1973 Oil Crisis

Introduction

In 1973 first oil crisis began. The oil crisis caused the price of the oil high nearly

quadruple. The oil crisis also increases inflation in the US. It is the most inopportune time for

the US because of the manipulation of the prices and supplies of the oil. The oil crisis in the

US was significantly higher. Between 1970 and 1973 US crude oil imports had practically

multiplied, reaching 6.2 million barrels per day in 1973. By 1973, an abundance of oil

production had eliminated the oil drop's emporium charge as the distributed expense (Zulkifli

& Haqeem, 2022). The crisis has both short-term and long-term effects on the global

economy. The event also affects the macroeconomic factors of the US. The study will discuss

the macroeconomic environment during and after the oil crisis. The study also discusses the

impact of the oil crisis globally.

Macroeconomic Environment

An oil ban enforced by the Organization of the Petroleum Exporting Countries in

1973 ended in rapid expansion and downturn. In the United States, supply, circulation, and

spending disruptions have been blamed for downturns, periods of radical expansion,

diminished efficiency, and periodic currency movements. The recession significantly reduced

the gross domestic product of the country. During a crisis, the crisis impacts the GDP of the

USA and causes a decline in GDP. The GDP of the US before the oil crisis was 3.1%. The

GDP of the US in the 1973 crisis declined to 5.6%. In 1974, the GDP of the US fell from

5.6% to -0.5%. in 1975 the recession was, and the GDP was -0.2%. When the oil crisis ended,

the GDP increased from -0.2% to 5.4% in 1976. GDP caused inflation in the US. The

inflation rate increased from 3.3% to 11.1% (MacroTrends, 2022). The 1973 oil crisis also

caused unemployment in the USA. The cost of unemployment rose, and the sum of interest
rate hikes and wage stagnation ended in stagflation or prolonged currency stagnation. The

two efforts and capital are underused within the gift emergency. While unemployment, like

capital unemployment, reduces the efficiency of goods and administrations, individual

unemployment has real human consequences for the unemployed and their families. Also, it

is believed that about 1 million people have stopped searching for artworks because they

don't trust finding compositions anymore. By the time these poor people are included, the

unemployment cost exceeds 10%. In addition, the number of part-time workers rose from 2.7

million in May 1974 to 3.9 million in May 1975. Before the oil crisis, the unemployment rate

was 3.5%. But in 1970 when the recession started, the unemployment rate increased from

3.5% to 6.1%. During the oil crisis, the employment rate fell from 6.1% to 8.2%. But after the

oil crisis in 1976, unemployment was reduced and become 7.8%. The widespread explosion

of unemployment has hit every enormous segment of the troubled labour force. The

unemployment cost for heads of the family has more than quadrupled, rising from 2.7 to 6.3

per cent (Greenley, 2019).