To: PKRBKR who wrote (1424573 ) 11/8/2023 10:01:05 PM From: pocotrader Read Replies (1) | Respond to The 1973 Crisis In October of 1973 Egypt and Syria (supported by a number of Arab nations) launched an attack against Israel which came to be known as the Yom-Kippur War . At the time the U.S had rising oil consumption, falling production and increasing imports of oil, mostly from OPEC countries. The decision by the U.S. to intervene in the Yom-Kippur War on the side of Israel had a disastrous effect for the US economy. Early in the war, the U.S decided to supply Israel with arms, this angered the Arab delegation of OPEC which responded with an embargo of oil sales to the U.S, Canada, the UK, Japan and the Netherlands. [3] embargo shocked the oil market and created a shortage in supply . The embargoed nations were able to get oil companies to sell them oil from other sources however, the mass confusion resulting from the normal supply translated into a sharp rise in prices. Oil traders and companies having to shift supply lines and resources lead to large transport and transaction costs which played into the already high price resulting from the shortage. Additionally, it took time to sort out new sources which meant the hole left by the embargo was not filled immediately. monopoly over the oil market, in 1973 they only had 56% of the oil market and while this led to a large amount of influence it does not allow OPEC to totally control the market. OPEC is an international cartel . The governments of the OPEC countries agreed to coordinate with petroleum firms (both state owned and private) in order to manipulate the worldwide oil supply and therefore the price of oil . OPEC has always had trouble cooperating, the 12 countries are not always able to coordinate policies to ensure their control over the market due to a large number of political and economic factors. [4] Because OPEC does not control the whole market they are restricted by what the rest of the market does. In the instance of the 1973 embargo the embargoes nations were able to reconfigure their supply lines to keep the oil flowing despite a short-term drop in supply and rise in prices. The ability to find other sources limited the effects of the embargo to the short term. downstream activities so they are reliant on mostly western companies to get their product refined and to market. [5]
