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2015.01.25 Journal of Wealth & Success Vol 3 Issue 4

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wealth & success Copyright 2015. All Rights Reserved. investment intelligence command & control tactical awareness 6 wealth & success volume 3 issue 4 January 25, 2015 The Middle East The First Great American Oil Crisis The catalyst involved a simple act of standing by a friend and ally, Israel. When the dust settled, the price of oil had quadrupled and a country was left standing in shock. It began on what could be described as the most impor- tant holiday in the Jewish year. Even Jews who do not observe many religious customs recognize Yom Kippur as a day of fast, rest, and synagogue services. In 1973, it was the day that an Arab coalition led by Syria and Egypt invaded Israel. But how much could a conflict on the other side of the world affect the United States? Certainly, it was true that the twelve OPEC nations supplied 37% of America's oil, but not to worry—the Shah of Iran was our dear friend. We could count on him, considering the amount of mili- tary and economic aid we had invested in Iran. Factors Leading Up to the Crisis Major actions never occur in a vacuum; they always have preceding factors which, unfortunately, only seem to be obvious to the parties involved well after the dam- age occurs. In the post-World War II era, American economic might remained on an impressive trajectory, becoming the major industrial juggernaut of the developed world. Oil was so abundant that, until 1947, the US actually produced more than it consumed. After 1947, we began importing oil to fuel our industrial powerhouse, but the oil fields of East Texas remained a "swing producer," able to adjust produc- tion to stabilize the global supply. In the late 1950s, President Dwight D. Eisenhower became concerned that too much oil was flowing into the United States. Still the world's largest producer, Ike limited the amount of imported crude that could enter the coun- try by creating a quota system. A series of bad luck and blunders in the early 1970s. In October of 1970, three years to the month until embargo D-Day, US oil production suddenly peaked; the spare capacity in the East Texas oil fields had vanished. Recently unclassified intelligence documents from the next month, November of 1970, had predicted interrup- tions in the supply of oil "during the next five years." By April of 1973, President Richard M. Nixon had assembled a new energy policy based, at least partly, on that report. The policy included a deregulation of gas In a surprise attack, an Arab coalition led by Syria and Egypt strike Israel.

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