In 1960, 12 oil-exporting nations, mainly in the Middle East, formed the Organisation of the Petroleum Exporting Countries (Opec). Its proposed role was to address the imbalance created by the Seven Sisters, a group of British, American and Dutch oil companies that had been working together from the early 1950s.
This period of stability was upset by three factors. Firstly, US oil production peaked in 1970, making America far more dependent on overseas imports.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Secondly, the end of the Bretton Woods currency arrangement in 1971 hit the value of the dollar, and in turn the real value of Opec's oil revenues (as oil was priced in dollars).
Finally, the decision of Syria and Egypt to attack Israel in early October plunged the Middle East into chaos. Richard Nixon's administration after some wavering intervened to support Israel.
On 16 October, Opec announced a price hike, then a day later, its Arab members decided to slash oil production and imposed an embargo on the US (later extended to Japan and western Europe). The oil price quadrupled from $3 a barrel to $12 ($56 in today's prices).
This caused queues at American petrol stations, while in the UK its effect on coal reserves (already depleted by an ongoing strike) saw electricity rationed to three days a week.
Even after the embargo ended in March 1974, the oil price remained high, thanks to efforts by Opec. This led to stagflation' high inflation and unemployment taking hold in Europe and America.
-
Gender pension gap rises to £113,000 – how to fill the shortfall and boost your pensionThe gender pension gap is growing, says Scottish Widows, with a third of women facing poverty in retirement
-
Highest value stocks and shares ISAs worth 17 times more than cashAhead of potential ISA reforms in the Budget, new FOI data highlights the significant gap between saving and investing your yearly tax-free allowance
-
31 August 1957: the Federation of Malaya declares independence from the UKFeatures On this day in 1957, after ten years of preparation, the Federation of Malaya became an independent nation.
-
13 April 1960: the first satellite navigation system is launchedFeatures On this day in 1960, Nasa sent the Transit 1B satellite into orbit to provide positioning for the US Navy’s fleet of Polaris ballistic missile submarines.
-
9 April 1838: National Gallery opens in Trafalgar SquareFeatures On this day in 1838, William Wilkins’ new National Gallery building in Trafalgar Square opened to the public.
-
3 March 1962: British Antarctic Territory is createdFeatures On this day in 1962, Britain formed the British Antarctic Territory administered from the Falkland Islands.
-
10 March 2000: the dotcom bubble peaks
Features Tech mania fanned by the dawning of the internet age inflated the dotcom bubble to maximum extent, on this day in 2000.
-
9 March 1776: Adam Smith publishes 'The Wealth of Nations'
Features On this day in 1776, Adam Smith, the “father of modern economics”, published his hugely influential book The Wealth of Nations.
-
8 March 1817: the New York Stock Exchange is formedFeatures On this day in 1817, a group of brokers moved out of a New York coffee house to form what would become the biggest stock exchange in the world.
-
7 March 1969: Queen Elizabeth II officially opens the Victoria Line
Features On this day in 1969, Queen Elizabeth II took only her second trip on the tube to officially open the underground’s newest line – the Victoria Line.
