Long queues at Britain’s gas stations, stockpiling of fuel and goods in case of emergencies, as well as high prices due to fuel shortages, are just a small part of the oil crisis that shook the British economy in the 1970s and 1980s.
We go back in time to 1978, to be exact.
At that time, a series of demonstrations took place in the streets of Tehran, which lasted for a whole year, and ended with the fall of the regime of Shah Mohammad Reza Pahlavi and the beginning of the era of the Islamic Republic of Iran.
Strikes at Iran’s oil fields began in the fall of 1978. By January 1979, crude oil production had fallen by 4.8 million barrels per day, or about 7% of global production at the time.
Other producers were able to make up for some of the shortfall, resulting in a net loss of supply of about 4 to 5%.
However, oil prices rose rapidly from $13 a barrel in mid-1979 to $34 a barrel in mid-1980.
This crisis has been called globally the “second fuel shock”.
As for the second, because it followed a crisis faced by Western countries about 5 years ago, when the Arab countries in OPEC imposed an embargo on the supply of oil to countries that supported Israel militarily following the October 1973 war on Egypt and Syria.
Shortages in the global supply of fuel and diesel were particularly acute in the spring and early summer of 1979.
Western countries began to adopt rationing policies, allowing the purchase of fuel every two days, and its sale was regulated according to the numbers of single and double cars in some United States.
In Britain, the shortage of gasoline also led to fears of a shortage of heating oil during the winter of 1979-1980, which increased the citizens’ demand for panic buying and the desire to stock up for fear of the unknown, just as happened at the beginnings of the Corona pandemic, and what is happening now despite the assurances of Prime Minister Boris Johnson, It was also published by The Guardian.
This demand, in turn, more than doubled the actual shortage, as oil was sold on the spot market for up to $50 a barrel.
In 1980, the Iran-Iraq war broke out, also affecting global supply after two oil-exporting countries clashed.
The price of oil peaked at $39 a barrel in February 1981. This figure was 160% higher than the level prior to the revolution in Iran. It took until May 1983 for the price to drop significantly below $30 a barrel, according to Investopia.
During this period, Margaret Thatcher assumed the presidency of the British government as the first woman in this position, specifically in May 1979, and the inflation rate rose immediately, as did the unemployment rate.
The recent rise was due to the harsh austerity that her government practiced at the same time that the American economy and other developed countries entered a major recession. Inflation in Britain was above 20%, while unemployment exceeded 1.5 million for the first time since the 1930s.
Thatcher adopted economic policies that supported the private sector and the liberal economy in conjunction with the discovery of oil in the North Sea.
This oil saved Britain from mounting public debt.
Thatcher privatized many public sectors, and critics of her economic policies believe that spending the oil revenues that supported the economy at the time did not improve the basic strength of the British economy and did not prepare it for the plan to reduce the supply of this resource.
The professor of economics at the University of Aberdeen, Scotland, said in a statement to the New York Times that the government’s management of oil wealth missed a real opportunity by spending it and not investing it in projects to create jobs and enhance future wealth.
The oil crisis is changing British society
This period of high energy prices has not been good for the country’s already shaky manufacturing sector.
The gradual collapse of the British-owned automobile industry was hastened by the additional costs of production.
In turn, high oil prices encouraged a move towards smaller cars, and helped create the environment in which Japanese companies such as Toyota and Honda became dominant in the UK and abroad.
The Japanese were welcomed; For their long experience in building smaller, more fuel-efficient cars, their experience has helped revive UK manufacturing.
changes in international politics
The oil price shock also changed the nature of the country’s international relations, which were more focused on risks coming from Russia and China as part of the Cold War.
After the two oil crises, Britain’s international policies focused on the Middle East and Arab oil-exporting countries. It also paid attention to some countries that could provide alternative and stable oil and gas supplies, such as Nigeria and Indonesia.
Gradually, there has been renewed interest in other forms of sustainable energy such as solar energy and others.