Yom Kippur War, Oil Embargo & Inflation

The Yom Kippur War was an armed conflict fought from October 6 to 25, 1973 between Israel and a coalition of Arab states led by Egypt and Syria. The majority of combat between the two sides took place in the Sinai Peninsula and the Golan Heights—both of which were occupied by Israel in 1967—with some fighting in African Egypt and northern Israel. Egypt’s initial objective in the war was to seize a foothold on the eastern bank of the Suez Canal and subsequently leverage these gains to negotiate the return of the rest of the Israeli-occupied Sinai Peninsula. By the time of the ceasefire, Israel had moved down from the Golan Heights into Syria and across the Suez into African Egypt. Egypt held a couple of strips of land on the Sinai Peninsula. All were relatively small land masses. (See map.)

The net result of the war was another victory for Israel, however this time the Arabs manage to make initial gains and Israel’s dominance was less pronounced than the previous 3 wars. This led to some serious soul searching and a willingness in 1978 to sit down with Egypt and hammer out a more lasting peace agreement at the Camp David Accords which was Jimmy Carter’s greatest foreign policy success.

“The Accords resulted in the Egypt–Israel peace treaty, the first ever between Israel and an Arab state. According to George Friedman, the war gave the Israelis increased respect for the Egyptian military and decreased their confidence in their own, and caused the Israelis to be uncertain whether they could defeat Egypt in the event of another war. At the same time, the Egyptians recognized that despite their improvements, they were defeated in the end, and became doubtful that they could ever defeat Israel militarily. Therefore, a negotiated settlement made sense to both sides. Many in the Arab world were outraged at Egypt’s peace with Israel. Sadat, in particular, became deeply unpopular both in the Arab world and in his own country. Egypt was suspended from the Arab League until 1989. Until then, Egypt had been ‘at the helm of the Arab world’.”

The second effect of the war was the Arab Oil Embargo In response to U.S. support of Israel, the Arab members of OPEC, led by King Faisal of Saudi Arabia, decided to reduce oil production by 5% per month on October 17. On October 19, President Nixon authorized a major allocation of arms supplies and $2.2 billion in appropriations for Israel. In response, Saudi Arabia declared an embargo against the United States, later joined by other oil exporters and extended against [Canada, UK, Japan and] the Netherlands and other states, causing the 1973 energy crisis.^[*] As a result, the per barrel cost of oil doubled, almost overnight, in the summer of 1974, there were long lines at fuel stations upwards of three hours. Fuel was rationed, on odd days of the month cars with license plates ending in odd numbers could purchase fuel and vice-versa on even days. A nationwide conservation effort was begun, including a federal law reducing the maximum speed limit to 55 MPH on interstate highways, most state followed suit and set 55 MPH on all state roads as well. (I truly hated driving 55 MPH.)

The embargo immediately impacted the American economy and it sank into a recession.