How did the 1973 oil crisis affect america and other countries?

after the yom kippur war. arabs raised the price of oil to countries supporting israel by 70% how did this affect the usa and other countries? please help im really stuck on this topic. (:How did the 1973 oil crisis affect america and other countries?
To combat the higher prices of imported oil, the US govt set out to raise US domestic prices, or said differently, raise the level of inflation. It鈥檚 critical to understand this relationship of where the goods and sources of pricing originate. It鈥檚 an open economy. The price of oil is set by OPEC and imported into the US. There is nothing on the supply/demand side the US could do (in the short run) so they have to take the price. It would be different in a closed economy and absent a monopoly, where an increased price would lower demand and thus equilibrium forces would push the price back down.





So with limited options, the US govt used just about the only tool they had, that is the printing presses of the Treasury. They flooded the economy with money using fiscal policy and govt spending as the means to carry that money to the markets. They created enormous inflation which had the effect of lowering the relative price of oil. Think of it like this (these are made up numbers used to illustrate a point) - a barrel of oil cost $10 anywhere in the world. In the US, $1 buys a loaf of bread. So oil to bread is 10:1. Then the oil crisis hits and raises oil to $20 on the world market but in the US, a loaf of bread still cost $1. Oil to bread is now 20:1. So oil effectively doubled in price relative to all other goods. After a couple years of inflationary policy, the barrel of oil still cost $20 but now the loaf of bread cost $2. This essentially wiped out the price increase. The new oil to bread ratio is once again 10:1. Sure, the level was higher, but the ratio of bread to oil was back in line and so purchasing power was returned to pre-crisis levels.





But inflation is a dangerous tool. Look no further than Mexico or Argentina or Brazil or Russia or ... for their inflation problems. By most accounts, this inflation caused the 80-81 recession. Its not so much the level of inflation that is bad, but rather the expectation for the future level. Jimmy Carter, the president who oversaw this program was demonized by the Republican Party for excessive spending and became the poster child for out of control govt spending. The Republcian machine scared America into thinking that inflation would never end while Carter was in office because he would keep spending frivously. This allowed Ronald Reagan and the Republicans to sweep to power in the Reagan Revolution in the 1980 election. Once in power, and with the help of Paul Volker at the Fed, the govt switched from using fiscal policy to monetary policy, ie interest rates. This put the market at ease because it got everyone's expectation of inflation to a more rational level. Within a couple years, inflation was back in check and the biggest bull market since WWII was under way.How did the 1973 oil crisis affect america and other countries?
There were long lines and rationing at the filling station. It was one of the first times oil was used as a geopolitical weapon besides World War II. It also served notice that cheap gas may be a thing of the past.It altered the types of cars that could be sold in the United States. For example, 1976 Datsun (Japanese import) got 50 miles per gallon when Detroit was saying ';it wasn't possible. '; . Detroit had to regear, rethink, because the 208Z was sporty and the cars made by Japan were high quality. Saudi Arabia -a friend of the U.S. -mitigated this effect somewhat by holding the line on oil prices and producing more oil. Also, drilling in Alaska and the pipeline construction started not long afterward. That's sorta an outline. The pipeline was completed in 1977 and has pumped 15 Billion barrels.
It allowed the Japs with their smaller more economic engines to gain a foothold in the US and across the rest of the globe.





This then impacted upon local car manufacturing and ultimately lead to the collapse of that once great car city Detroit which is still in ruins today.





After this they decided never again, and as a result America now enters into any conflict it can where Oil is involved to effectively take over the control and supply of it. See Iraq, Afganistan(Pipelines from Middle East to China).





Although you will hear it said that they went in for stability and democracy, if that was true then when not sort out Isreal, Zimbabwa, and a whole host of other tin pot dictatorships?