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Fifty years ago, war in the Middle East prompted an oil embargo that quadrupled oil prices and resulted in gas shortages, rationing and stagflation. 

Now that war engulfs the region again, are we likely to see a similar impact? 

“I think we are in a very different place than we were in the 1970s,” says Pablo Calderón-Martínez, an associate professor in politics and international relations on Northeastern’s London campus.

During the 1973 Arab-Israeli War — or Yom Kippur War — Arab countries worked together and embargoed oil from the United States and other Western countries, he said.

“We’re far from that happening,” Calderón-Martínez says. “So, I don’t think there’s necessarily going to be a lack of available oil.”

However, Calderón-Martínez also stresses that while no spike in oil prices is happening currently, an escalation in the Israel-Hamas war could cause prices to increase.

“Nothing is happening right now, but I think that the fear is that if the war escalates and becomes a prolonged conflict, an out-of-control conflict where other regional countries are involved, then you could have a real issue of oil supply — particularly if somehow the U.S. gets involved in the conflict, Europe gets involved in the conflict, Iran gets involved in the conflict,” Calderón-Martínez says. “I think it’s unlikely, but I stopped making predictions long ago.”

In the 1970s, Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo against the United States in retaliation for the U.S. and several allies’ support of Israel. The embargo banned petroleum exports and cut oil production. 

As a result of the embargo and other factors, oil prices per barrel doubled, then quadrupled; gas shortages arose and led to rationing; and a period of stagnant economic growth with high inflation and high unemployment (stagflation) began.

It sounds somewhat familiar to many. 

Moreover, a year-and-a half ago, another war involving a major oil supplier — Russia’s invasion of Ukraine — sent oil prices soaring to a 14-year high of $140 a barrel. Add to that a low Strategic Petroleum Reserve following the Biden administration’s sale of 180 million barrels to help stabilize oil markets and combat high pump prices in the aftermath of the invasion, and concerns multiply.

I think that the fear is that if the war escalates and becomes a prolonged conflict, an out-of-control conflict where other regional countries are involved, then you could have a real issue of oil supply.

Pablo Calderón-Martínez, an associate professor in politics and international relations on Northeastern’s London campus

But Calderón-Martínez notes that oil prices were down early this week at around $80 a barrel.

And, Calderón-Martínez says, there are several differences between today and the 1970s — and even today and March 2022. 

First of all, the United States responded to the 1973 embargo with several measures to decrease reliance on foreign oil — everything from increased domestic production to fuel economy standards and the SPR.

The United States is also now the world’s top producer of oil. Moreover, the U.S. became a net exporter of oil, meaning that it exports more oil than it imports, in 2020.

“It also has a lot of resources, partners to buy oil from, and a lot of them will be in the Americas as well,” Calderón-Martínez says. 

As for the difference between now and March 2022…

“In Russia and Ukraine, it took out one of the world’s major producers of oil, pretty much took out the production line overnight, and that has a big, big impact,” Calderón-Martínez says. “I don’t think we’ll see something similar.”

Moreover, although the calendar may not have changed all that much in the grand scheme of things since March 2022, the economy has. 

“The (Russia-Ukraine war) had a big shock because we were coming from very different economic and monetary policies coming out of the pandemic, when it was low interest rates and spend, spend, spend, spend, spend,” Calderón-Martínez says. “Then the Russia-Ukraine war comes, and it’s no, no, no, no, no — handbrake on, and reverse course quite quickly. It was a big, big shift in the economy.”

With high interest rates and other anti-inflation measures currently in place, an increase in oil prices may be less painful, Calderón-Martínez says.

That’s not to say that some increase in price would be surprising, especially if the Israel-Hamas war expands to a regional conflict and continues for a long time.

“I think there’s an expectation (in the markets) that probably the price of oil will go up and the conflict will expand,” Calderón-Martínez says, predicting that prices may go to $100 per barrel. “But I think it’s also confident that we will manage the shock relatively well.”

Ultimately, however, there’s not a whole lot that the U.S. can do about a spike in oil prices. 

“The oil prices are the oil prices,” Calderón-Martínez says. “The U.S. can’t control it, nobody can control it, it is what it is. At the end of the day, if the oil prices are $150 a barrel, they’re going to sell it at $150, no matter who’s buying. BP, British Petroleum, doesn’t sell oil cheaper to Britain because it’s called BP.”

Cyrus Moulton is a Northeastern Global News reporter. Email him at c.moulton@northeastern.edu. Follow him on X/Twitter @MoultonCyrus.