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1970s Oil Crisis

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In October of 1973 Middles-eastern OPEC nations stopped exports of oil to the US ... aspirin, balloons, bandages, boats, bottles, bras, bubble gum, butane, cameras, ... – PowerPoint PPT presentation

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Title: 1970s Oil Crisis


1
1970s Oil Crisis
  • Understanding the Oil Crisis of the 1970s and
    how it connects to today.

2
What do you glean from this 1970s Mad Magazine
comic?
3
The 1970s Oil Crisis in a paragraph
  • In October of 1973 Middles-eastern OPEC nations
    stopped exports of oil to the US and other
    western nations. They meant to punish the western
    nations that supported Israel, their foe, in the
    Yom Kippur War, but they also realized the strong
    influence that they had on the world through oil.
  • Source for these slides Recession.org

4
EMBARGO
  • a government order imposing a trade barrier

5
What this meant for Americans
  • One of the many results of the oil embargo was
    shortages and higher prices all throughout the
    western world, particularly in America.
  • The embargo forced America to consider many
    things about energy, such as the cost and supply,
    which up to 1973 no one had worried about.

6
The crisis highlights World dependence on oil.
  • What we see in this crisis is the fact that
    prices of commodities like oil play a much more
    vital role in our economy than most think.
  • The world needs so much oil every day to run, and
    will literally need to pay whatever it costs, or
    it will cease to run.

7
Besides gas, whats made from oil?
  • Air conditioners, ammonia, anti-histamines,
    antiseptics, artificial turf, asphalt, aspirin,
    balloons, bandages, boats, bottles, bras, bubble
    gum, butane, cameras, candles, car batteries, car
    bodies, carpet, cassette tapes, caulking, CDs,
    chewing gum, cold, combs/brushes, computers,
    contacts, cortisone, crayons, cream, denture
    adhesives, deodorant, detergents, dice,
    dishwashing liquid, dresses, dryers, electric
    blankets, electricians tape, fertilizers,
    fishing lures, fishing nets, fishing rods, floor
    wax, footballs, glues, glycerin, golf balls,
    guitar strings, hair, hair color, hair curlers,
    hearing aids, heart valves, heating oil, house
    paint, ice chests, ink, insect repellent,
    insulation, jet fuel, life jackets, linoleum, lip
    balm, lipstick, loudspeakers, medicines, mops,
    motor oil, motorcycle helmets, movie film, nail
    polish, nylons, oil filters, paddles, paint
    brushes, paints, parachutes, paraffin, pens,
    perfumes, petroleum jelly, plastic chairs,
    plastic cups, plastic forks, plastic wrap,
    plastics, plywood adhesives, refrigerators,
    roller-skate wheels, roofing paper, rubber bands,
    rubber boots, rubber cement, rubbish bags,
    running shoes, saccharine, seals, shirts
    (non-cotton), shoe polish, shoes, shower
    curtains, solvents, solvents, spectacles,
    stereos, sweaters, table tennis balls, tape
    recorders, telephones, tennis rackets, thermos,
    tights, toilet seats, toners, toothpaste,
    transparencies, transparent tape, TV cabinets,
    typewriter/computer ribbons, tires, umbrellas,
    upholstery, vitamin capsules, volleyballs, water
    pipes, water skis, wax, wax paper

8
More products made from oil means increasing oil
consumption.
9
And for the West, more oil consumption means
increased dependence on the Middle East.
  • Although the embargo ended only a year after it
    began in 1973, the OPEC nations had quadrupled
    the price of oil in the West. The embargo opened
    a new era in international relations.
  • It was a political and economic achievement for
    the Middle East. The Middle East demonstrated
    that their natural resources, specifically oil,
    could be used as a political weapon.

10
That political power has continued ever since
11
The 1970s Oil Crisis in a paragraph
  • In October of 1973 Middles-eastern OPEC nations
    stopped exports of oil to the US and other
    western nations. They meant to punish the western
    nations that supported Israel, their foe, in the
    Yom Kippur War, but they also realized the strong
    influence that they had on the world through oil.
  • Source for these slides Recession.org

12
What is OPEC?
  • Organization of the Petroleum Exporting Countries
    (OPEC) is an association of countries that depend
    heavily on oil exports for their incomes.
  • Its members work together to try to increase
    their revenue from the sale of oil on the world
    market.
  • OPEC members produce about 40 percent of the
    world's oil and possess about 70 percent of the
    world's recoverable oil reserves.

13
Why was OPEC created?
  • OPEC was founded in 1960 by Iran, Iraq, Kuwait,
    Saudi Arabia, and Venezuela. At that time, the
    petroleum industry in those countries was
    controlled by United States and European oil
    companies.
  • These Western companies paid the host governments
    income taxes and royalties (shares of their
    profits) based on the posted price the companies
    charged for crude oil on the world market.

14
OPEC was created because of a price cut that
benefited the West and hurt the Middle East.
  • In 1959 and 1960, oil production greatly exceeded
    world demand.
  • The surplus that was thereby created prompted
    several of the major Western companies to cut the
    posted price and thus their payments to host
    governments.
  • OPEC was founded in response to this price cut.

15
Shift of OPEC policy towards the West in the 1970s
  • OPEC had little influence on oil prices during
    the 1960's, when production expanded to keep pace
    with demand.
  • In the 1970's, however, world demand for oil
    began to outgrow what was available from non-OPEC
    sources. In 1973, OPEC stopped consulting with
    Western oil companies and decided to raise oil
    prices in keeping with the rate of inflation (the
    rise of all prices).
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