OPEC oil embargo
On October 17, 1973, ten days into the Yom Kippur War, OPEC's Arab members announced an oil embargo against the United States, the Netherlands, and other countries that had supported Israel. Combined with production cuts agreed by all OPEC members, the embargo quadrupled the world oil price within months — from about $3 per barrel to nearly $12. Gasoline lines, fuel rationing, the 55-mph speed limit, and the first major Western recession in nearly thirty years all followed. The embargo demonstrated that a coordinated cartel of producing states could impose a coordinated price on the consuming world. It was the moment energy security entered American politics as a permanent topic.
The embargo was lifted in March 1974 after diplomatic shuttling by Henry Kissinger. But oil prices did not return to pre-embargo levels — the new $12 price became the floor. Nine years later the Iranian Revolution and Iran-Iraq War would push it briefly above $40, and the 1970s would be remembered as the decade Western middle-class energy expectations broke.
04 · The Petrodollar
When Nixon closed the gold window in August 1971, the dollar lost its commodity backing. It immediately gained a new, less visible one. In 1974, Saudi Arabia agreed to price all its oil exports in U.S. dollars in exchange for American security guarantees and a Saudi commitment to recycle oil revenues into U.S. Treasury bonds. Every country that wanted oil now needed dollars. Sovereign wealth funds emerged as the warehouses of recycled petroleum money. The petrodollar system was as load-bearing for the post-Bretton-Woods financial order as gold had been for the previous one — and far less visible.
Read the full era →