On October 17, 1973, the Arab members of the Organization of the Petroleum Exporting Countries, or OPEC, voted in Kuwait City to begin tightening supplies. As John Chancellor reported that day on NBC Nightly News, it was the Arab nations’ response to U.S. support of Israel during the Yom Kippur War.
“They will reduce oil production by five percent a month until the Israelis withdraw from occupied territories. If the Arab countries keep that pledge, it would reduce their production by almost 50 percent in one year.”
When the embargo began, Joe Pratt was 25 years old — studying oil and energy as a PhD student at Johns Hopkins.
“As Americans, we had assumed by then that cheap gasoline was a birthright. It was just there. And most of us didn’t know where it came from, essentially.”
But the Cullen professor of History and Business at the University of Houston says Americans got a harsh lesson on the geopolitics of oil — as pump prices shot up, and lines formed around gas stations.
“When you were in those lines, which I was, what you felt is real anger and wanting to find a villain — big oil, OPEC, somebody.”
However, what was painful for the larger economies of the U.S. and Western Europe turned out to be not-all-that-bad for the local economy here in Houston.
NBC Nightly News coverage of OPEC’s decision to cut exports of oil to the United States along with other nations. Reported by John Chancellor of the evening of October, 17 1973.
“Because oil is suddenly worth, by December, two months after the embargo, oil is, on the world market, four times more expensive than it was before the embargo. And if you’re selling oil, that’s a good thing. Or, if you’re looking for it, and need money to look for it.”
Pratt says skyrocketing oil prices extended what had already been a healthy period of growth for Houston after World War II.
“I went away for part of the 70’s — the only time I lived away from the city — and when I came back, the city had been transformed. It was kind of like a hyper boom – and particularly in the late 70’s it was a second oil price shock when the Iranian hostage taken had occurred. There was a period there where it was almost oil euphoria in our region.”
But Pratt says the oil euphoria of the 70s gave way to a tremendous hangover by the mid 80s, when oil prices tanked. Pratt says the bust hurt Houston almost as much as The Great Depression.
“No one understood in ’73, before the embargo, that prices could return to what they’d been, historically, before World War II — just up and down, really sharply. Because we’d had 25 years of fairly predictable, constant prices. And oil companies, government officials, almost no one had ever lived in the boom-and-bust that comes with oil price spikes which suddenly, we were in, and we’re still in today.”
Pratt says the oil collapse of the 1980s taught Houston the danger of being known as just an energy capitol. And that lead the way to today’s economic diversity, in which healthcare, high tech, and trade are among the major drivers of the local economy.