Module 3: Energy Crisis

Energy Crisis

The 1970s were marked by a series of interrelated crises that reshaped global politics, economics, and energy policies. At the center of this turmoil was the rise of the Organization of the Petroleum Exporting Countries (OPEC), which dramatically increased its influence on global oil markets.  In 1967, Israel (a key U.S. ally in the Middle East) launched a sneak attack on its neighbors Egypt, Syria, Jordan, and Iraq, leading to an Israeli victory.  This was known as the Six Days War. In 1973, Egypt, Syria, Jordan, and Iraq attacked Israel in retaliation, leading to the Yom Kippur War.  Israel was nearly defeated, until last-minute American support turned the war against the attackers.  The First Oil Shock of 1973 was triggered by OPEC's decision to impose an embargo on countries that supported Israel during the Yom Kippur War, a conflict between Israel and a coalition of Arab states led by Egypt and Syria. This embargo led to severe oil shortages and skyrocketing prices, sending shockwaves through global economies. The resulting energy crisis not only caused widespread inflation and economic slowdown but also highlighted the West's dependence on Middle Eastern oil, exposing vulnerabilities in energy security.

The crisis deepened with the Second Oil Shock in 1979, sparked by the Iranian Revolution. The overthrow of the Shah of Iran, a key ally of the United States, led to instability in the Persian Gulf and the disruption of Iranian oil exports. As tensions mounted in the region, OPEC once again reduced oil production, further exacerbating shortages. The Iranian Revolution and the subsequent hostage crisis at the U.S. embassy in Tehran contributed to a sense of geopolitical uncertainty, prompting further oil price hikes. As a result, many Western nations faced double-digit inflation, energy rationing, and widespread economic stagnation, a combination of issues that came to be known as "stagflation."