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2 Losing Control over Oil If our government and the public at large had been lulled into apathy during the 1950s and 1960s by plentiful oil at cheap and stable prices, the illusion that such conditions would last forever was shattered on October 20, 1973. It was on that day that the Arab oil-producing states declared a total embargo of oil shipments to the United States. Soviet-supplied Egypt and Syria had launched surprise Yom Kippur attacks on Israel two weeks earlier. For the next ten days, Israel pleaded with the United States for arms and supplies. The Nixon administration finally responded with a shipment intended to arrive under the cover of darkness, but high winds at a fuel stop in the Azores delayed its arrival until daylight on October 17. That same day, with the airlift now public, Secretary of State Henry Kissinger boldly told a meeting of the Washington Special Action Group, the interagency body responsible for international crises that Kissinger chaired, “We don’t expect an oil cut-off.” On October 19, the president proceeded to request from Congress $2.2 billion to pay for the arms and for additional aid to Israel. The Arab states wasted no time in responding. They announced an embargo the next day, setting off the first great oil shock of the post–World War II era. Americans would soon be lining up at gas stations to fill their tanks. Schools and businesses would close due to shortages of heating oil. The posted price of oil would rise from $3 a barrel on October 16 to $11.75— nearly a fourfold increase—by Christmas. Spot prices for Iranian oil would hit $16 to $17 a barrel that December. The take of the oil-producing nations would rise from about 90 cents a barrel in 1969 to more than $10 a barrel in 1974. By 1980, the price of oil would reach $39 a barrel. The greatest peacetime transfer of wealth the world had ever seen was under 22 Chapter 2 way, and this time the wealth was heading away from the United States, Europe, and Japan to the treasuries of the oil-producing nations, mostly in the Middle East. For more than a decade, like an adolescent refusing to get out of bed, America’s leaders had hit the snooze button every time the oil supply alarm went off: September 1960, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela form OPEC to protect themselves against declining oil prices—snooze; September 1969, Colonel Muammar al-Qaddafi seizes power in Libya in a military coup and within a year throws out U.S. and British forces, nationalizes foreign banks, and begins to take control of Libyan oil—snooze; March 1971, U.S. domestic oil production peaks and begins to decline— snooze; July 4, 1971, President Richard M. Nixon delivers the “first comprehensive energy message” to Congress, calling for a nuclear breeder reactor to be built by 1980, which he calls the nation’s best hope for economical clean energy—snooze; October 1971, OPEC countries demand “equity participation” in the oil companies operating in the Middle East— snooze; December 1971, Britain withdraws all of its remaining troops from the Middle East—snooze. With the actions of the Arab states in October 1973, however, the time had unmistakably come for this nation to wake up, wipe the sleep from its collective eyes, and tackle the energy issue. The oil embargo was the culmination of a major shift in control over Middle East oil production away from U.S. and European oil companies, who for decades had controlled both output and prices, to the nations in whose lands the oil was located. By the end of 1972—at the latest—this shift of power over oil should have been apparent to policymakers in the oil-consuming nations, but complacency somehow persisted. Western interests in Middle Eastern oil originated in the years following World War I in the international context of the British Empire. British political control allowed oil companies to obtain drilling rights to areas as large as Texas for as little as $30,000. In the late 1940s, the American and British governments came together to sign the Anglo-American Agreement on Petroleum, warning the newly established Middle Eastern governments that the United States and Great Britain would guarantee “all valid concession contracts and acquired [drilling] rights” with the full force of their governments. [13.59.218.147] Project MUSE (2024-04-23 16:20 GMT...

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