What The 1970s Oil Shock Can Tell Us About Today

The oil shock as felt in America

It feels a lot like the 1970s. Fuel prices are rising, the Third World is writhing, and Silk Sonic is vibing in bell bottoms again. War in Ukraine has blown up energy prices like the 1973 Israel War, with the West somehow sanctioning itself this time. As Miss Shirley Bassey said, “it’s just a little bit of history repeating.”

So let’s read some history (Oil Shock: The 1973 Crisis And Its Economic Legacy, edited by Elisabetta Bini, Giuliano Garavini, and Federico Romero).

The 1970s Oil Crisis

According to Fiona Venn, “the energy crisis of 1973 consisted of two ‘distinct but interrelated crises’, one ‘political’, the other ‘economic’.”

the energy crisis of 1973 consisted of two ‘distinct but interrelated crises’, one ‘political’, which was the six-month embargo shaped by the Arab–Israeli con-flict. The other was ‘economic’, which concerned the renegotiation of oil agreements, beginning in 1971, which increased the level of payments to host governments. By 1974, most of these nations began moving from participation to 100 per cent nationalization. This is the real significance of the oil crisis of 1973.

The political crisis was the oil embargo declared by Arab members of OPEC in 1973. But they were only even able to do this because oil-producing countries had already been nationalizing their natural resources for years.

As Christopher R.W. Dietrich wrote, “OPEC had waged a protracted and highly publicized campaign to wrest pricing and production control from the grip of the multinationals in the previous half-decade. Between September 1970 and September 1973, the nominal posted price had already moved from $1.80 to $3.07, its largest sustained increase in history.”

Hence the economic pressure was building before the political pressure exploded. As the soon-to-be deposed Iranian Shah said, “You’ve sent petrochemical prices rocketing. ‘You buy our crude and sell it back to us, refined as petrochemicals, at a hundred times the price you’ve paid us. You make us pay more, scandalously more, for everything, and it’s only fair that, from now on, you should pay more for oil.”

In many ways, what the West called an oil ‘crisis’ was a moment of proud decolonization. Newly independent governments from Iraq to Venezuela took sovereign control back of their natural resources. As the editors wrote, “For many oil-producing countries, on the other hand, the shock was associated with the end of colonialism and with full membership in the international economy, and in many cases it was not at all perceived as a crisis, let alone as a shock.”

For those countries it worked pretty well, but it fucked everybody else, especially other colonized people in the South. As William Glenn Gray wrote, “The oil states were taking in far more money than they could spend, even as the new price levels generated hardship for the industrial West and disaster for the world’s poorest states.”

As Glenn Gray continued,

Now OPEC members were likely to take in a surplus of $60 billion in 1974 alone, with $9 billion in deficits accrued by developing countries. Perhaps it was time to hammer home the irresponsibility of the oil producers, whose actions would cause so much misery for the world economy and for the poorest countries in particular?

We felt this in Sri Lanka in the 1970s as profound energy and food and shortages which were blamed on the socialist(ish) government of the time. But these were really global trends that destabilized governments the world over. Hence the ‘oil shock’. While oil-producing countries were able to get a fair share for themselves, it made the world more unfair overall. For reasons that will follow.

The Empire Strikes Back

By nationalizing oil resources and forming a cartel, oil-producing countries were able to earn much more money than before. So much money that they didn’t even know what to do with it. If this was a truly decolonizing moment that money should have flowed into other colonized countries, but that’s not what happened. We weren’t in the cartel.

Instead, while western countries lost some control of petroleum, they retained control of the petrodollar. Almost all of that money was ‘recycled’ up North. As Glenn Gray wrote, “put simply, the oil producers did not want to bear the risk of pouring their earnings directly into developing countries.” Instead, “when the oil exporters began to shift from short-term bank deposits to medium-term bond purchases, they favoured the industrial nations by a huge margin: France, Japan, the US and even (unwisely) Britain.”

In this way, the colonial hydra just regrew whatever heads had been lopped off by the defiance of 1973. Oil-producing countries were paid off, but the financial control of White Empire over the world remained intact, and even grew stronger.

While oil-producing countries were running surpluses, most of the Global South fell into terrible western debt traps. As Glenn Gray wrote, “The losers here, as in any globalized system, were poor countries that had nothing substantial to exchange as the price of oil and food and industrial goods all shot upwards.”

While the anti-imperial ‘model to be emulated’ was nationalizing resources, the exact opposite happened in the Global South. Countries driven into debt and destitution had to ‘open up’ to the predations of western capital even more, privatizing resources, cheapening their labor, and becoming trapped in western debt that most have yet to clamber out of.

While oil-producing countries staked a claim to their petroleum, the White Empire still retained control of the petrodollar, which was where the real power was. America used this to finance its own military and eventually occupy much of the Middle East with bases or outright invasion.

Of the original five OPEC members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), two are sanctioned, one has been invaded, and the others are occupied with American military bases. They get paid for their troubles, but they’re still paid in imperial coin. Hell, the headquarters of OPEC is in Austria now. The Empire struck back hard.

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