Seeking to explain America's current political divisions, a number of historians are finding answers in the 1970s. Now, as then, the 1973 “oil shock” is inescapable. For Meg Jacobs, the oil embargo imposed by the Organization of Petroleum Exporting Countries (OPEC) against the United States—putatively a reaction to U.S. support for Israel during the Arab-Israeli war of that year—initiated a “seismic shift [to the right] in national politics,” as a new generation of young conservatives pinned the blame on big government for America's dependence on foreign oil and other economic ills (Panic at the Pump [2016], p. 7). Andreas Killen extends the shock metaphor further, dubbing 1973 the year of “three shocks”—the embargo, America's “defeat” in Vietnam, and Richard Nixon's impeachment for the Watergate cover-up—that together “shook the national psyche to its core” and led to a “nervous breakdown” from which the country has yet to recover (1973 Nervous Breakdown [2006], p. 2).
The title of this new volume of essays on the 1973 oil crisis, Oil Shock, is thus slyly misleading. As the editors explain in the introduction, “The description of the shock as a turning point has come to imply that, for the different actors involved, the Arab oil embargo came as a complete surprise” (p. 2). Instead, a central purpose of the book—edited by three leading international historians—is to show how deeply rooted the shock was in changes already taking place, within but also beyond the West, where it remains “the symbolic marker of the end of an era” (p. 1).
Another, complementary task is to “illuminate the complex specificities and peculiarities of the oil world . . . for the non-specialist” (p. 3). Bernard Mommer's opening essay explains how competing ideas of natural-resource ownership (“references,” in industry parlance) defined producer-consumer relations in the early twentieth century and set up future conflicts. Like the international adoption of the dollar in 1944, the global extension of the “American reference” around the time of World War I “was pregnant with major economic implications” (p. 19). As Philippe Tristani explains in his essay on Iraq's oil industry from 1958 to 1972, “The producing countries did not control the amounts produced, the level of exports, or prices. They were confined to the role of mere tax collectors” (p. 69). Frustrated with the low royalties and taxes Western-based international oil companies (IOCs) paid to gorge on their deposits, as well as the U.S. government's decision to adopt oil quotas to protect its own oil production (thereby pushing prices down further), in 1960 the major oil producing countries formed OPEC to bargain collectively for a better deal.
By the late 1960s OPEC members had forced the largest IOCs, or the “eight sisters,” into renegotiating the American reference. In a dynamic familiar to Iran in the early 1950s, Western governments, whose priority was regular supply, not oil industry profits, urged IOCs from the sidelines to accept the new terms to prevent a wave of all-out nationalizations. (The IOCs, in turn, feared a “ratchet effect” of ever-escalating demands [p. 99].) As Francesco Petrini's piece shows, the IOCs were able to preserve their profits in 1971–1972 by passing on extra costs to consumers, but not without significant damage to their credibility with both Western and OPEC governments.
Western policymakers’ awareness of escalating tensions did not lead to comprehension when the shock hit. Henry Kissinger's well-known aversion to both economists (“[like] being in charge of the military for the Pope”) and oil (“they might as well be bottles of Coca-Cola”) was a major handicap (quoted on p. 39). As Christopher Dietrich explains, Kissinger's ineffective threat to boycott Arab-Israeli peace negotiations revealed a fundamental misunderstanding of OPEC's “global price decision,” which had been in the works for years (p. 42). Still, Kissinger was aware of the geopolitical implications. In March 1972, his National Security Council warned of the “shift of balance of power from companies and consuming countries to producer countries” as an outcome of the 1971 Tripoli and Tehran accords, which put an end to the American reference (p. 145). But consumer cooperation during this time, the subject of Marloes Beers's essay, was slow to take shape. Europeans were much more dependent on Middle East oil than was the United States and could not form a consensus on American proposals for a new international body to represent consumers. It took the shock for Europeans to join Kissinger's International Energy Agency, announced in December 1973 and launched less than a year later, but the seeds had already been planted.
A less-studied consequence of the oil crisis is its impact on the international monetary system. Economists have called the shock the largest nonviolent transfer of wealth in history, as billions of Western “petrodollars” flooded oil states’ coffers faster than they could be spent. Again, efforts to manage this problem among major developed countries had begun before the 1973 embargo but accelerated dramatically once it came. Various schemes from the IMF, OECD, and OPEC itself arose to “recycle” oil profits in everything from stakes in Daimler Benz and Deutsche Bank to Third World development. The joint U.S.–West German commitment to promoting the free flow of capital in 1973–1975, William Glenn Gray argues in his contribution, “was a key moment in defining the future of the international monetary system as open and globalizing rather than regional and walled off by trade and financial barriers” (p. 173).
Other essays examine how the shock impacted energy consumption, primarily in developed countries. Brian Black credits the shock with initiating new ideas about scarcity and conservation that have produced “a steady and intensifying shift” toward “green capitalism,” especially in the market for consumer vehicles (p. 214). On the other hand, Tyler Priest's contribution shows how the shock provided the “economic incentive and strategic imperative” for IOCs to invest in new technologies to mine previously unreachable oil deposits in Britain's North Sea and the Gulf of Mexico (p. 119). Outside of the United States, Oscar Sanchez-Sibony argues that the shock accelerated the Soviet Union's scheme to engineer economic integration with western Europe via “petrobargaining,” creating a dependence on volatile oil exports that would set it up for failure in the 1980s. The shock did have one energy casualty: nuclear. Post-shock inflation dramatically increased borrowing costs for the capital-intensive industry, and its haughty attitude toward critics did it no favors. “By taking a defensive position on safety,” Martin Melosi explains, “the nuclear power industry made its credibility vulnerable to any highly publicized accidents to come,” such as the 1979 core meltdown at Pennsylvania's Three Mile Island (p. 257).
Oil Shock widens our view of the oil crisis by going beyond its immediate (and extensively covered) political causes, like the Arab-Israeli War, and Western economic outcomes, like stagflation. As an international history it could have benefited from a closer look at the shock's relationship to global North-South issues, such as the 1972–1974 world food crisis or 1974 New International Economic Order, in which OPEC was a leading actor. Regardless, business historians should find a lot to like here. The payoff is a richer understanding of the place of the oil crisis in contemporary global history and of the roles of oil and its claimants in post-1970s globalization in particular.
