OPEC Changes the World

October 17, 1973. Ask ten people to place the date — to describe its significance and impact. The end of the Vietnam war? The resignation of an American President? Chances are, the guesses would be wrong.
It is a date that does not resonate in the American memory in the way some dates do, yet no date in history has been more important for those in the oil industry.
Its legacy began with block-long lines at corner gas stations. Its result was a complete change in the way Americans and the world thought about oil and energy, and that change would ultimately contribute to the greatest crisis ever faced by the oil industry

.OPEC Finds Itself
The impact of the OPEC embargo was more far-reaching than anyone could have predicted at the time. The Organization of Petroleum Exporting Countries had been organized in 1960 in an effort to give the producing countries some measure of influence over the consuming nations, and particularly the so-called "Seven Sisters," the major oil countries.
Without a common cause and strong leadership, the organization had been largely ineffective. The three-week Yom Kippur War between the Arab countries and Israel gave OPEC its unifying, common cause, and galvanized the cartel into an economic force of almost unprecedented global power.
On October 17, 1973, that power was used in a way that literally changed the world. OPEC declared a ban on shipments of petroleum to nations which had assisted Israel during the war.
World oil prices shot up, with a disastrous impact on the entire globe, particularly Third World countries. The Iran-Iraq War caused prices to skyrocket again.
In the United States, which at the time of the OPEC action was importing about one-third of its oil, only a mild winter and a leaky embargo prevented total chaos. Spot shortages developed, particularly in the Northeast, leading to angry confrontations in endless lines at the gas pumps. Gasoline prices at the pump jumped from an average of 38.5 cents per gallon in 1973 to 55.1 cents in 1974.
For the oil industry, it was a short-term windfall. Drilling increased substantially all over the world, as higher prices made risks much more attractive. More importantly, the spotlight was focused on the negative effects of government controls, which for years had held prices artificially below what the market would bear. Even before the OPEC embargo, government controls had led to supply disruptions. When controls were ultimately removed and natural market forces were allowed to work, exploration and production rose dramatically.