FIRST OIL CRISIS - EVERYTHING YOU NEED TO KNOW

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The first oil crisis also known as 1973 oil crisis happened due to the YOM-KIPPUR war which was fought between Israel and Arab countries. So in order to have a clear understanding about the first oil crisis we need to understand the YOM-KIPPUR war.
The YOM-KIPPUR war was fought between Israel and Arab countries like Egypt, Syria, Saudi Arabia, Iraq, Libia. Israel was supported by the United states of America and Arab countries were supported by the Soviet Union. So the war was directly between Israel and Arab countries but slowly it turned into an indirect and massive war between two biggest nuclear powers of the world.
The war started on 6th october 1973 and continued till 24 october 1973. 
The end result was: 
  • Israel won the war.
  • Some political gains to Egypt as it occupied the eastern coast of Suez Canal.
After Effects of War - World Wide Recession 
After the war ended, OPEC ( organisation of petroleum exporting countries) proclaimed an embargo on countries which were supporting Israel .Embargo was initially targeted to the USA, UK, Canada, Japan, Netherlands and later extended to Portugal, and South Africa. This was the main cause of the first oil crisis. Because of the embargo the oil prices rose to 400% i.e. from $3 per barrel to $12 per barrel. This led to a “shock” with many effects on the global economy. 
It triggered a sharp recession around the world. 1973-74 is the second sharpest stock market crash in US history. The first crash was in 1930-32.
The immediate impacts were severe on America, as they were unable to feed the immediate demand for oil. Similarly american companies were facing difficulties in arranging oil. 
The Arab countries made a lot of money from embargo which was mainly dispensed in purchasing weapons and promoting ‘Wahhabism’ i.e. fundamentalist interpretation of islam.
Although many analysts believe that the embargo was a failure as the countries which were targeted did not change their policies on Arab-Israel conflicts. Not only this but the embargo remade the international economy also. As counties started researching alternative energy resources, energy conservation etc. to better fight with inflation, 
Shaurya Gupta  
Bcom (hons), University of Delhi 
Financial markets (hons), Yale University

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