Scenario HubOil Supply Shock 1973

Oil Supply Shock (1973)

Supply Shock · Advanced Difficulty · Global

~30 min
+480 XP
Advanced

Historical Context — Oil Supply Shock (1973)

The 1973 oil crisis was triggered during the Yom Kippur War, when Arab oil-producing nations coordinated through OPEC to reduce oil exports to countries supporting Israel — especially the US and Western Europe. Before 1973, oil was cheap and stable, Western economies relied heavily on imported oil, and growth was strong with relatively low inflation. After the shock, oil prices quadrupled and energy became a strategic weapon, triggering the first major episode of stagflation — simultaneous high inflation and rising unemployment.

Before the Shock (Pre-1973)

  • CPI ~3–4% — low and stable inflation
  • GDP ~5–6% — strong growth
  • OIL ~$3/bbl — cheap, abundant energy
  • UNEMP Low — near full employment

After the Shock (1974–1975)

  • CPI 10–15%+ — severe cost-push inflation
  • GDP Negative — recession in many countries
  • OIL ~$12/bbl — 300% price increase
  • UNEMP Rising significantly — firms cut output

Key Macroeconomic Indicators

Oil Price (USD/barrel)
$12.00
prev: $3.00
CPI Inflation (US)
12.3%
prev: 3.4%
GDP Growth (US)
-0.5%
prev: 5.6%
Unemployment Rate (US)
8.5%
prev: 4.6%
US Trade Balance ($bn)
-$5.8bn
prev: -$1.2bn
Economic Sentiment
22/100
prev: 68/100

Click any indicator card to see context

Oil Price (USD/barrel)

Jan 1973 – Jan 1975

+300%

Macro Indicators 1971–1976

Inflation, GDP Growth & Unemployment (%)

CPI GDP Unemp

Key Events Timeline

Oct 1973WarYom Kippur War begins — Egypt and Syria attack Israel
Oct 1973EmbargoOPEC announces oil embargo against US and Western Europe
Nov 1973PolicyUS introduces emergency speed limits and daylight saving to cut energy use
1973–74PricesOil prices rise from ~$3 to ~$12 per barrel — a 300% increase
1974–75RecessionGlobal recession hits US, UK, Germany and Japan simultaneously