History shows oil shocks are followed by recessions – will it be any different this time?
The 1973 oil shock led to a significant increase in oil prices, resulting in a recession in oil-importing countries. The wealth shift from Western countries to Arab oil-producing countries led to an influx of petrodollars, which were lent to governments and used to finance various projects, including the Rumble in the Jungle boxing match in Zaire.
The 1973 oil shock was triggered by an embargo on the US by OAPEC, in response to Western support for Israel. This led to a fourfold increase in global oil prices. The resulting wealth shift from Western countries to Arab oil-producing countries led to an influx of petrodollars. These petrodollars were lent to governments, which used them to finance various projects. In Zaire, President Mobutu Sese Seko used the funds to host the Rumble in the Jungle boxing match. The oil shock had a significant impact on the global economy, leading to recession in oil-importing countries. Inflation rose, output and trade collapsed, and world income slumped. The effects were felt globally, including in Ireland, where inflation jumped and growth fell.
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