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Appendix G –
The 1973 Oil Crisis and the 1973 Miner’s Strike

The 1973 oil crisis began on October 17, 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced, as a result of the ongoing Yom Kippur War, that they would no longer ship oil to nations that had supported Israel in its conflict with Syria and Egypt (the United States, its allies in Western Europe, and Japan).   About the same time, OPEC members agreed to use their leverage over the world price-setting mechanism for oil in order to raise world oil prices, after the failure of negotiations with the "Seven Sisters"[1] earlier in the month. Because of the dependence of the industrialized world on crude oil and the predominant role of OPEC as a global supplier, these price increases were dramatically inflationary to the economies of the targeted countries, while at the same time suppressive of economic activity.

 

In 1973, the British economy was troubled by high rates of inflation. One of the government's strategies to tackle this was to cap pay rises. This caused unrest amongst trade unions in that wages were struggling to keep pace with prices. This extended to most industries, most notably an industry where there was a powerful union - coal mining.  By the middle of 1973, the National Union of Mineworkers had encouraged their members to work to rule[2] - as a result, coal stocks slowly dwindled. The global effect of the 1973 oil crisis also drove up the price of coal. The Heath government entered into negotiations with the NUM, to no avail.

 

 

[1] The Seven Sisters consisted of three companies formed by the break up by the U.S. Government of Standard Oil, along with four other major oil companies. With their dominance of oil production, refinement and distribution, they were able to take advantage of the rapidly increasing demand for oil and turn immense profits.

Being well organized and able to negotiate as a cartel, the Seven Sisters were able to have their way with most Third World oil producers. It was only when the Arab states began to gain control over oil prices and production, mainly through the formation of OPEC, beginning in 1960 and really gaining power by the 1970s, that the Seven Sisters' influence declined.

The Seven Sisters were the following companies:

  1. Standard Oil of New Jersey (Esso), which merged with Mobil to form ExxonMobil.
  2. Royal Dutch Shell (Anglo-Dutch)
  3. Anglo-Persian Oil Company (APOC) (British). This later became Anglo-Iranian Oil Company (AIOC), then British Petroleum, and then BP Amoco following a merger with Amoco (which in turn was formerly Standard Oil of Indiana). It is now known solely by the initials BP.
  4. Standard Oil Co. of New York ("Socony"). This later became Mobil, which merged with Exxon to form ExxonMobil.
  5. Standard Oil of California ("Socal"). This became Chevron, then, upon merging with Texaco, ChevronTexaco. It has since dropped the 'Texaco' suffix, returning to Chevron.
  6. Gulf Oil. In 1985 most of Gulf became part of Chevron, with smaller parts becoming part of BP, and Cumberland Farms, in what was at that time the largest merger in world history. A network of stations in the northeastern United States still bears this name.
  7. Texaco. Merged with Chevron in 2001. The merged company was known for a time as ChevronTexaco, but in 2005 it changed its name back to Chevron. Texaco remains as a Chevron brand name.

As of 2005, the surviving companies are ExxonMobil, Chevron, Shell, and BP, now members of the "supermajors" group.

 

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