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[casi] A note on oil embargoes

Hello, all. In light of all the speculation about a possible oil embargo on
the United States by Iraq (which will certainly not be supported by anyone
else, with the extremely unlikely possible exception of Iran), I thought a
historical note about the effect of such embargoes.

Many people, when considering 1973, confuse two separate actions. One was a
quadrupling of the price of oil by OPEC, which non-OPEC members went along
with. The other was a specific embargo targeted at the United States and
the Netherlands for their support of Israel. Although Saudi Arabia
participated in this embargo, Iran did not. In any case, the effects of the
embargo itself were negligible, although the effect of the price hike was
great. The reason for this is the obvious fact that oil is fungible. The
United States went to other sources, did third-party deals with European
countries, and suffered no more than any other country, and less than many,
since the US is itself an oil producer.

Even if all of OPEC cut off the United States, the effect on oil prices for
American companies would be very slight. Prices at the pump might rise, but
that would just be because of domestic oil companies taking advantage of
the situation. And, of course, what is being tentatively discussed is a
symbolic one-month embargo, which most OPEC spokespeople have strongly opposed.

In solidarity,

Rahul Mahajan

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