How the world changed the last time there was a brutal rise in the price of oil (as some now hope)

The Petroleum. The raw material par excellence whose production, supply and demand moves the world. It is the most used energy source and is vital for all the countries of the world, although every time The renewable energies they are gaining more ground.

But today it is still the raw material par excellence, and changing their prices is key to the economies of the countries that depend on him, as is the case with ours. A sharp rise in oil prices could jeopardize the recovery in which we are immersed after the COVID crisis. And it is something that could happen.

Because in the last few months the price of crude has not stopped rising, along with the OPEC (the Organization of the Petroleum Exporting Countries, that is, the producers) cut production while the demand increased. While recently have agreed to increase production to take advantage of the favorable wave that has been generated again (demand is picking up again after months of declines) and the rise in prices, of course.

Therefore, we have an oil context of uncertainty that makes many come to mind what happened in 1973, a black year for the Spanish economy. That year the price of crude soared, putting the economy of our country in check.

1973, the year that changed everything

What happened in 1973 for the Spanish economy to suffer this setback? Well it all started because of a war, la del Yom Kippur -from August 6, 1973 to August 24-, when a coalition of Arab countries decided to attack Israel taking advantage of its holy holiday, something that went wrong because Israel had the military support of the United States to end the Arab forces.

But, the thing would not stop there. Because in response, the OPEC member states, including Iraq, Saudi Arabia and Iran, started another war, the oil, raising prices to such an extent that if at the end of 1973 it cost 3.39 dollars a barrel, in 1974 it already exceeded 11 dollars.

The problem is that this not only punished the United States, but the whole world. And among the most affected, Spain. Why? Because it was very dependent on oil. Your energy consumption depended 70% on crude. But this was not the only problem. Already at the end of the Franco regime the economy was very decimated because of the autarkic system that had closed us off from the world. Although an open-ended policy was being carried out since the 1960s, the economy was suffering from problems, such as inflation that financed speculative operations that gave a quick return but in the medium term were in deficit (bread for today and hunger for tomorrow).

In addition, there was significant unemployment because only the northwest area was enhanced (Madrid, Bilbao, Barcelona and Valencia) and only those urban centers developed, causing a large part of the population from other places to have to emigrate to other European countries to find a living.

When oil prices began to climb, the Franco government decided to assume them almost entirely and it only affected the citizen 20%, but stopping entering 35%. But although it did not have much impact on the Spanish, it did on the rest of Europe, decimating tourism, which was already a great source of growth and income at that time.

Thus, Spain continued to grow like a giant with feet of clay, as it accumulated a foreign debt of 4,000 million dollars, to which must be added those structural employment problems that we continue to drag on today. So when democracy began, what the new rulers found was not a buoyant economy, but a basic problem.

The solution: let the consumer pay

The economic crisis that erupted with the rise in the price of oil it was not contained in Spain until the 80s, when democracy could be established and the work of that first government to bear fruit.

In 1977 the Moncloa Pacts, which included a financial and fiscal reform of the Spanish economic system, with the aim of controlling inflation and the public deficit. Thus, when the price of crude rose again in the 1980s, the State did not assume it, but passed it on to the consumer, so that sustained growth could be achieved in the coming years without condemning the public treasury.

In any case, this crisis of the 73 sIt only makes it show the seams of the Spanish economic system. In 2008, more of the same happened with the financial crash, and that is that while Spain is an economy subject to the service sector without strong industrial production or an export industry with muscle, it will continue to be exposed to economic cycles and international decisions.

In addition, the financial and fiscal system also requires a profound reform, and pensions remain without a long-term solution. It only remains to hope that European funds are distributed and invested in such a way that the COVID crisis serves to boost our ailing economy.


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