Continuity or Change? The 1973 Oil Crisis Reconsidered

The oil crisis, or “oil shock”, has long been considered an unexpected and sudden turning point for the economies of the industrialised countries and in the history of the West more generally. Indeed, 1973 is seen as a pivot between golden decades of growth and the decades of crisis that followed; from the absolute dominance of the Western economies to a new role for the Arab world and New Industrialising Countries (NICs). In the first part of this paper we address the nature of the “oil shock” and the objectives pursued by oil-producing countries. We argue that the Yom Kippur War had only a limited role in setting the oil price. In the second part of this paper we try to explain the consequences of this shock on the Western European countries, and we ask whether it can be considered the main factor in changing the course of their economic and political history in the twentieth century. In our reflections we are generally concerned with the amount of change generated by the oil shock in October 1973.We conclude that 1973, far from being the turning point in post-war history, represented only a stage in a wider process of change that was essentially marked by two developments. First the crisis of the “golden age” of economic growth in the Western world. 1973 did not bring about that crisis. At that time it had already been underway for some years, and was determined largely by by endogenous factors, particularly the consequences that full employment had on the relations between labour and capital. In other words, the energy crisis did not represent the beginning of the end, but a blow to an already weakened system, accelerating and sharpening a pre-existing crisis with the quadrupling of oil prices. Furthermore, while the 1973 oil crisis did affect the effort to build a common European identity and reinforced Transatlantic cooperation, it did not immediately affect economic policies in Western Europe or lead to a serious challenge to the socialist parties and the Keynesian economics that prevailed up to the end of the decade. Second, there was the entry into the international economic arena, as autonomous subjects, of non-Western countries. This, as far as the oil crisis is concerned, implied two consequences. First, that the rise in oil prices was not the product of a conspiracy hatched by the big companies and the US administration. Second, that the crisis did not come from out of the blue. Actually it had been underway since at least 1971 when the Tehran and Tripoli agreements on oil prices marked a major change in the relations between the oil companies and the producing countries; and its roots can perhaps be traced back to 1960 when OPEC was created.