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Fiona Venn. The Oil Crisis

Yet many of the issues are still alive today: for that reason, while this discussion centres on the decade of the 1970s, it also addresses developments until the current day.

In October 1973, the Organization of Petroleum Exporting Countries (OPEC) decided unilaterally to end the oil corporations monopoly over crude oil prices and production levels, and immediately set a price considerably in excess of the prevailing norm. In the same month, a war broke out between Israel and the neighbouring Arab states: in order to support the Arab cause, a number of leading Arab oil producers announced a selective boycott of oil supplies, coupled with a progressive cut in production levels. In the aftermath of these two separate decisions, oil prices soared, the traditional role of companies within the international oil industry changed, and the incomes of the major oilexporting states increased severalfold.

The petrodollar became an important element in the world economy, and Western companies competed for the contracts available for the rapid further development and modernization of the newly affluent oil states. Meanwhile, the vast rise in the price of oil caused further problems for the economies of the industrialized world, already suffering from inflation. Even when the real price of oil began to decline later in the 1970s, the power over pricing and production decisions still remained with the producer governments rather than the oil companies.

In 1979 the Iranian Revolution triggered a worldwide panic about oil supplies that again pushed up prices severalfold and dealt a further blow to the developed economies.

Although both crises had a transforming effect upon the international political economy, it is the first, in 1973, whose date is commonly used as a shorthand reference point for a moment of transformation. In histories of the world economy, the Middle East and the oil industry, 1973 is used as a synonym for a moment of crisis and change.

Many commentators and politicians at the time regarded this apparently massive upset in traditional sources of power within the world economy and the oil industry as heralding an irreversible and regrettable change.

In examining elements of both continuity and change in a number of different political and economic spheres, this study will cast doubt upon some of the more exaggerated conclusions and predictions of contemporaries, and emphasize the many aspects of the international political economy that have remained remarkably unchanged since 1973.

Nonetheless, the magnitude of the perceived changes suggests, rightly, that while the oil crisis might not have had the degree of influence and change that some maintained at the time, nonetheless it accelerated existing forces for change and acted as a catalyst to such an extent that the use of the term turning point is indeed justified.

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