What If The Oil Crisis of 1973 Never Happened?

The Actual History

The 1973 Oil Crisis represents one of the most significant economic shocks of the 20th century, dramatically altering global energy policies and power dynamics. The crisis began in October 1973 when the Organization of Arab Petroleum Exporting Countries (OAPEC), consisting of Arab members of OPEC plus Egypt and Syria, proclaimed an oil embargo. This decision was made in response to Western support for Israel during the Yom Kippur War (also known as the October War or Ramadan War), which began when Egypt and Syria launched a surprise attack on Israel on October 6, 1973.

The embargo specifically targeted nations that had supported Israel during the conflict, most notably the United States, but also the Netherlands, Portugal, South Africa, and later extended to include Canada, Japan, and the United Kingdom. The OAPEC nations announced production cuts and banned petroleum exports to the targeted countries. Saudi Arabia, the world's largest oil exporter at the time, played a central role in implementing these measures.

The immediate effects were dramatic. Global oil prices quadrupled, rising from approximately $3 per barrel to nearly $12 by 1974. In the United States, the price of gasoline rose from 38.5 cents per gallon in May 1973 to 55.1 cents in June 1974. Long lines formed at gas stations across America as panic buying ensued. Some states implemented odd-even rationing systems, where vehicles with license plates ending in odd numbers could purchase fuel on odd-numbered days, and even-numbered plates on even-numbered days.

The economic impact was severe and wide-ranging. The crisis contributed significantly to the period of "stagflation" in the 1970s—a toxic combination of economic stagnation and inflation that challenged conventional economic theory. The Dow Jones Industrial Average lost nearly 45% of its value between January 1973 and December 1974. Unemployment rose, economic growth faltered, and inflation soared in most Western industrialized nations.

The oil crisis transformed energy policy worldwide. President Nixon launched "Project Independence" in November 1973, aiming to achieve energy self-sufficiency by 1980. The U.S. established the Strategic Petroleum Reserve and later created the Department of Energy in 1977. The crisis prompted the first significant push toward energy conservation, alternative energy sources, and fuel-efficient vehicles. In Japan and Western Europe, which were even more dependent on Middle Eastern oil than the United States, similar policy shifts occurred, with France accelerating its nuclear power program and Japan diversifying its energy imports and suppliers.

The embargo formally ended in March 1974 after U.S. Secretary of State Henry Kissinger negotiated an Israeli troop withdrawal from parts of the Sinai Peninsula. However, the effects of the crisis persisted for years, and OPEC's demonstrated power to weaponize oil supplies permanently altered global energy security considerations.

In the longer term, the crisis prompted structural changes in the global economy. It accelerated the decline of American industrial dominance, highlighted Western vulnerability to resource nationalism, and shifted tremendous wealth and geopolitical leverage to oil-producing nations. The petrodollar recycling system that emerged—where oil exporters invested their dollar surpluses in Western financial institutions—became a cornerstone of the late 20th century global economic system.

The 1973 Oil Crisis stands as a watershed moment that revealed the deep connections between energy, economics, and geopolitics, and whose repercussions continue to shape energy policy and international relations to this day.

The Point of Divergence

What if the Oil Crisis of 1973 never happened? In this alternate timeline, we explore a scenario where the Arab oil embargo was never implemented, sparing the world from its first major energy crisis and potentially altering the course of global economic and energy development for decades to come.

Several plausible variations could have prevented the crisis from unfolding:

First, the Yom Kippur War itself might have been averted through diplomatic interventions. Had the United States or the Soviet Union anticipated the brewing conflict and applied sufficient pressure on their respective allies, the surprise attack by Egypt and Syria on October 6, 1973, might never have occurred. Without this war, OAPEC would have lacked the primary catalyst for implementing the oil embargo.

Alternatively, even with the Yom Kippur War proceeding as it did historically, Arab oil producers might have calculated differently about using the "oil weapon." King Faisal of Saudi Arabia, a crucial figure in the embargo's implementation, was initially reluctant to weaponize oil exports. In our timeline, he ultimately yielded to pressure from more hawkish Arab leaders, particularly after the U.S. announcement of a $2.2 billion military aid package to Israel on October 19, 1973. In an alternate scenario, Faisal might have maintained his resistance to the embargo, perhaps calculating that long-term Saudi interests were better served by maintaining stable economic relations with the West.

A third possibility involves internal OPEC dynamics. Oil ministers like Saudi Arabia's Sheikh Ahmed Zaki Yamani or Iran's Jamshid Amouzegar might have more effectively argued that an embargo would ultimately damage producer interests by accelerating Western efforts toward energy independence. The Shah of Iran, a key U.S. ally, opposed the embargo in our timeline; in the alternate scenario, his influence might have prevailed among other producers.

Lastly, U.S. diplomacy might have succeeded in preventing the embargo through early concessions regarding Israel. If the Nixon administration, distracted by the escalating Watergate scandal, had nonetheless prioritized Middle East diplomacy and signaled a more balanced approach to the Arab-Israeli conflict, Arab oil producers might have seen less need for economic pressure.

In this alternate timeline, we'll explore a scenario where a combination of these factors—primarily King Faisal's firmer resistance to the embargo idea and more effective U.S. diplomatic signaling—prevented the oil weapon from being deployed, despite the Yom Kippur War unfolding largely as it did historically. While oil prices would still have risen somewhat in the 1970s due to underlying market conditions, the world would be spared the sudden, traumatic quadrupling of prices and the profound economic and geopolitical consequences that followed.

Immediate Aftermath

Global Oil Markets and Pricing

Without the embargo, global oil markets would have experienced a markedly different trajectory through the mid-1970s. Instead of the sudden quadrupling of prices that occurred in our timeline, oil prices would have followed a more gradual upward trend, reflecting the tightening supply-demand balance that was already underway before the crisis.

Prior to the embargo, OPEC had already been negotiating for higher posted prices and greater control over production. The "Tehran Price Agreement" of February 1971 had increased oil prices by about 35%, and producers were pushing for further adjustments. In this alternate timeline, this process would have continued, but without the dramatic price shock:

Moderate Price Increases: Oil prices likely would have risen from roughly $3 per barrel in early 1973 to perhaps $5-6 by 1975, rather than leaping to $12 as in our timeline
Continued Producer-Consumer Negotiations: Without the traumatic experience of the embargo, Western nations might have engaged in more collaborative negotiations with OPEC regarding price stability
Gradual Market Adjustments: Consumers and industries would have had more time to adapt to rising energy costs through normal market mechanisms

The absence of panic buying, hoarding, and rationing would have maintained normal market functioning and prevented the social disruption that characterized the actual crisis.

Economic Impact on Western Nations

The most immediate and visible difference would have been in Western economies, particularly the United States, where the absence of gas lines, rationing, and price controls would have changed the economic landscape of the mid-1970s:

Mitigated Stagflation: While the U.S. and other Western economies were already experiencing inflation and slowing growth due to factors including the Vietnam War, monetary policy decisions, and the collapse of the Bretton Woods system, the absence of the oil shock would have significantly reduced inflationary pressures. The U.S. inflation rate, which reached 12.3% in 1974, might instead have peaked at 7-8%
Continued Industrial Production: Energy-intensive industries would have avoided the sudden production cutbacks and layoffs that occurred historically. The automotive industry, already challenged by increased Japanese competition, would have had more time to adapt rather than facing a sudden collapse in demand for larger vehicles
Consumer Confidence Preservation: Without the psychological blow of the energy crisis, consumer confidence would likely have remained stronger, supporting retail spending and housing markets
Stock Market Stability: The Dow Jones Industrial Average, which lost 45% of its value between January 1973 and December 1974, would have experienced a milder correction, perhaps 15-20%, primarily responding to the general economic slowdown rather than the energy shock

In Europe and Japan, which were even more dependent on imported oil than the United States, the economic benefits would have been proportionally greater. Without the crisis, Japan's "economic miracle" might have continued longer before its eventual slowdown in the late 1970s.

Political Repercussions

The absence of the oil crisis would have had significant political implications, particularly in the United States:

Nixon Administration: Already battling the Watergate scandal, the Nixon administration would have been spared managing a simultaneous energy crisis. While this wouldn't have saved Nixon's presidency, it might have altered the timing of events, with the administration maintaining marginally higher approval ratings into early 1974
1974 Midterm Elections: Democrats would still have made gains in the 1974 midterms following Watergate, but without the compounding factor of public anger over the energy crisis, these gains might have been less dramatic
Energy Policy Development: Without the crisis as a catalyst, the establishment of the Department of Energy might have been delayed or taken a different form. The Strategic Petroleum Reserve would likely not have been created in this period

In European nations, the absence of the crisis might have moderated the political shifts of the mid-1970s, including the rise of more conservative governments in several countries that occurred partly in response to economic difficulties.

Middle East Dynamics

The decision not to implement the oil embargo would have altered Arab-Israeli dynamics and inter-Arab relations:

Arab-Israeli Peace Process: Without demonstrating the oil weapon's effectiveness, Arab states might have had less leverage in subsequent negotiations with Israel. The initial steps toward peace between Egypt and Israel might have developed differently or been delayed
Saudi Regional Leadership: Saudi Arabia's decision not to lead an embargo would have temporarily diminished its claim to leadership in the Arab world, particularly in relation to more radical states like Libya and Iraq
OPEC Cohesion: The organization would have continued its gradual consolidation of power in oil markets, but without the dramatic demonstration of its influence provided by the embargo

While the fundamental conflicts in the region would have persisted, the geopolitical dynamics would have evolved along different lines, with petroleum producers seeking influence through more incremental market actions rather than dramatic political gestures.

Initial Energy Policy Responses

Without the crisis as a catalyst, early energy policy responses in consuming nations would have been more modest:

Continued Consumption Growth: The exponential growth in oil consumption would have continued longer into the 1970s, with delayed implementation of conservation measures
Slower Alternative Energy Development: Early investments in solar, wind, and other alternative energy sources, which received initial funding boosts after the crisis, would have developed more gradually
Delayed Efficiency Standards: Automotive fuel economy standards like the U.S. Corporate Average Fuel Economy (CAFE) regulations might have been implemented later or in less stringent forms
Nuclear Energy: The nuclear power industry would have continued its growth trajectory, but without the additional impetus provided by the oil crisis

These more gradual policy responses would set the stage for significantly different energy landscapes developing over subsequent decades.

Long-term Impact

Energy Consumption Patterns (1975-1990)

Without the shock of the 1973 crisis, Western nations would have followed different energy consumption trajectories through the late 1970s and 1980s:

Delayed Conservation Ethics

Continued Oil Dominance: In our timeline, oil's share of global energy consumption peaked in 1973 at 48.3%. Without the crisis, this percentage would likely have continued rising into the late 1970s
Slower Efficiency Gains: The dramatic improvements in energy efficiency that occurred after 1973 would have been significantly delayed. U.S. energy intensity (energy use per dollar of GDP) fell by 32% between 1973 and 1985; in this alternate timeline, that improvement might have been only 10-15%
Larger Vehicle Fleets: The American preference for larger vehicles would have continued longer, with the market share of imported, fuel-efficient Japanese and European cars growing more gradually
Higher Overall Consumption: By 1990, global oil consumption might have been 15-20% higher than in our timeline, with corresponding implications for resource depletion and carbon emissions

Alternative Timeline: The Late-1970s Crisis

Without the 1973 shock to drive early conservation and policy changes, a more severe crisis might have emerged in the late 1970s as demand eventually outstripped supply capabilities. The Iranian Revolution of 1979, which caused the Second Oil Crisis in our timeline, might have produced an even more severe disruption in this alternate world, as Western economies would have been even more dependent on Middle Eastern oil and less prepared for supply disruptions.

Economic Development Trajectories

The absence of the 1973 crisis would have altered economic development paths for both oil-consuming and oil-producing nations:

Consuming Nations

Extended Manufacturing Dominance: The crisis accelerated deindustrialization in the West by making energy-intensive manufacturing less competitive. Without this shock, American and European industrial bases would have remained stronger through the 1970s and early 1980s
Delayed Service Economy Transition: The shift toward less energy-intensive service economies would have occurred more gradually
Different Asian Development: Japan and later the "Asian Tigers" benefited from their head start in energy efficiency and smaller vehicles. Without the crisis, their comparative advantage would have been somewhat reduced, potentially slowing their economic ascendance
Reduced Economic Volatility: The extreme economic cycles of the 1970s and early 1980s would have been moderated, potentially avoiding the severe recession of 1981-1982 and the corresponding high unemployment rates

Producing Nations

More Gradual Wealth Accumulation: Without the windfall from quadrupled oil prices, petroleum-exporting nations would have accumulated wealth more gradually
Altered Development Priorities: Countries like Saudi Arabia, Venezuela, and Nigeria would have had less immediate cash for massive infrastructure and development projects, potentially resulting in more sustainable long-term planning
Petrodollar Recycling: The massive flow of petrodollars into Western financial institutions, which both helped fund third-world development and eventually contributed to the Latin American debt crisis of the 1980s, would have been significantly reduced

Geopolitical Power Balances

The 1973 crisis fundamentally altered global power dynamics. Its absence would have had profound implications:

Middle East Influence

Moderated Regional Power: Without demonstrating the effectiveness of the "oil weapon," Arab states would have held less leverage in global affairs through the 1970s and 1980s
Different Palestinian Question Evolution: The crisis elevated global attention to the Palestinian cause; its absence might have resulted in less international pressure on Israel regarding Palestinian issues
Altered Military Spending: Oil-rich states like Saudi Arabia and the United Arab Emirates would have had smaller budgets for military procurement, potentially reducing regional arms races

U.S.-Soviet Competition

Extended U.S. Energy Advantage: Before the crisis, the United States benefited from relatively low energy costs compared to the Soviet Union. This advantage would have persisted longer
Delayed Soviet Decline: Ironically, the oil crisis ultimately benefited the Soviet Union as a major oil producer. Without the price spike, Soviet hard currency earnings would have been lower, potentially accelerating economic difficulties and hastening the regime's collapse
Different Strategic Calculations: U.S. military and diplomatic strategies were significantly shaped by energy security concerns after 1973. Without this driver, American engagement in the Middle East might have taken different forms

Global South Development

Alternative Debt Trajectories: Many developing nations were devastated by higher energy costs after 1973, leading to massive borrowing and eventual debt crises. Without this shock, alternative development paths might have emerged
Different Non-Aligned Movement Focus: Energy issues became central to North-South dialogues after 1973. Without this crisis, the Non-Aligned Movement might have focused more on other economic justice issues

Environmental and Climate Implications

The environmental consequences of an avoided oil crisis present perhaps the most profound long-term divergence from our timeline:

Delayed Climate Awareness

Higher Cumulative Emissions: Without early conservation measures and efficiency improvements, global carbon emissions between 1973 and 2000 would have been substantially higher
Later Recognition of Climate Issues: The oil crisis indirectly contributed to early awareness of energy-related environmental issues. Without this catalyst, climate change might have emerged as a mainstream policy concern years or even decades later
Different Environmental Movement: The environmental movement partially realigned around energy issues after 1973. In this alternate timeline, environmentalism might have maintained different priorities longer

Alternative Energy Development

Slower Renewable Energy Innovation: Early investments in solar, wind, and other renewable technologies that occurred after 1973 would have been delayed
Extended Nuclear Expansion: The nuclear power industry, which faced increasing economic and public acceptance challenges after the mid-1970s, might have maintained stronger growth in the absence of competing energy conservation priorities

Technological Development

The crisis spurred innovation in multiple fields; its absence would have altered technological development paths:

Transportation Technology

Delayed Efficiency Technologies: Innovations in automotive efficiency—from fuel injection to aerodynamic design—would have developed more slowly
Different Electric Vehicle Timeline: Early electric vehicle research that received funding after the 1973 crisis would have progressed more slowly, potentially delaying the eventual emergence of commercially viable electric cars by decades
Extended Internal Combustion Dominance: Alternative automotive powertrains would have faced less immediate incentive for development

Energy Production and Conservation

Different Smart Grid Development: Early energy management systems emerged partially in response to the crisis; their development would have followed different trajectories
Building Technology: Innovations in insulation, HVAC efficiency, and building design would have evolved more gradually
Later Industrial Efficiency: Energy-intensive industries like aluminum, chemicals, and steel implemented significant efficiency improvements after 1973; these would have occurred more slowly

Cultural and Social Impact

The oil crisis significantly shaped Western cultural attitudes toward energy and consumption; its absence would have maintained different social paradigms:

Consumer Culture

Extended Conspicuous Consumption: The crisis partially checked the growth of American consumer culture and raised questions about limits to growth. Without this shock, high-consumption lifestyles might have continued expanding unquestioned for longer
Different Urban Development: Suburban expansion patterns might have continued longer without the constraint of higher commuting costs
Delayed "Small is Beautiful" Ethics: The philosophical questioning of constant growth and resource consumption that gained prominence in the 1970s might have remained more marginal without the crisis as a catalyst

Political Movements

Altered Conservative Resurgence: The economic disruption of the 1970s contributed to the rise of Reagan, Thatcher, and conservative movements that emphasized free-market solutions. Without the crisis exacerbating economic problems, this political realignment might have taken different forms
Different Environmental Politics: Energy conservation and independence became partially linked with national security after 1973. Without this connection, environmental policies might have remained more separate from security considerations
Alternative Globalization Debates: The crisis accelerated discussions about global economic interdependence. In its absence, debates about globalization might have evolved differently

By 2025, this alternate world would likely feature higher overall energy consumption, different geopolitical alignments, and potentially more severe climate challenges due to delayed efficiency measures and renewable energy development. However, it might also have avoided some of the economic disruptions and debt crises that shaped global development in the late 20th century.

Expert Opinions

Dr. Michael Farber, Professor of Economic History at Princeton University, offers this perspective: "The 1973 Oil Crisis functioned as a global economic 'reset button' that fundamentally altered market dynamics and policy priorities. In an alternate timeline without this shock, Western economies would have continued their high-energy, manufacturing-focused development longer, potentially delaying the service economy transition by a decade or more. I suspect we would have seen a more gradual but ultimately more severe energy reckoning in the 1980s, as demand growth eventually collided with production constraints. The most profound difference might be in climate change trajectories—without the early efficiency measures implemented after 1973, cumulative carbon emissions through the turn of the century would have been substantially higher, potentially accelerating climate impacts we're only now beginning to fully experience."

Dr. Samira Al-Jabri, Director of the Center for Middle Eastern Geopolitics at the London School of Economics, provides a regional perspective: "The oil embargo represented the first major instance of resource nationalism successfully challenging Western economic dominance. Its absence would have dramatically altered the political economy of the Middle East. Saudi Arabia and other Gulf states would have accumulated wealth more gradually, likely resulting in different domestic development paths and regional power dynamics. The 'demonstration effect' of the embargo empowered resource-rich nations across the global South; without this model, the relationship between multinational corporations and host governments might have evolved along different lines. Perhaps most significantly, the Israeli-Palestinian conflict might have remained more regionally contained rather than becoming the global issue it did after Arab oil producers demonstrated their leverage over Western economies."

Ambassador Richard Holden, former U.S. diplomat and energy security specialist, considers the geopolitical implications: "American foreign policy since 1973 has been profoundly shaped by energy security considerations that wouldn't have been as urgent without the embargo's demonstration of vulnerability. Without the crisis, I believe U.S. military engagement in the Persian Gulf would have evolved more gradually, potentially changing the conditions that led to both Gulf Wars. The Carter Doctrine, which declared the Persian Gulf a vital American interest, might never have been formulated in its historical form. European and Japanese foreign policies, even more constrained by energy dependence than America's, would have followed different trajectories as well. The interesting counterfactual is whether this would have ultimately left the West better or worse prepared for the geopolitical challenges of the 21st century. My assessment is that while the short-term economic pain might have been avoided, the longer-term awakening to energy security vulnerabilities served an important strategic function that would have been dangerous to delay."