Newstalgia Reference Room - an interview from Meet The Press with Walter Levy, Economist and oil consultant regarding the Arab Oil Embargo of 1973 and its effect on world oil prices. From November 23, 1973
Having noticed the steep and continuing climb in gas prices (over $4.00 a gallon in L.A.), and the state of nervousness surrounding the Jasmine Revolution, once again the oil producing Arab nations are being tagged as the culprits in the latest energy crisis. Whatever the circumstances are (and there are always countless circumstances for spikes in gas prices; some imagined, some imaginable), the region has not been a stranger to crisis situations. In 1973 it was the Arab Oil Embargo based on the then-Arab-Israeli War and our support of Israel in the way of military aid. And since there was the Cold War still going on, the Soviet Union was a source of concern with their support in the way of military aid to the Arab nations. There was also the domestic furor over Watergate which some have contended suited the Arab Oil Embargo quite nicely as it took our attention away from Nixon for a while. Whatever the real situation was, it created a crisis which has become something of a playing card ever since. But in 1973 it was something new and the signs of "no gas" were creeping up all over the country. Somehow, we knew this was the beginning of the future and it was never going to go back to the way it was.
And of course all the punditry and experts were lined up to explain what was going and why this was going on and in their way, get us used to it. One of those experts called upon was Walter Levy an economist and Oil consultant who appeared on an episode of Meet The Press on November 23, 1973 to explain what this all meant.
Walter Levy: “Certainly the last three years have shown that oil companies, that have huge operations in the Middle East, who discovered this oil, who developed it, exported it all over the world, have lost practically all of their bargaining power with regards to the Middle East producing countries. We have a story in the last three years of nothing but broken agreements between oil companies and oil producing countries. And where, when the producing country concerned, the producing country concerned, changed it’s demands, increased its requirements for money, for control, against arrangements just concluded, the oil companies could never afford to say ‘we want to negotiate, we want to change it’, because the usual reply of the producing country was ‘if you do not – quote/unquote agree today, we will legislate tomorrow’, and a minute before the legislation became due, the oil companies, just in order to protect whatever they still had said ‘yes, sir’.”
In what sounds like the ultimate "good cop-bad cop" scenario, the Arab Oil Embargo of 1973 set a precedent which has been repeated over and over simply because it works. Shift blame, shrug shoulders, wring hands and repeat. And let's face it - this is way too comfortable a situation on the parts of the Oil Companies and the Oil producing countries to change since all parties are quite happily in bed with each other. The system has been figured out and is played at every chance. And it is most likely for that reason there will probably never be a successful alternative to Arab oil in our lifetimes. Ain't gonna happen IMHO.