This Day In Market History: OPEC Raises Oil Price To $7 Per Barrel

Each day, Benzinga will take a look back at a notable market-related moment that happened on this date.

What Happened? On Dec. 22, 1973, OPEC announced it would be unilaterally raising the price of crude oil from $5.12 per barrel to $7 per barrel.

Where Was The Market? The S&P 500 was trading at 93.54 and the Dow Jones Industrial Average was trading at 818.73.

What Else Was Going On In The World? In 1973, Secretariat won the Triple Crown and the Watergate hearings began. Americans were paying an average of $175 per month in rent.

Oil’s Big Jump: 1973 was a historic year in the history of the global oil market. The Organization of Arab Petroleum Exporting Countries issued an oil embargo on the U.S. starting in October 1973 to protect U.S. support of Israel during the Yom Kippur War. As a result, OPEC began hiking its posted price of oil. In October, OPEC raised its price by 70% to $5.11 per barrel. Oil ministers also began cutting production by 5% per month. In addition, OAPEC blocked all oil deliveries to the U.S., which it deemed to be a “hostile country.”

On Dec. 22, OPEC announced another price hike to $7 per barrel and said it would be raising prices further to $11.65 per barrel on Jan. 1, 1974. All together, the hikes represented a 128% increase in less than a three-month stretch.

As a result of the price increases, production cuts and embargo, the U.S. experience an “oil shock” in 1973 that would have a lasting impact on U.S. energy policy.