was still a substantial share of non-embargoed productionflowing into the world market, it was a simple matter for the internationaloil firms -- who controlled distribution -- to adjust distributionpatterns, if need be diverting oil under embargo to non-embargoedcustomers, and non-embargoed oil to embargoed customers. 11ff). If 1973 was in itself a victory, it is one that the Arab-Islamicworld as a whole has not fully followed up on. Coming as it did after failure in Vietnam, it was even seen asmarking the beginning of American decline in the world. 187ff). 2). In a sense, then, the 1973 embargo and increase in oil prices can beviewed as a successful act of outraged frustration. Along with the Iranian hostage crisis, Americanweakness seemed underlined. Skeet, Ian (1988). The Iranian revolution of 1979-8 , led to another "oil shock," thisone much steeper in absolute terms than that of 1973 (Adelman, 1995, pp.171ff). In 1974,Nixon was forced to resign, and in 1975 South Vietnam collapsed. This seemed to presage a vast transformation in the politicaland economic power relations between the industrialized West and the ThirdWorld. B. The Arab-Islamic world as a whole remains stuck on amiddle rung of the socio-economic ladder; as a group its nations are nolonger among the world's poor, but not yet among the world's prosperous. If the intervention talk was orchestrated as a veiled threat toOPEC's Arab-Islamic members, it failed as completely as the 1967 embargohad. To Americans it was a revelation ofhelplessness, and what was regarded as blackmail by distant foreigncountries. The election of Ronald Reagan in 198 can be seen as very much aresponse to the oil shocks (though of course particularly to the second).Reagan proclaimed his intention to "restore America," in some degree fromall the setbacks of the previous decade or so, but especially from the oil-shock humiliations. 22-23). Increased supply and downward price pressure would reappear in the198 s and most of the 199 s, even though they are both contrary to thenearly universal assumption that oil is a fundamentally limited commodity.It is natural to think of oil in this way. The economic transformation in the Arab world has largely stalled,with oil income failing to bring the level of progress once hoped for. The opening stages of the war werea startling revelation to the Israelis, the West, and the Arab peoplesthemselves. As was suggested earlier, the American public response to gasolineprice spikes in 2 and 2 1, and to the spate of electrical brownouts inCalifornia in early 2 1, indicate how far the political environment andunderlying public perceptions have changed since 1973. Almost all projections assumed further price increases (Adelman,1995, pp. Al-Otaiba, Mana Saeed (1975). Formation of OPEC OPEC grew out of a proposal by the Petroleum Committee of the ArabLeague in 1959, and formally came into being in 196 . In particular, the inflow of oil wealth has failed to stimulate abroader "takeoff" into general industrial and economic development.Several related reasons can be given for this: 1) The distribution of oil resources was largely unrelated to thedistribution of population and economic infrastructure. Thus they were ableto avoid lowering crude oil prices to a level just above production andshipping costs, i.e., the free-market price. However, there is a strong case to be made that the notion of afinite and declining oil supply, however valid in some abstract sense, isirrelevant to oil economics. C. Moreover, member governments eachhad their own interests, concerns, and national development requirements,which made it difficult for them to agree on a common pricing strategy,much less on production quotas. As we have seen, the events of 1973 weremore or less replayed in 1979. Nevertheless, the embargo was "real" to the extentthat it was perceived to be real, and the mere fact that it was soperceived by much of the world underlined and demonstrated that OPEC wasnow in the driver's seat. Baltimore: Johns Hopkins. 2). The embargo itself wastherefore an almost purely psychological exercise. 3) In the case of Iraq, mismanagement has been much worse, with alevel of wasted potential that can be called catastrophic. The boom of the 196 s had come to an end, and inflation wasalready markedly increasing. The oilembargo thus became just one in a series of events highlighting Americanweakness and decline in world standing. Nevertheless, oil prices even in the mid-199 s, before the recentwave of increases, were much higher than they were in 197 . So long as thesemarkets were wholly under the control of the Western oil firms, the oil-producing countries were always subjected to their heavy hand. This has in turndriven the usual trend of oil prices, which has over most periods beendownward. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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