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Global oil shortage

In January 1968, Arab members of the Organization of Petroleum Exporting Countries (OPEC) formed the Organisation of Arab Petroleum Exporting Countries (OAPEC). Although they were not oil-producing nations, Egypt and Syria also joined and participated in policy making. The aim of OAPEC was to put pressure on western support for Israel. By the middle of October, the Arab oil producers (Saudi Arabia, Iraq, Iran, Abu Dhabi, Kuwait and Qatar) had increased the price of oil by 17 per cent and reduced oil production. The move produced a global oil shortage, vastly increasing oil prices which quadrupled in the following months.

Oil as a weapon against the west

On 6 October 1973, Egypt and Syria invaded Israel, beginning the Yom Kippur War. The Arab states now used the supply of oil as a weapon against the west. The combination of fuel shortages and high prices had dramatic effects on the British economy, producing an energy crisis. The government considered a range of measures to reduce the use of oil by ten per cent, including:

  • Rationing of petrol
  • Reduction of oil supplies to power stations
  • Reduction of the speed limit
  • Voluntary restrictions on domestic heating

The government also launched a diplomatic effort to persuade the Arab oil producers to increase supply. At the end of 1973, the Cabinet announced a state of emergency and decided on a three-day week in certain industries. In 1974, the government considered further measures for reducing the domestic use of oil.

Inflation increased to nearly 15 per cent in 1974, and to over 27 per cent in 1975. A programme of counter-inflationary measures was devised with the Trades Union Congress (TUC) and Confederation of British Industry (CBI), including a wage freeze and the fixing of prices. The government produced a number of White Papers and consultative documents on counter-inflationary measures between 1973 and 1976.

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