Middle East Oil Crisis 1973

The use of oil by the Arab states as a diplomatic weapon against Israel has highlighted rather dramatically the energy crisis which now confronts most of the industrialized countries of the Western world. The crisis was brought to a head by the decision of the Arab oil exporters on October 17 to reduce their production of crude oil by 5% every month until Arab territories occupied by Israel since 1967 had been freed. The Arab action of course was aimed especially against the United States and other countries backing Israel. The Arab countries were anxious to take advantage of their strong bargaining position, given that they now accounted for 50% of total world exports in oil.

However, it soon became apparent that such an indiscriminate use of the oil weapon would not be equally effective in relation to all the importing countries. To begin with, Japan and Western Europe were far more dependent for their energy needs on Arab oil than was the United States. And so, the Arab countries decided to classify states as friendly, neutral or hostile depending on their attitude to the Middle East dispute. Finally states which supported the Arab cause would continue to receive the same quantities of oil which were supplied to them prior to the cuts. Neutral states would be subjected to the 5% monthly reduction, while hostile states would be faced with a complete embargo.

 The United States and Holland were immediately branded as hostile. It was in order to escape a complete or even partial embargo that Western Europe and subsequently Japan decided to shift their Middle East diplomacy. Accordingly, on November 6 the nine members of the European Community issued a common and forthright declaration calling for an end to Israeli occupation of Arab land and for the recognition of the legitimate rights of the Palestinian people. Two weeks later Japan came out openly and officially against Israel’s present position and threatened to reconsider its relations with that country if there were no change of policy.

While the shift to a pro-Arab line in the Middle East conflict is likely to spare both Japan and Western Eastern Europe – with the possible exception of Holland – drastic cuts in oil supplies, it is clear that such a diplomatic realignment will not be sufficient to provide consumer countries with all the oil which they require or which they have come to expect. Sweden has already decided to introduce petrol rationing in January. Britain has cut oil deliveries by 10% and Denmark by 25%, while most of Western Europe is in the process of banning Sunday driving and imposing speed limits. Japan, which has reduced its oil consumption by 10% risks the undreamt possibility of zero economic growth for the foreseeable future.

It is important to understand, however, that the present oil crisis does not owe its origins to the recent Middle East war – although it has been a contributing factor, but to a far-reaching change in the international oil system which over the last 2 to 3 years has changed from a buyer’s to a seller’s market. Once the price of oil reaches $5 a barrel – as is not likely, the Middle East States will probably have an annual revenue of $90,000 million dollars, a far greater sum that could possibly hope to utilize, hence their added incentive for keeping their oil in the ground. We now have a position where oil-exporting countries can earn more by producing less.

One should therefore expect the energy crisis to continue even after a Middle East settlement. On the other hand, Arab oil diplomacy is likely to force Western Europe and Japan to show greater interest and to play a greater role in the search for a solution to the conflict, especially if the United States and the Soviet Union should, in the interests of détente, decide to play down their commitment to their respective clients.

 Another unexpected but beneficial result of the current predicament might be the introduction of long-term changes in the way of life of modern affluent societies which may have to abandon the gadgetry responsible for so much pollution in our cities, to do away with  superfluous commodities and put an end to the in-built obsolescence of consumer goods. The energy crisis my thus be an appropriate time to reassess our lifestyles and explore new possibilities for creating a just and orderly distribution of the world’s goods and services.