To what extent is the oil crisis of 1973 a turning point in postwar economic development?

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Chin Ying Lin Olivia (2)



To what extent can the oil crisis of 1973-4 be regarded as a turning point in the development of the international economy?

The 1973 oil crisis was an event when the members of Organization of Petroleum Exporting Countries (OPEC) proclaimed an oil embargo in response to the U.S. decision to re-supply the Israeli military during the Yom Kippur war and lasted until March 1974. In this essay, a “turning point” is defined to be a landmark- an event marking a unique or important historical change of course or one on which important developments depend. While acknowledging that the oil crisis certainly had dramatic and lasting impact on the development of the international economy: in terms of signifying the start of a worldwide shift in power away from the U.S for the first time, bringing about catastrophic repercussions on the international economy and also leading to the formation of the G-7 ; to regard it as a “ turning point” would be an overstatement, due to the temporary nature of the crisis, as well as preceding events such as the collapse of the Bretton Woods System, and the continuity of dominance of the US in the global economy, albeit with lesser power than before the oil crisis. All these suggest otherwise: either that other events qualify more as a “turning point” than the oil crisis, or that there remained continuity of certain phenomenon in the global economy even after the event, implying that it failed to become a watershed event.

Firstly, one reason why the 1973 oil crisis can be regarded as a turning point would be its resulting in a basic change in world geopolitics.  For the first time in history, the oil producing countries took over the power of decision-making of global economic matters from the US. Its unchallenged position in the world economy so far was suddenly undermined by the emergence of a unified bloc of producers, unsheathing oil as a weapon of economic embargo to achieve its own political self-interests.

With the context of the Yom Kippur War, and with the idea of forcing the Western nations( particularly the US) to order Israel to withdraw from Arab territories occupied during the Six Day War-- the OPEC nations ordered an embargo on the shipment of oil to US, Japan and Western Europe. The cut in output allowed OPEC nations to force the price of crude oil up fivefold in dollar terms from an index of 146.3 in 1972 to 752.1 in 1974. Even the US, the economic super-power which dominated the global economy back then, was badly hit by the oil-crisis. There was a traumatic rise in the costs of manufacturing, transportation and food production. Unable to cope with such repercussions on the economy, Secretary of State Henry Kissinger succeeded in a

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lift of the embargo by negotiating a temporary settlement and convincing Israel to withdraw from part of the occupied territories---The oil crisis was thus a political and economical achievement for the Middle East. Firstly, this showed how the OPEC nations had now seized upon petroleum as the essential instrument of global diplomacy, Secondly, while the global economy was previously one in which the US was central, the oil crisis had forced the latter to devolve as the world’s premier economic power, succumbing for the first time  to the political demands of the OPEC nations(albeit minimal). The fact that the oil-crisis ...

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This is an extremely impressive response with excellent knowledge, detail and analysis. The author achieves good balance and reaches a conclusion but this could be more developed. 5 Stars