Chapter 29: The Oil Weapon

The 1970s introduce the new term that exist still today- “energy crisis.” During the early 70s, the crisis was largely due to the growing fragility of the marketplace combined with conflict. In WWII, we learned how oil supply influenced the war by impacting how the countries fought. But in the 1970s, we learned how a local war could have global impact through the role of oil. The greatest conflicts of that time were the Arab-Israeli engagements.  

Because the US was seen as an ally to Israel, it got caught up in the conflict. Oil was now, itself, a weapon, used to drive policy and get concessions. A friend of Israel was an enemy to the Arab states and therefore vulnerable to attack. The most effective use of the weapon was production cutbacks more so than embargos. A country can get around an embargo by moving oil from countries that aren’t embargoed to those that are. But the producing countries realized that it was more effective to simply reduce production so there is not enough oil to move around.  

This period saw the end of 12-year surplus and a shift from the 30-year post-war way of doing business to this new world where the power was seated with the producing countries, and they knew it! Unfortunately for the US, the Watergate scandal introduced doubt in the minds of other countries about American leadership, and this further emboldened the producing countries. It also did not help that we ignored the warning signs leading up to the early 1970s, and we found ourselves vulnerable in terms of reliable supply of foreign oil, and not enough production in the US. The two diagrams below show the great shift from restricting foreign oil to support domestic producers, to importing as much as possible to have enough.  

Quotas Illustrated

Click for a text description of Quotas Illustrated.

The image is a diagram illustrating the impact of quotas on United States oil markets. At the center is a light blue rectangle labeled "United States Oil Markets." Surrounding this rectangle are several arrows. There are green arrows pointing toward the rectangle, symbolizing limited importing of oil, and red U-shaped arrows pointing away, representing foreign oil forced to find other markets due to quotas. Alongside the arrows are three orange starburst shapes, each labeled “Quota,” showing where quotas impact oil import directions. Below the diagram, there are textual explanations.

Credit: Quotas Illustrated by K. Jensen © Penn State is licensed under CC BY-NC-SA 4.0(link is external)

Importing Oil into the United States 

Click for a text description Importing Oil into the United States.

The image features a blue rectangular box labeled "United States Oil Market" at the center, surrounded by eight green arrows pointing outward in a circular arrangement. The arrows symbolize the even distribution and spread of oil imports into the United States. Below the diagram, there is black text that provides context about the U.S. government's response to an oil shortage acknowledged after President Nixon's speech in 1973. The green arrows are noted as representing the even spread of oil imports.

Credit: Importing Oil into the United States by K. Jensen © Penn State is licensed under CC BY-NC-SA 4.0