March 13 (Reuters) – The International Energy Agency said the closure of the Strait of Hormuz has caused the biggest disruption to global oil markets in history, with supply expected to fall by around 8 million barrels per day in March, or about 8%.
The agency’s member countries responded by agreeing to release a record 400 million barrels of strategic reserves to stabilize oil prices and offset lost Middle East production.
Here is a list of some of the previous oil supply disruptions:
THE ARAB OIL EMBARGO OF 1973-1974
The Arab oil embargo was triggered by the Yom Kippur War, which began on October 6, 1973, when Egypt and Syria launched coordinated attacks against Israel.
Arab producers, acting through the Organization of Arab Petroleum Exporting Countries, ordered an immediate 5% production cut, followed by additional monthly reductions of 5%. The move was taken to pressure Western nations to force Israel to withdraw from Arab territories it had occupied since the 1967 Six-Day War.
Declassified US National Security Council documents prepared for President Richard Nixon estimated that the embargo would leave the United States with a deficit of between 2 and 3 million barrels per day, and that the total shortage in the embargoed countries would reach around 4.5 million bpd.
The OAPEC announced the embargo on October 17, 1973, and it remained in effect against the United States until March 1974, according to US government records.
As a result, crude oil prices nearly quadrupled, rising from about $2.90 per barrel before the embargo to $11.65 in January 1974. The government prepared fuel rationing plans, ordered industries to switch from oil to coal, pushed for greater domestic production, and advanced emergency energy legislation. The crisis also led oil-consuming countries to establish the International Energy Agency in 1974 to coordinate responses to supply disruptions.
THE IRANIAN REVOLUTION OF 1978-1979
Political turmoil in Iran led to the collapse of Shah Mohammad Reza Pahlavi’s government and the rise of Ayatollah Khomeini. Iranian oil production fell sharply by 4.8 million bpd, equivalent to about 7% of world supply, in January 1979.
Oil prices began to rise rapidly in mid-1979 and more than doubled between April 1979 and April 1980, driven by fears of further disruptions, speculative hoarding, and strong global demand.
The crisis contributed to increased inflation in the United States. In August 1979, Paul Volcker was named chairman of the Federal Reserve and the central bank adopted aggressive monetary tightening to curb inflation. The policies broke the cycle of stagflation but, combined with the oil crisis, pushed the US economy into a severe recession.