The Era Of Oil #2: 1973 Oil Crisis

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OPEC

Back 1

An international CARTEL formed in 1960 in order to coordinate members' oil production serve as strategic counterpart to the major oil companies known as the SEVEN SISTERS

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The Seven Sisters

Back 2

Nickname for the seven major multinational oil corporations

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the seven oil companies that comprise the Seven Sisters

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Anglo-Persian Oil Co. ,Gulf Oil Standard Oil of California, Texaco , Royal Dutch Shell, Standard Oil of New Jersey, Standard Oil of New York

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the Supermajors

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Corporate successors to the Seven Sisters

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The four multinationaloil corporations known as the Supermajors

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British Petroleum, Chevron, ExxonMobil, Royal Dutch Shell, and sometimes ConocoPhillips is counted as a fifth

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the Middle East

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From the 1940s-'70s, the SEVEN SISTERS was the most powerful group of private oil companies. It largely controlled post WWII oil production in the ___________________ and controlled much of the world's oil reserves and dominated the global oil market.

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1. OPEC's growing strength ; 2. the creation of state-owned oil companies

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Influence of the Seven Sisters declined in face of these two factors

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oligopoly

Back 8

In the United States, the manufacture of tennis balls, breakfasts cereals, aircraft, electric light bulbs, washing machines, cigarettes, and - you guessed it! -OIL are all industries in which production is highly concentrated and form this kind of MARKET STRUCTURE

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competition

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MONOPOLIES: Have MARKET POWER because BARRIERS TO ENTRY prevent _________________.

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examples of barriers to entry in a market

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Ownership of key resource and government issue of patent or copyright

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a natural monopoly

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exists when a single firm can supply the market at a lower cost than could 2 or more

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choices

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In an oligopolistic market, producers must consider not only the LAW OF SUPPLY but also the _____________ other suppliers make, thus, the opportunity for STRATEGIC interaction!

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cartel

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an agreement in which suppliers agree to cooperate and behave like monopolists In order to maximize total industry profits

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collusion

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Cooperation ,as in a cartel, is called this.

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anti-trust

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U.S. _____________ law prohibits: 1) Collusion to restrict output and/or fix prices and 2.) Formation of CARTELS

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price wars

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In oligopoly markets, price leadership is usually the industry alternative to _____________.

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cheat

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The problem with cartels is that members have an inherent motive to do this

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legal

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As an international agreement between sovereign nations, OPEC does not face _____ barriers like American companies do.

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1960

Back 19

OPEC was organized in this year.

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Baghdad

Back 20

OPEC was organized in this city.

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Iran and Venezuela

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OPEC's 2 key organizers

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OPEC's 5 founding members

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Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.

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In 1965, the members of OPEC were these countries.

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Algeria, Angola, Ecuador, Gabon, Iran, Iraq,Indonesia, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela

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12

Back 24

In 1965, OPEC had 14 members; now it has ___.

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Oct. 6, 1973

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the Arab-Israeli War (Yom Kippur War/October War)

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Egypt and Syria

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attacked Israel in in 1973

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Soviet

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The U.S. provided weapons & supplies to Israel to Israel to fight ____________-backed Egyptian and Syrian forces

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oil embargo

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Led by Saudi Arabia and Libya, OPEC responded to U.S. support for Israel in the 1973 Arab-Israeli War with a/an ______.

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Complete SURPRISE

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U.S. reaction to embargo

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the "oil weapon"

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slang term for use of oil as geopolitical bargaining chip

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"political blackmail"

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What Sec. of State Henry Kissinger called the oil embargo

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Nixon & Kissinger

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President / Sec. of State who didn't see the embargo coming

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40%

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In a matter of months, as a result of the 1973 oil embargo, the retail price of gasoline rose this much.

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fuel allocation system

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The nation's recent shift to a ________________ exacerbated problems because distributed gasoline resources throughout country disallowed shifts from one area to another even when desperately needed

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International Energy Agncy (IEA)

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In Nov. of 1974, Industrialized countries created the ____________ to address vulnerability to OIL SUPPLY SHOCKS to facilitate cooperation on ENERGY SECURITY ISSUES.

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EMERGENCY OIL SHARING SYSTEM

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developed by the IEA to address vulnerability to OIL SUPPLY SHOCKS

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the Strategic Petroleum Reserve

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In 1975, to protect against future supply disruptions the U.S. began building a domestic emergency oil storage reserve situated in 4 subsurface caverns near the Gulf of Mexico

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727 million barrels of oil

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storage capacity of the SPR