What was the 1970s oil crisis, and are we heading for something worse?

Rachel Clun

Sourec Link

The oil crisis in the 1970s sparked a global economic and financial crisis

The month-long closure of a crucial waterway for the global energy supply has sparked warnings the world is heading for problems worse than those caused by the 1970s oil crisis.

Lars Jensen, a shipping expert and former director at Maersk, told the BBC the impact of the US-Israeli war on Iran could be "substantially larger" than the economic chaos seen in the 1970s.

His comments follow a warning from the director of the International Energy Agency, Fatih Birol, earlier this month that the world is "facing the greatest global energy security threat in history".

"It is much bigger than what we had in the 1970s, the oil price shocks. It is also bigger than the natural gas price shock we have experienced after the Russia's invasion of Ukraine," he told the BBC.

But while the closure of the Strait of Hormuz is disruptive to global supplies, others argue the world today is more resilient.

What happened in the 1970s oil crisis?

The 1970s oil crisis was "fundamentally different" from today's, as the first oil shock back then was "the result of a deliberate policy decision", economist Dr Carol Nakhle, who is also the chief executive of Crystol Energy, told the BBC.

In October 1973, Arab oil producers placed an embargo on a group of countries led by the US over their support for Israel during the Yom Kippur war. That policy came alongside a co-ordinated cut to oil production.

"The result was a near quadrupling of oil prices within a few months," Nakhle said.

This led to fuel rationing in major oil-consuming countries, and Nakhle said it triggered a "global economic and financial crisis" with lasting implications.