The OPEC Oil Shock Crisis (1973) An Analysis

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The Opec Oil Shock Crisis (1973): An Analysis
Article in Asian Journal of Research in Business Economics and Management · March 2022
DOI: 10.55057/ajrbm.2022.4.1.12
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Asian Journal of Research in Business and Management
e-ISSN: 2682-8510 | Vol. 4, No. 1, 136-148, 2022
http://myjms.mohe.gov.my/index.php/ajrbm
The Opec Oil Shock Crisis (1973): An Analysis

Noraini Zulkifli1*, Daniel Haqeem1
1
Department of International Relations, Security and Law, Faculty of Management and Defence Studies, National
Defence University of Malaysia
*Corresponding Author: noraini@upnm.edu.my
Accepted: 15 February 2022 | Published: 1 March 2022
DOI: https://doi.org/10.55057/ajrbm.2022.4.1.12
__________________________________________________________________________________________
Abstract: The OPEC Oil Embargo (1973) was precipitated by the Yom Kippur War. The United
States was the first country to be sanctioned by Saudi Arabia, Libya, and other Arab countries on
October 19, 1973 for its political and military support for Israel (particularly through the delivery
of military equipment and arms, which played a key role in Israel's wars against neighboring
countries). The 1973 Oil Embargo put a strain on a United States economy that had become
increasingly reliant on foreign oil. The research is conducting to analyse the The Opec Oil Price
Shock Crisis (1973) and Impact to United States of America. The objectivof this study is to examine
the OPEC Oil Price Shock Crisis impact to United States of America. The concept of national
interest is used to support the action of United States of America in solving the the crisis. The study
is being carried out using a qualitative approach, including data gathered from secondary sources.
The secondary data in this study also consists of printed and digital material gathered from articles
and books. Findings of the study are several impacts that have a significant impact on the United
States where it has already had an impact on the economy, politics and also the United States
relationship with the OPEC organization. One of the obvious impacts is from an economic point
of view. The U.S. economy undeniably experienced a downward trend during the oil crisis. It left
no lasting impression, even more than a year on the United States. Not to forget the impact on U.S.
politics. U.S. politics is seen as less stable and volatile after the oil crisis. But the United States
Government is still able to work together to overcome this problem. Not to forget the impact on
US relations and the OPEC Organization. The relationship between the two was seen to erode
when the crisis began and in 1974 to 1975 witness their recovery phase but this crisis has taught
the United States not to be too dependent on oil resources from foreign countries.
Keywords: Embargo, OPEC oil crisis 1973, The United States of America, Stock crisis
___________________________________________________________________________
1. Introduction
The OPEC oil embargo was a decision by the Organization of Petroleum Supplying Countries
(OPEC) to halt exporting oil to the United States. The 12 OPEC members agreed to the embargo
on October 19, 1973. Oil prices tripled in the next six months. Even when the embargo expired in
March 1974, prices remained higher. The 1973-1975 recession was generally attributed to the oil
embargo. The 1973-74 oil crisis, in the eyes of Federal Reserve policymakers, tended to
significantly complicate the macroeconomic situation, notably in terms of inflation.
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Throughout World War II, the United States was the world's largest oil production (a status it
regained in 2018). In the 1950s and 1960s, oil fields in Texas, Oklahoma, other states, and the Gulf
of Mexico produced enough oil to keep gasoline affordable in the United States. By 1973, the
United States had the largest oil consumption in the world, consuming one-third of all oil produced
but having only 6% of the world's population. Oil imports were increasingly required to maintain
America's economic expansion and growth as a result of huge industrial growth, the construction
of roads, and the creation of automobiles. By the early 1970s, imports accounted for around 30%
of total oil consumption in the United States, which had begun to reduce local production and
exploration owing to environmental concerns and government regulations.
The OPEC embargo demonstrated the cartel's growing influence in the global economy, and many
Americans saw it as another another indication of their country's collapse in the 1970s. Oil prices
rose from $2 per barrel to $11 per barrel when the embargo went into effect. The impact was seen
by American customers in their wallets, as retail gasoline prices increased by 40% in November
1973 alone. Americans queued up at the pump to refill, fearful of gasoline shortages, as gas
businesses hiked their prices many times every day. The gas queues revealed the hysteria that
gripped the country during the embargo, as drivers feared that if they did not fill up today, the price
might rise tomorrow. Not surprisingly, with demand high, many stations ran out of fuel, and signs
saying “Sorry, No Gas Today” became quite common in the late fall months.
2. The Economic Impact Towards The USA
The 1970s were a decade of pessimism for many people. In 1970, it began with a recession and
the bitter end of the Vietnam War. Because of memories of the Great Depression, policymakers
were hesitant to deploy restrictive monetary and fiscal policies to control inflation, fearing that the
resulting increase in unemployment would be unacceptably high. Instead, in August 1971, wage
and price restrictions were implemented. An oil embargo imposed by the Organization of
Petroleum Exporting Countries (OPEC) in 1973 resulted in fast inflation and a recession, and
another round of oil supply interruptions occurred in 1979 (Bradford De Long. J, 1996).
i. Unemployment Rate
Unemployment rates increased, and a combination of price rises and wage stagnation resulted in
stagflation or a period of economic stagnation. President Nixon attempted to address these issues
by weakening the dollar and instituting wage and price freezes (Mitchell. T, 2010). Both labor and
capital are underused in the present crisis. While labor unemployment, like capital unemployment,
reduces the potential output of goods and services, individual unemployment has real human
consequences for jobless people and their families (Moore. G, 1977). As a result, there is a worry
not just about the number of people who are unemployed during a recession and the economic
consequences, but also about how this unemployment spread across the population (Schwenk. A.
E., 2003). In May 1975, around 8.5 million individuals went jobless (seasonally adjusted),
resulting in the most significant overall unemployment rate in any postwar recession at 9.2%
(Schumacher. D, 1985). Furthermore, it is predicted that at least 1 million people have ceased
seeking work because they do not believe they will find work. When these unhappy workers are
factored in, the unemployment rate exceeds 10%. Furthermore, the number of part-time persons
climbed up from 2.7 million in May 1974 to 3.9 million in May 1975 (Greenley. H, 2019). In May
1975, long-term unemployment (thirteen weeks or longer) reached 31.5 %, up to 17 % in
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December 1973 (Willner. S, 2018). The substantial increase in unemployment has hit every
significant segment of the labor force. Between September 1973 and May 1975, the unemployment
rate for household heads more than quadrupled, rising from 2.7 to 6.3 percent (Matthews. R &
Steglich. E, 2011). The number of married males had virtually quadrupled in this time (from 2.1
percent to 5.8 percent). Significant increases in secondary worker unemployment have mirrored
sharp increases in primary breadwinner unemployment (Engi. D & Icerman. L, 1995). In May
1975, compared to the previous year, Blacks have been hurt more than whites regarding rising
unemployment, and teenagers have been hit harder than adults (Neu. C, 2012). Although adult
male unemployment rates have increased faster than adult female unemployment rates, the number
of discouraged employees who leave the economy is expected to be more significant for females
than males. In addition, there are differences in the severity of unemployment based on work and
geographic region. The economic recession affected the blue-collar employees first, next to the
white-collar employees. Between May 1974 and March 1975, the blue-collar rate surged from 5.8
percent to 12.5 %, then slightly higher to 13% in April and May 1975 (Robb. T, 2012). Between
March and May, the white-collar rate increased faster than the blue-collar rate, rising from 4.6
percent to 5.4 percent (Engi. D & Icerman. L, 1995). Not only are there more jobless individuals
now than there were a year ago, but they are also unemployed for longer lengths of time (Krymm.
R, 1998.). Unemployment lasted an average of 13.4 weeks in May 1975, up from 9.3 weeks in
December 1973 (Robb. T, 2012). Only around one-third of the unemployed have been unemployed
for less than five weeks, compared to more than half of the unemployed. (Bradford De Long. J,
1995).
ii. Inflation
During the recession, there was a significant drop in real output and resource utilization, as well
as a high rate of price inflation. Because traditional policy prescriptions predict that low inflation
rates correspond to low economic activity and high unemployment, monetary and fiscal
policymakers have a considerable problem in dealing with this condition of inflation with slack.
When there is high unemployment and rapid inflation, it is not always apparent whether the optimal
solution is to limit or stimulate (Schwenk, A. E., 2003).
Table 1.1: Changes in The Consumer Price Index and The Wholesale Price Index During the Recession Of
1974-1975.
Source: US Department of Labor, Bureau of Labor Statistics. (2001)
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Based on table 1.1, the drop-in economic activity in 1974 was followed by the highest annual
increase in the Consumer Price Index in the same year, at 12.2 % (Chen. T & Gentle. P, 2011).
The Wholesale Price Index increased by 20.9 % in the same period, with industrial commodity
prices increasing by 25.6 %. Although the first quarter of 1975 saw significant success on the
inflation front, the slowdown is threatened by future energy advances. Wholesale prices have
begun to rise again, partly due to an increase in food prices, and oil price increases later this year
might contribute significantly to a resurgence. The Wholesale Price Index grew at a 12% annual
pace in April and May, compared to a -5.8 percent fall in the first quarter. As indicated in Table
3.2, reflecting price increases for food and crude materials. In April and May, the Consumer Price
Index increased by 6.2 percent, up marginally from the first quarter but still well behind the double-
digit rate of 1974. Energy advances may result in even higher inflation. The combined effects of
another OPEC price hike, phased-in decontrol of old oil, and the recently announced additional $1
import fee could push inflation up by 2 to 3 percent in the following 18 months. (U.S. Department
of Labor, 2001).
iii. Food and Energy Prices
Table 1.2: Rate of Change in Wholesale Price Index And Components (percentage changes, seasonally-
adjusted annual rate)
Source: US Department of Labor, Bureau of Labor Statistics (2001)
Based on table 1.2, price rises in both wholesale and consumer sectors were moderate in April and
May if food and energy costs were excluded. Industrial commodity wholesale prices increased at
annual rates of 1.2 percent in April and 2.4 percent in May. Suppose crude material price increases
(primarily due to higher energy costs) are excluded from the industrial commodities index. In that
case, the April and May gains are significantly less, at 0.5 percent and 1.3 percent, respectively.
(Chen. T & Gentle. P, 2011). In the last two months, wholesale prices for intermediate items have
remained unchanged. Consumer finished goods prices increased by 2.4 percent in April and 3.7
percent in May on an annual basis. In the near run, these non-food and non-crude components of
the Wholesale Price Index are primarily unaffected by rising energy and food costs. They may be
used to measure inflation driven by factors other than rising energy and food prices. These indexes
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did not accelerate beyond the very favorable rates of rising in the first quarter in April and May,
unlike comprehensive price change indicators. (Schwenk, A. E., 2003).
iv. Trends in Labor Unit Costs

Higher labor costs also aid inflation. During the recession, unit labor expenses climbed slightly
faster than the overall inflation rate, putting a strain on business earnings. This, along with higher
material costs, has resulted in a significant squeeze in profits. The steep drop in person-hour
productivity that occurred when output declined had significantly contributed to rising unit labor
costs (Moore. G, 1977). In 1974, person-hour compensation increased by only 10%, which was
less than the inflation rate. However, when this rise was combined with a 3.6 percent drop in
person-hour productivity in 1974, labor cost per unit of production increased by 13.9%. In the first
quarter of 1975, the annual rate of rising in unit labor costs was 11.4 % (Chen. T & Gentle. P,
2011). The economy's revival should help reverse the downward trend in productivity.
Furthermore, enormous upward wage pressure is unlikely if unemployment stays high. As a result,
the recovery may be accompanied by lower rises in unit labor costs, especially in the early phases
when productivity gains are likely to be rapid. However, higher increases in unit labor costs are
inevitable in the long run, as pay pressure is unlikely to be entirely offset by sustained rapid product
development. (Bradford De Long. J, 1996).
v. United States car manufacturing

The 1973 oil crisis and its impact on the automobile industry are examples of this (Joskow. P,
2013). Before the 1973 oil crisis, the auto industry had a long and illustrious history. However,
everything that has happened since then can be traced back to that fateful day – Oct. 16, 1973 –
when members of OPEC (Organization of Arab Petroleum Exporting Countries) decided to raise
the posted price of a barrel of oil by a staggering 70% (Igari. E, 2002). It was the end of an era and
the beginning of economic nightmare for the car industry. Until that time, the Detroit-based firms
had believed that vehicles will become larger and more powerful every year. Although some
smaller vehicles were produced, the most popular models were the largest. These were the cars
that Detroit promoted, which their automakers wanted their consumers to buy (Klier. T.H, 1994).
Henry Ford II openly despised, if not outright despised, tiny automobiles. He used to tell his
executives (McIntosh. J, 2017). The majority of Detroit-built automobiles were inefficient in terms
of fuel use. The average American-built full-size car, intended to seat five persons comfortably,
would achieve 14 or 15 miles per gallon (Cooney. S, 2000.). The average car performance at the
time was 13 miles per gallon. However, because gasoline was very inexpensive, poor performance
was not an issue (Canis. B, Webel. B & Shorter G, 2010). The Detroit corporations were so
unfamiliar with the notion of fuel economy that they gave little attention to even mentioning it.
The Cadillac Eldorado and Oldsmobile Toronado, two massive personal luxury automobiles
powered by a V8 engine with a displacement of 500 cubic inches, were the worst fuel-economy
performers of the time (Klier. T.H, 1994). Both cars had a fuel economy of just two miles per
gallon.
The Detroit company's aversion to fuel economy was aggravated by its confidence in an unending
supply of Middle Eastern oil (Jeffrey. H.D & Kentaro. N, 1999). That supply had been secured in
part in the early 1950s when the CIA helped to bring down the Iranian government, which the US
regarded as too friendly with the Soviet Union (Canis. B, Webel. B & Shorter G, 2010). The
Iranians had already nationalized a British corporation. On the other hand, the Americans
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established the Shah of Iran, who promised them and their western friends a plethora of petroleum.
It is fascinating to consider how consistent oil prices were at the time. Gas was 27 cents a gallon
in 1950, according to David Halberstam's superb book on the Detroit auto sector, The Reckoning.
The tax was collected on seven cents (Cooney. J, 2000). In 1973, the price of a gallon of gasoline
in the United States was 37 cents, barely four months before OPEC agreed to raise the price of oil.
Taxes were collected on 11 cents (Halberstam, D, 2012). The inclusion of each manufacturing
company was initially done to see whether there were any discrepancies in reaction time or timing
between the three. We predicted disparities in reactions and reaction times since the organizations
had diverse management and thus varied strategies. However, we report the models below because
the initial models showed little diversity between companies more. Because the amount of variance
between firms is dwarfed by the variation due to other factors. We see a relatively similar reaction
across companies in figure (3.3a-3.3c). It shows that the manufacturing company was affected
until the downward trend in 1973-1974 because of the crisis (White. L.J, 1972).
Figure 1.3a: GM Unit Production by Cylinder

Source: Ward’s Automotive Yearbook, (1991)
Figure 1.3a shows that the production of GM cars per unit shown downtrend for each cylinder
except the six cylinder in 1973 until 1974. In 1973, the production of eight cylinders GM cars per
unit decreased from 4 million unit to 3.2 million unit on 1974 followed by four cylinders decrement
from 400 thousand in 1973 unit to 350 thousand unit in 1974. However, the six cylinders rose from
200 thousand unit in 1973 to 400 thousand unit in 1974. (Jeffrey. H.D & Kentaro. N, 1999).
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Figure 1.3b: Ford Unit Production By Cylinders

Figure 1.3b stated the Ford cars production per unit by cylinder. It shows the same case like GM
previously in 1973 until 1974 the eight and four cylinders cars production shown downtrend while
the six cylinder cars production raise. In 1973, the production of eight cylinder and four cylinders
cars are 1.5 million and 600 thousand decreased to 1.15 million and 500 thousand in 1974.
However, the six cylinders production was 250 thousand in 1973 and increase around 230 thousand
unit in 1974. (Jeffrey. H.D & Kentaro. N, 1999).
Figure 3.3c: Chrysler Unit Production By Cylinder

Based on figure 1.3c the Chrysler unit production fallen for the eight and six cylinders while
increased for the four cylinders. In 1973, the eight cylinders’ car production was 1 million but
decreased to 750 thousand in 1974. The six cylinders had 450 thousand production unit in 1973
however decreased for 11.11% in 1974. In 1973 the four cylinders’ production was 50 thousand
and rose for 10% on the next year. (Jeffrey. H.D & Kentaro. N, 1999). Even though Detroit was
created on the promise of cheap gas, some people were concerned that the party had ended. Rising
nationalism in the Middle East, according to Charley Maxwell, a New York-based oil specialist,
has exposed Western economies. Maxwell delivered a presentation to the automotive makers in
Detroit in June 1973, describing and warning them about the impending disaster (Igari. E, 2002).
Maxwell predicted that oil prices would soar to unprecedented heights by 1980 (Klier. T.H, &
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McMillen D.P, 2008). Despite this, Maxwell's appearance was mainly overlooked by the Detroit
businesses. Only Chrysler sent executives with any influence, while GM and Ford sent junior
executives with no clout in their companies. When OPEC announced its decision in October 1973,
even Charley Maxwell was astonished (Wada. K, 2020). It happened so quickly, but it played out
exactly as he had predicted. Syria and Egypt launched an unprovoked attack on Israel on October
6, 1973. After the Soviet Union began delivering weaponry to Syria and Egypt, President Richard
Nixon approved an airlift to assist Israel with weapons and supplies (Moore. G, 1977). The
embargo was getting tighter. OPEC announced a 25% reduction in output on November 5th. On
November 23, the embargo was extended to Portugal, Rhodesia (Zimbabwe), and South Africa
(Micheline. M, 2003). Israel was asked to leave the western bank of the Suez Canal by OPEC
member countries. On March 5, 1974, this finally happened.
Nevertheless, it was a bleak winter in the United States and Western Europe. Gasoline shortages
were prevalent in the United States (Schumacher. D, 1985). Not only had prices more than
doubled, but there was also a gasoline shortage. Although the impact was not as dramatic in
Canada, other countries in Western Europe, such as Holland, actually restricted automobile traffic
on some days (Takin. M, 1997). The effect on Detroit businesses was devastating. Sales of their
1974 models plummeted, and the slump continued into the 1975 model year (Cooney. S, 2000).
Companies tried to become more efficient while also attempting to meet new federal pollution
rules, which necessitated new equipment that reduced fuel efficiency. (White, L.J., 1972). The
early winners of the instability were Japanese businesses. Even though their automobiles' fuel
economy was poor by today's standards, they outperformed American ones by a wide margin.
Datsun (now Nissan) began an advertising campaign with the simple slogan "Datsun Saves."
Vehicle manufacturers in the United States competed to develop new, more fuel-efficient models
(Cooney. S, 2000). A month before the Yom Kippur War, Ford had recently released its new
Granada/Monarch mid-size automobiles, which, while not particularly fuel-efficient by today's
standards, consumed less gas than other models, resulting in record sales. (Halberstam. D, 2012).
Meanwhile, GM took a chance on one of its most ambitious projects yet. It decided to reduce the
size of its whole fleet, starting with full-size vehicles. New smaller full-size vehicles would arrive
in 1977, 1978 saw the introduction of new smaller mid-size automobiles, new smaller personal
luxury cars in 1979, and new front-wheel-drive compacts in 1980 (Flink J, 1975). The whole focus
was on improving fuel economy. Ford started a similar initiative, although it was not as forceful.
However, the goal remained the same. Chrysler was in a poor spot after sending key executives to
Charley Maxwell's lecture in June 1973 (Esperdy. G, 2019). Chrysler did not produce any tiny
vehicles, and their technology was arguably older than Ford's or GM's. On the other hand, Chrysler
released the compact Plymouth Horizon/Dodge Omni in 1978. The cars were front-wheel drive
and had high fuel efficiency, and they looked like VW Rabbits (Micheline. M, 2003). On the other
hand, Chrysler was unable to capitalize on its success. The company's colossal automobile sales
plunged, and it was on the verge of bankruptcy (Canis. B, Webel. B & Shorter G, 2010). When the
company was forced to borrow money from the US government, it concentrated on developing the
K-car, a compact front-wheel-drive car. The Plymouth Reliant/Dodge Aries, which debuted for
the 1981 model year, was an instant hit and helped salvage the company (Halberstam. D, 2012).
On Oct. 16, 1973, the date remained a continental divide for Detroit (Joskow. P, 2013). All of the
industry's assumptions and paradigms were shaken overnight when the price of oil, which had
previously been deemed cheap and secure, more than doubled. How those businesses work now
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and how our economy continues to function is predicated on new assumptions: oil is costly and
unreliable (White. L.J, 1972).
3. The Impacts Of Political Towards U.S
Energy policy switched gears in 1973, moving away from tackling specific problems in five stable
fuel policy regimes and toward attempts by the president and Congress to address broader issues
(Daoudi. M & Dajani. M, 2019). Policymakers were looking for answers to several pressing
questions about energy supply and demand in general and petroleum supply and demand in
particular. The 1970s oil price shocks occurred inside an institutional framework that governed
how producers, consumers, and the government interacted with the oil market (Kisswani. K, 2014).
Low-cost fuels and consistent supply typified economic development and expansion before the
1970s. Even the closure of the Suez Canal in 1956 and Saudi Arabia's oil embargo in 1967 had
minimal effect on customers, resulting in quantity decreases but no price increases. Oil import
limitations were critical to achieve energy independence as part of national security strategy (Bohi,
D.R, And Russell, M, 1978). They were also incentives for domestic oil producers. Consumption
eventually outstripped output, causing import restrictions to be considered. President Nixon and
his advisers recognized the potential necessity for preparation to respond to severe supply
disruptions as early as 1970 (Kash. D & Rycroft. R, 1984).
Even as early as 1975, George Lincoln, head of the President's Oil Policy Committee, emphasized
the significance of avoiding an irresponsible dependence on somewhat unreliable sources of
supply (Sobel. R, 1974). Wilson Laird of the Office of Oil and Gas informed Congress that the
Middle East was a dangerous source. Many issues occurred, most of which were connected to the
underlying quota system, which established the rules under which oil producers could receive and
distribute their products. As explained further below, these quota systems interacted with supply
limits imposed by import quotas. This is not to suggest that alternative sources of energy were not
examined. Nixon's first comprehensive energy message to Congress argued for more sources (such
as nuclear and clean coal) and a fifteen-fold increase in oil import quotas (Whitford. A, 2003).
Energy market structural problems remained until the early 1970s. The big oil companies, who
were the focus of early regulation, were also considering expanding into other energy industries,
especially coal and uranium. (Sobel. R, 1974).
While the evidence for such assertions was challenging to sort out, some possibilities, such as the
Alaska pipeline's construction, were hampered by political decisions (or impasses). Utility rates,
oil products (2 percent), natural gas (6 percent), and electricity (6 percent) had all climbed in price
by 1973. Fuel oil and propane gas were in limited supply in the Midwest (Varisco. D, 2009).
According to the American Petroleum Institute, there is only a six-week residential and industrial
oil supply. The trade imbalance in energy was $4 billion. In February, the government advised
businesses to preserve energy (Krutakov. L, 2021). In April, Nixon abolished import limitations,
increased offshore leases, and formed the Office of Energy Conservation (Blair. P, 1978).
The government also supported oil prices. During high inflation, Congress established the
Emergency Petroleum Allocation Act of 1973 (EPAA) to maintain price stability, avoid windfall
gains, and assure affordable energy (Ikenberry. G, 2004). This boosted domestic output by pricing
oil from new wells higher than existing wells. Such price controls were an equity tool dating back
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to the Standard Oil Trust's early regulation. Price limits were a source of contention among
policymakers, even though they lasted until the conclusion of the Carter administration. (Sobel. R,
1974). OPEC imposed an embargo in 1973. In 1971, OPEC nations signed the Teheran Agreement
with Western oil firms, claiming 85 % of known reserves outside the US and the Soviet Union
(Bahgat. C, 2003). Saudi Arabia connected oil exports to US policy toward Israel. At the same
time, Libya, Iraq, Kuwait, and Algeria temporarily halted oil exports in May (Solomon Ogbu. P &
Obiageli. L, 2019). The OPEC declared the Teheran accord dead in October and advocated price
hikes. The United States imported 1.2 billion barrels of oil per day from the Middle East at the
time (Kisswani. K, 2014). OPEC and the major oil firms could not renegotiate the 1971 agreement.
(Randall. A, 1987).
OPEC decreased output, cut exports, and raised prices and taxes paid by oil corporations; within
months, this was expanded to include a ban on shipments to the United States, with more cuts and
prohibitions to follow. Price rises were felt all across the world. The US vowed reprisal, but OPEC
cut output, and non-OPEC countries raised prices by 60 to 80 % in December. By mentioning a
variety of responses that Congress and the president have taken. Congress and the Nixon
administration were still at odds over energy policy. Rationing took place. The price of natural gas
was permitted to grow. Following that, there were gas shortages. Gasoline and heating oil prices
have risen, and mandatory fuel allocation for specific petroleum product markets has been ordered.
Oil corporations demanded that an emergency industry council apportion oil imports. (Blair. P,
1978).
4. Impact Of Opec And United States Relation
OPEC and the United States have had a rocky history since 1973. Every US president since Nixon
has advocated for energy independence, notwithstanding economists' disagreements. Supporters
said that decreasing reliance on OPEC oil minimizes trade imbalances and improves the US
economy's resilience to oil price volatility. Some think that it will at the very least allow the US to
shift its emphasis away from the Middle East (Zanotti. J, 2018). On the other hand, OPEC
continues to be a helpful ally. President Jimmy Carter sought to urge Americans to reduce their
gasoline use by using OPEC's threat. Congress has also threatened OPEC and its member states
with antitrust charges. For OPEC members who see the organization as more of a political club
than an economic cartel, the US scaremongering about it serves a purpose: it keeps the myth of
OPEC's significance alive. It keeps Western diplomats and politicians focused on it (Kemezis, P.
& Wilson, E.J., 1984).
5. Conclusion
In conclusion, we can see that this crisis had an enormous impact from various angles such as
economic, political, and impacted on the relationship between the United States and the OPEC
organization itself. From an economic context, the US economy seen as very depressed. The
unemployment rate has increased, causing the country not to achieve a reasonable unemployment
rate. Inflation has also been shown to increase, causing food and energy prices to rise and proving
the US population's purchasing power to be affected. Not forgetting the trend in labor unit costs
has also increased, causing many companies to wind up because they cannot afford to pay labor
wages. In addition, the US car manufacturing sector was also affected, causing many cars to go
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unsold, and they had to switch to fuel-efficient and fuel-efficient cars to control fuel rates.
Furthermore, the politics of the United States was seen to be quite fibrous and chaotic during this
crisis. However, it can be seen that their central government can overcome this problem by sitting
at the same table and discussing their country's interests. Government policymakers are also seen
to have succeeded in helping the government overcome this problem by establishing several new
acts. Finally, relations between the United States and the OPEC organization in a year of the crisis
were not good. This caused the United States to no longer trust the organization and made their
country its oil producer.
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2. The Economic Impact Towards The USA

Source: US Department of Labor, Bureau of Labor Statistics. (2001)

iii. Food and Energy Prices

Source: US Department of Labor, Bureau of Labor Statistics (2001)

iv. Trends in Labor Unit Costs

v. United States car manufacturing

Figure 1.3a: GM Unit Production by Cylinder

Figure 1.3b: Ford Unit Production By Cylinders

Figure 3.3c: Chrysler Unit Production By Cylinder

3. The Impacts Of Political Towards U.S

4. Impact Of Opec And United States Relation

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