22 December 1973: Opec more than doubles the price of oil

On this day in 1973 Opec, the oil price cartel, more than doubled the price of oil from $5.12 a barrel to $11.65.

On this day in 1973 Opec more than doubled the price of oil overnight from $5.12 a barrel – around $60 in today's money (the price of oil is currently around $50) – to $11.65 (around $145 now). The initial price was in fact as a result of being raised a few months earlier from $3. The price increase caused the legendary 1973 oil crisis, and was a major shock for the Western world economy.

The reason behind the price rise was political. Israel had just won the Yom Kippur War against Egypt and Syria – the two Arab countries had launched a surprise attack on Israel during the Jewish Yom Kippur festival with the aim of reversing the losses of the Six Day War in 1967 and reassert Arab claims over the region.

However, the Opec move was not designed against Israel. It was meant to hurt the United States who had quickly and heavily supplied Israel with military equipment to fight the war, as well as providing political support.

Richard Nixon, the US president at the time, created a new short term Energy Office to deal with the crisis. It implemented price controls which forced “old oil” to stay at a certain price, while newly discovered oil was allowed to be sold at market rates.

It was meant to reduce dependence on Arab oil by opening up new suppliers. However, the result was an artificial shortage in fuel because “old oil” disappeared from the market. To tackle this, the government introduced a rationing programme and even reduced the speed limit to 55mph to cut consumption.

Eventually, the crisis ended through a negotiated settlement between Israel and the Arab countries. Israel came out on top overall but relinquished some of the new land it had taken during the war.

Recommended

The best one-year fixed savings accounts - February 2023
Savings

The best one-year fixed savings accounts - February 2023

Earn almost 5% on one-year fixed savings accounts.
3 Feb 2023
Best regular savings accounts – February 2023
Savings

Best regular savings accounts – February 2023

Looking to stash small amounts away each month? You can now earn as much as 7% on regular saving accounts. We list the ones worth looking at.
3 Feb 2023
Which supermarket is the cheapest?
Personal finance

Which supermarket is the cheapest?

With food inflation hitting almost 17%, we look at which is the cheapest supermarket, plus the Competitions and Market Authority’s plan to introduce u…
3 Feb 2023
After slumping 42% last year, what's next for Scottish Mortgage?
Investment trusts

After slumping 42% last year, what's next for Scottish Mortgage?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust fell by 42% last year. We take a look at the trust's performance and dis…
3 Feb 2023

Most Popular

When will interest rates go up?
UK Economy

When will interest rates go up?

Interest rates are now at 4%, and they could rise further in the months ahead.
3 Feb 2023
NS&I brings back one-year fixed bonds with highest rates since 2010
Personal finance

NS&I brings back one-year fixed bonds with highest rates since 2010

NS&I’s one-year fixed bonds are back on sale after being pulled off the market in 2019 - but is the rate any good?
1 Feb 2023
Covid-19 vaccines helped these stocks take off, but what’s next for these companies?
Investments

Covid-19 vaccines helped these stocks take off, but what’s next for these companies?

Dominic Frisby explores how the top vaccine stocks are doing as booster take-up remains at a low
2 Feb 2023