The Oil Crisis and Its Impact on Global Financial Crises

ZodiacTrader
5 min readSep 23, 2024

The oil market plays a pivotal role in the global economy. Any significant fluctuation in oil prices, particularly during an oil crisis, can reverberate across industries and nations, leading to broader financial crises. This article delves into the mechanics of how oil crises can trigger global economic downturns, with solid numbers, historical examples, and detailed explanations of the causes and effects.

What is an Oil Crisis?

An oil crisis occurs when there is a significant disruption in the supply of oil, leading to a sharp increase in prices. These disruptions can stem from geopolitical conflicts, natural disasters, sanctions, or cartel-driven production cuts. Due to oil’s central role in powering industries, transportation, and generating energy, sudden price spikes can have far-reaching consequences.

Historical Oil Crises and Their Impact

  1. The 1973 Oil Embargo (First Oil Crisis)

In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) proclaimed an oil embargo in response to the U.S.’s support of Israel during…

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