This article was published in October 2021. It reviews the experiences of several energy crises since World War II and summarizes the responses of relevant countries to the energy crisis. It can highlight its reference significance today.

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The recent escalation of the conflict between Russia and Ukraine has led to an increase in global risk aversion. Crude oil, as the "mother of bulk" and an important strategic reserve, has always attracted much attention, and the market is concerned about the supply of crude oil. Shortage fears are at a fever pitch. This article was published in October 2021. It reviews the experiences of several energy crises since and during World War II, and summarizes the responses of relevant countries to the energy crisis. It can highlight its reference significance today.

We have sorted out four energy crises in history. In the early stage, the energy crisis was mainly dominated by crude oil. However, starting from 2019, due to the lighter production raw materials of petrochemical companies, the energy crisis of natural gas also began.

• In the 1973 Arab oil embargo war, crude oil prices rose by 300%,

• In the 1979 Iran-Iraq War, crude oil prices rose by 400%,

• In the 1990 Persian Gulf War, crude oil prices rose by 250%,

• In 2004, with the rise of emerging economies, crude oil prices rose 70%.

• Natural gas and electricity crisis in 2021, natural gas rose 420%

The path of transmission of previous energy crises: rising raw material costs triggered an increase in corporate bankruptcies, increased unemployment, GDP declined, and reduced demand triggered a drop in raw material costs, and the stock market fell before commodities.

The first energy crisis: 1973

Before 1973, the price of crude oil was set by buyers, mainly the seven major Western oil companies. Of course, sellers of crude oil pricing power have now begun to dominate.

Before 1970, the average price of crude oil was less than 2 US dollars, and it only rose to 3 US dollars a barrel in 1973. During this period, OPEC continued to work hard. Of course, the Western oil refining groups were very dissatisfied because, crude oil The increase represents an increase in costs.

In October 1973, the Fourth Middle East War broke out. Arab countries demanded that Western countries that supported Israel change their patronage attitude towards Israel and decided to use oil weapons to teach Western powers a lesson.

On October 6, 1973, Arabs took advantage of the " Yom Kippur " opportunity to launch an attack on Israel and regain the lost territory. In the early days of the war, the Arabs were victorious, but the situation reversed a week later, and Israel began a large-scale counterattack, leaving Egypt at a disadvantage.

Because the war broke out on the Day of Atonement, almost all Israelis could hear the news of the war at home. Israel's national radio issued an order to the people across the country: "All active and reserve personnel report to the army immediately." Within 24 hours, 220,000 Israelis were armed and ready to go to the front line.

At this time, Arab oil-producing countries are negotiating with foreign oil companies to increase crude oil prices. On October 14, 1973, the negotiations broke down. On October 16, 1973, representatives of the five Arab oil-producing countries in the Gulf plus Iran met in Kuwait and decided to unilaterally increase the price of a barrel of crude oil by 70%, reaching $5.11. The "Seven Sisters" who have long controlled the world market are helpless, and the decision-making power of oil prices has been transferred to the hands of OPEC .

On October 17, 1973, the oil ministers of the Arab oil-producing countries met to discuss how to support Egypt with practical actions, attack the United States and other Western countries that support Israel, and force them to side with the Arabs politically. It was decided to immediately and gradually reduce production and exports, and reduce oil supplies to the United States and the European Union.

The method used by Arab oil-producing countries to increase oil prices is still the same as it was 40 years ago, which is to reduce production. In 2021, we see that OPEC+ still controls the price of crude oil through production reduction and increase.

Let’s first look at the struggle process between Arab countries and the United States and other Western countries:

• In September 1973, the daily production level and supply of crude oil decreased by 5% per month.

• In October 1973, it announced $2.2 billion in military aid to Israel.

• In early October 1973, Libya announced an oil embargo to the United States that day.

• At the end of October 1973, oil-producing countries acted in concert to embargo oil from the United States and the European Union.

• In December 1973, OPEC raised the price of oil to $11.65 per barrel.

• In November 1973, the European Community expressed its support for the Arabs on Middle East issues .

• In November 1973, Japan supported the Arabs, and the United States and the Netherlands were isolated..

The global crude oil supply market has reduced oil supply by 5 million barrels per day. Western Europe and Japan import more than 80% of their oil, and the source of imports mainly relies on the Middle East . The impact has been far greater than that of the United States. However, U.S. oil production has been declining and it is unable to increase production. As a result, oil prices have skyrocketed, and many cars have long queues at gas stations.

History will always repeat itself. The United States still insisted on supporting Israel in 1973 and had a tough attitude at its own peril, even at the risk of triggering a domestic economic crisis. Today, 40 years later, Americans are fighting a trade war again, oil prices are skyrocketing, and there are once again long lines at home to refuel.

Economic Crisis: 1973-1975

During 1973, most of the oil used by capitalist countries, especially Western Europe and Japan, came from the Middle East, and a large part of the oil used by the United States also came from the Middle East. The oil price increase and embargo immediately caused chaos in the economies of Western countries, increased the international balance of payments deficit of Western powers, and ultimately triggered the largest economic crisis in the postwar capitalist world from 1973 to 1975.

The main characteristics of this economic crisis are:

A: From November 1973 to September 1974, industrial production in the entire capitalist world dropped by 8.1%;

B: Corporate bankruptcies were serious, the Dow Jones fell by 50%, and the number of unemployed people reached 7.8 million. ;

C: The British stock price index fell by an even greater 72%,

D: Fixed capital investment decreased, of which housing construction investment fell by 32.5%;

E: The total physical exports and imports of developed capitalist countries decreased by 7.2% and 11.6% respectively.

Prices generally continue to rise, international trade situation has worsened, many countries have experienced huge balance of payments deficits, currency crises have further deepened, and economic crises have seriously damaged social productivity. Each crisis has set back production by years or even decades. , the crisis caused huge damage to social wealth. In the United States, the crisis lasted from December 1973 to May 1975:

1. The crisis lasted about 20 months and lasted for a long time.

2. GNP fell by 5.7% and industrial production fell by 15%.

3. Fixed capital Investment decreased by 23% in total, and enterprise equipment investment dropped by 48%.

4, the unemployment rate was as high as 9.1%, and the number of unemployed people reached 8.25 million.

5, Inflation was serious. In 1974, the US CPI rose by 11.4%, and in 1975 it rose by 11%.

It can be seen that in the crisis stage, holding commodities is better than holding stocks, because the main pressure for corporate bankruptcy comes from the rising costs caused by the surge in commodities. At the same time, crises are not something that capitalist countries can solve through regulation and are an inevitable result of economic laws.

Karl Marx wrote in " Capital": Market economy cannot eliminate the root causes of economic crises, so economic crises break out periodically. This cyclical nature of economic crises makes capitalist reproduction also exhibit cyclicality.

In the first oil crisis , the United States interfered in the internal affairs of Middle Eastern countries and supported Israel, which was the direct trigger of the crude oil outage. The United States will also play an important role again in the second oil crisis .

The second energy crisis: 1979

At the end of 1978, a huge anti-American wave started in Iran, which finally overthrew the pro-American Pahlavi dynasty. Iran's oil production has dropped significantly due to political unrest. Under the slogan "Death to America", the new Iranian regime attacked the U.S. Embassy , imprisoned embassy personnel, and banned all U.S. military bases in Iran.

Almost all American businessmen engaged in oil exploration and oil trading in Iran have been deported. American oil companies then passed on the losses they suffered in Iran to the American people. Just like the first oil crisis, U.S. oil companies repeated their old tricks. They first used the media to exaggerate the harm of Iran's oil production cuts to the United States, and then deliberately reduced the supply of oil in the U.S. market, artificially creating an oil shortage, and then Oil companies are frantically raising prices in accordance with the agreed prices.

The price of U.S. crude oil soared from $13 per barrel at the end of 1978 to $39.5 in April 1980, triggering the second oil crisis. This time the price increase of crude oil was uniformly raised by U.S. oil companies.

In the second energy crisis in 1979, the price of crude oil rose from around US$15 per barrel to a maximum of US$39 in February 1981. From the end of 1978 to the beginning of March 1979, Iran stopped exporting oil for 60 days, leaving the oil market with a daily shortage of US$500. million barrels, accounting for approximately 1/10 of the world's total consumption.

On September 20, 1980, the Iraqi Air Force bombed Iran, and the Iran-Iraq war broke out. The oil production of the two countries was completely stopped, and the world's oil production was completely affected. Production dropped sharply. There was a gap of 5.6 million barrels per day in the global market, breaking the fragile relationship between supply and demand in the global crude oil market at that time. Balanced supply has become tight again, causing oil prices to rise again.

Economic Crisis: 1980-1981

The war between Iran and Iraq in 1979 still triggered an economic crisis. Western countries were hit. Taking the United States as an example, the GDP growth rate dropped from 5.6% in 1978 to 3.2% in 1980, until 0.2% in 1981. % negative growth.

After 1980, the economies of various countries entered the stagflation stage, with economic recovery and weak growth, but unemployment and inflation rates remained high. In July 1979, the crisis first broke out in the United Kingdom. Canada's industrial production declined in October of the same year. The United States fell into crisis in February 1980. Other countries that experienced crises in 1980 included Belgium, , Japan, the Federal Republic of Germany, the Netherlands, and France. , Italy, Ireland .

In the United States, the industrial production index shows a W-shaped curve of decline-recovery-decline. In 1981, after Reagan became the President of the United States, he advocated tax cuts, reducing inflation, lowering interest rates, expanding military spending, increasing government deficits and national debt, eliminate loopholes in tax rules, and continue to deregulate business activities so that free market mechanisms can automatically correct the problems they face. The U.S. economy began a vigorous recovery in 1983. This wave of economic growth lasted for several years and continued until the end of Reagan's term, making it the longest economic expansion in U.S. history.

Britain reached its lowest point in May 1981. The crisis in Germany is worse. Due to the continuous appreciation of Mark , wage costs increased rapidly. From March 1980 to December 1982, the crisis in Germany lasted for 34 months. Japan was the least affected by the crisis and the crisis lasted the shortest. There was no production decline for six consecutive months, and the decline in production was very small. After the end of this round of world economic crisis, Japan's energy-saving home appliances and automobiles have flooded into countries around the world, and the international trade surplus has increased significantly. Since 1985, Japan has become the world's largest creditor nation.

Japan’s rapid rise after 1980 was mainly due to the fact that Japan’s industrial structure was manufacturing. The later rise of Germany also relied on precision manufacturing and processing industries. This route is of great reference significance. Our country also proposed to develop industry in 2020.

If we look at the growth of electricity consumption in the industry, the high-tech and equipment manufacturing industry consumes 588.1 billion kilowatt-hours of electricity, a year-on-year increase of 21.7%, and the consumer goods manufacturing industry consumes 366.9 billion kilowatt-hours of electricity, a year-on-year increase of 18.3%. The total of these two industries is More than 900 billion kilowatt hours, close to one-third of industrial electricity consumption.

High-tech and equipment manufacturing industries include: pharmaceutical manufacturing, metal products industry, general equipment manufacturing , special equipment manufacturing, automobile manufacturing, railway/ship/aerospace and other transportation equipment manufacturing, electrical machinery and equipment There are 9 industries including manufacturing, computer/communications and other electronic equipment manufacturing, and instrumentation manufacturing.

That is to say, from the perspective of the flow of electricity in our country, the strategy of a manufacturing power has begun to be implemented. However, in the fact that the country’s top leaders are controlled by foreign countries through chips in 2020, they see that the approach of Germany’s manufacturing power may be more suitable for China. national conditions. At the beginning of 2021, securities market funds also began to buy manufacturing and sell consumer assets. This change in thinking is confirmed by the power generation indicators.

Why Japan was able to rise in 1980? In addition to vigorously developing manufacturing, it also transformed its energy structure.

Japan learned from the experience of the first oil crisis, carried out large-scale industrial adjustments, increased the use of energy-saving equipment, increased nuclear power generation, and maintained a growth rate of 3.35% during the second oil crisis. It replaced the United States in one fell swoop. The world's largest creditor nation.

Japan rapidly realized the transformation of its energy structure in the 1960s. Simply put, the energy used shifted from "coal as the main source of oil" to "oil as the main source of coal as the slave." In 1973, oil accounted for 77% of Japan's primary energy. . Japan's rapid economic growth is highly dependent on energy input, and it is also highly dependent on imported oil.

After the oil crisis , Japan entered the energy structure adjustment of "de-oil", increased the import of natural gas, developed nuclear energy, increased the use of traditional energy - coal, and developed new energy. After years of hard work, Japan has replaced oil with natural gas, nuclear energy and part of coal to a certain extent, reducing its dependence on oil. Japan's oil dependence on primary energy fell to 54% in 1990, 48% in 2000, and 44% in 2008. Japan's "oil substitution" efforts have achieved great results.

Is this scene very similar? At the same time as the energy crisis occurred, my country began to vigorously develop the photovoltaic industry and undergo economic transformation in 2020. The prices of related soda ash and glass have risen rapidly. The transformation of the energy structure is a very important measure in the future.

It seems that there are experts in the court.

The third energy crisis: the 1990 Persian Gulf War

According to the rules of the first energy crisis and the second energy crisis, both are inseparable from the conspiracy of the United States. The same is true for the third energy crisis. The factors that triggered the energy crisis The direct trigger was the U.S. war against Middle Eastern countries.

Saddam was a generational hero. Although during his rule, he led Iraq on the road to prosperity and became one of the top military powers in the Middle East. After the Iran-Iraq War, Saddam defeated his opponent Iran with his strong military strength. At the same time, self-confidence rapidly expanded. In order not to repay the debt owed, it decided to attack Kuwait and launch another war. This fundamentally violated the interests of the United States. Therefore, in order to remove stumbling blocks on the road to hegemony, in January 1991 The order to bomb Baghdad also represented the outbreak of the Gulf War.

The third oil crisis . The crisis originated from Iraq's occupation of Kuwait. Iraq suffered international economic sanctions, which interrupted Iraq's supply of crude oil to the world. International oil prices rose from US$16.5 in July 1990 to a peak of US$40.1 in October. Although the International Energy Agency released emergency oil reserves and countries such as , Saudi Arabia, and increased production to stabilize the market, the growth rate of world GDP still fell below 2% in 1991.

In fact, the United States had already experienced a serious economic crisis in 1987. In order to divert domestic political pressure, waging war abroad has always been the political method of the United States.

On October 19, 1987, the US Dow Jones Index fell sharply, falling 508.32 points in one day, a drop of 22.6%. The number and magnitude of the drop were the highest ever recorded before. The stock market crash had a relatively large impact on the U.S. economy. The growth rate of the entire U.S. gross domestic product reached its highest point in the fourth quarter of 1987, close to 7%. It dropped to 1.7% in the second quarter, nearly zero in the fourth quarter, and turned into negative growth in 1990.

After the " Black Monday " in the United States on October 17, 1987, Japan's Tokyo Nikkei 225 stock price index fell 620 points on the 19th, and then fell another 3,800 points on the 20th, with a cumulative decline of more than 15%. However, Japan The stock market quickly recovered and led to a rebound in global stock markets. By December 1989, the Nikkei Stock Average, which opened for the last time on the Tokyo Stock Exchange, was as high as 38,915 points.

But this is only the final feast. In fact, the country that has been most affected by this economic crisis and has lasted the longest is Japan, so people also call it the Japanese economic crisis.In 1990, Japan's real estate bubble burst, and its annual real GDP growth rate dropped sharply, from 2.5% in 1991 to less than 1% in 1992 and 0.4% in 1993. There was a significant rebound in 1995 and 1996, reaching 2.5% and 2.5% respectively. 3.4%, but dropped to 0.2% in 1997, experienced negative growth in 1998, and in subsequent years has been hovering between slight growth and negative growth, unable to extricate itself. The entire 1990s in Japan was called the "lost decade of and ".

In fact, after 1990, the world entered an economic crisis mode, and many economic crises occurred in the world. In addition to the Japanese real estate bubble in 1990, the Mexican financial crisis in 1994-1995, and the Southeast Asian financial crisis in 1997, etc.

We have seen economic crises caused by previous energy crises, usually due to rising costs, falling profits, corporate bankruptcy, rising unemployment, and declining GDP. However, the price of commodities does not necessarily fall immediately. Instead, the prices of crude oil and other commodities begin to fall after the total demand falls.

Stocks are a leading indicator of the economic crisis. For example, during the National Day holiday in 2021, the prices of natural gas and crude oil in the United States continued to surge, but the stock markets of the United States, Germany and Japan fell instead. This pattern is the same pattern shown in the previous two economic crises.

The Fourth Energy Crisis: Oil surged in 2004

2004 was a period of great economic development in China. There is a saying circulating in the international commodity trading market, "Whatever China needs, the national trading market will rise."

The demand for commodities in the Chinese market has almost become a barometer of the international commodity futures market, and price changes in the international futures market have never affected China's nerves so much, because as a major consumer of commodities in the world, our country may become a part of this price increase trend. the biggest victim.

At the end of 2003, our domestic Company A continuously short-sold 2 million barrels of oil options in the international market, and suffered huge losses as a result. As of March 2004, this loss had reached 5.8 million U.S. dollars. Of course, this 5.8 million yuan book float Loss is nothing to Company A, which has annual sales of US$7.6 billion. The leaders of

A were discussing cooperation with ExxonMobil. However, after learning about the losing transaction, they immediately sent an email to the company, asking the two traders to cut their positions and out. However, what these two foreign traders were trading was not ordinary futures, but a " selling call option " (naked short option). This option has fixed income, no cost, can avoid supervision, and can be sold before delivery. It does not need to be shown in the financial report. This option has low returns but very high risks.

A company leaders do not understand this complex product, but the company's risk management committee J.Aron of Goldman Sachs and two foreign traders said that this kind of option cannot be simply liquidated, and the wisest way is to "move the market" ".

The so-called "moving trade" refers to closing a loss-making near-term contract in options trading, and then paying for the cost of closing the previous position by selling longer-term, higher-priced, and larger-volume options. But this is a double-edged sword. If the trend reverses, the previous losses can be completely offset, and if the trend continues, the risk will increase exponentially.

In June 2004, Company A's accumulated floating losses on this oil options transaction reached US$35.8 million. But even with such a serious loss, Goldman Sachs' J.Aron risk management team still recommended moving transactions and believed that the losses could be recovered in 2005.

International oil prices continued to rise, and losses gradually expanded. Unknowingly, in September 2004, oil prices continued to soar, and Company A could no longer afford the deposit.

This is a microcosm of the rise in crude oil in 2004. It illustrates the fact that financial products that are too complex should not be touched, and at the same time, do not trust these foreign investment banks. They may be the biggest rivals behind them.

In 2004, the direct cost of rising crude oil prices to China was US$13.6 billion, of which US$7.5 billion was spent on crude oil imports and US$6.1 billion was spent on petrochemical products. This figure was 0.9% of last year's total GDP.

The impact of oil prices on residents' daily lives has been clearly shown: car owners will feel their wallets are tight because the price of car oil has nearly doubled compared to 2002. Previously, the National Development and Reform Commission and the Civil Aviation Administration of China also approved the request of civil aviation companies to resume charging fuel surcharge on domestic routes, and the fuel surcharge will be levied from August 1.

In the petrochemical industry, the profits of the crude oil mining industry have increased significantly, while oil refining and petroleum processing companies have suffered significant losses due to the price of being inverted against . In the petrochemical industry that uses crude oil as raw materials, products have also soared with oil prices, and the prices of individual products have increased. The increase even exceeded the increase of oil, which made up for the loss of high costs and entered a prosperous period.

Compared with 2002, oil prices rose from US$24.93/barrel to US$42.68/barrel in 2004, an increase of more than 70%. During this period, the world economy, especially the economies of China, India, Russia and other countries, experienced overall growth. The world economy grew strongly by 5.1% in 2004. The overall economic growth caused an increase in oil demand, and the contradiction between supply and demand intensified, leading to an increase in oil prices.

Throughout 2004, the OPEC basket oil price averaged US$36.05 per barrel, which was US$7.95 higher than the average price in 2003, and rose to nearly US$47 per barrel in late October. During this period, although the situation in Iraq, strikes in Venezuela and Nigeria , and the decline in spare production capacity in oil-producing countries all had an impact on the rise in oil prices, the main reason was that the oil supply had changed from overall oversupply in the past 10 years to undersupply. transformation.

The fifth energy crisis: natural gas

In late June 2021, the northwest region of the United States suffered the most severe heat wave in history. Thousands of people have sought emergency medical treatment due to physical discomfort caused by high temperatures.

Major cities in the northwest United States have set high temperature records. According to the US "Capitol Hill" report on June 30, local time, the Portland area has set a record for the highest temperature in history for three consecutive days. The temperature on the 30th reached about 46.7℃, and the highest temperature in the Seattle area reached about 46.7℃ on the 30th. 42.2℃, Washington State The highest temperature in at least two other areas that day was about 47.8℃.

The price of natural gas has historically fluctuated greatly, but due to relative excess capacity, it has not triggered a large-scale crisis. However, since 2019, the United States, the Middle East and our country have increased their chemical industries using natural gas as raw materials, and demand has increased significantly. Gas prices around the world are rising at the same time.

The price of natural gas began to rise in July 2020. The price of natural gas in the United States rose from 1.51 to 6.39, an increase of 423%.

According to the rule that all previous energy crises are related to the United States, this energy crisis is still caused by the United States. In 2020, the United States experienced historically hot weather, and 40% of the power generation raw materials in the United States come from natural gas, which directly led to industrial use. There is a shortage of natural gas, and even some industrial gas needs to make up for the natural gas gap.

LPG separated from natural gas is an important chemical raw material. The United States is the world's largest producer. China's LPG only accounts for 1/12 of the world, and 35% needs to be imported from the Middle East and the United States.

The United States, the United Kingdom, and Germany all use natural gas as one of the main raw materials for power generation. However, the United States controls the world's natural gas resources. Therefore, power outages caused by hot weather in the United States will inevitably reduce the amount of natural gas sales to other countries.

As the world's largest LPG exporter, the United States' energy shortage will trigger global gas tension. Some LPG products are entirely derived from natural gas.

The natural gas shortage has not only caused a surge in a large number of downstream chemicals, such as methanol , LPG, PP, and electricity has also risen sharply. The production costs of enterprises have risen again. At the same time, a large number of chemical plants in Europe and the United States have stopped production due to lack of natural gas.

The price of electricity in the UK has increased seven times in a year. The price of electricity in the UK in September this year has increased seven times compared with the same period last year. The price of electricity has increased sevenfold in a year. Li Ka-shing's family controls 25% of the British electricity market. I have to admire Superman's vision.

We don’t know how long this energy crisis will last. The National Weather Service issued a La Niña warning during the National Day holiday. This year’s winter may be relatively long.

Judging from the previous energy crises, capitalist countries have all fallen into economic crises after energy crises. I don’t know if they will be spared this time. However, foreign stock markets have indeed weakened in advance. This is stagflation . A well-known cycle research expert once said: stagflation is the echo of depression.

In the United States, judging from the August data released this time, the core personal consumption expenditures price index, excluding food and energy costs, rose 0.3% this month and 3.6% year-on-year. That's the highest level since May 1991 and reflects inflation pressures that Fed Chairman Jerome Powell said earlier this week were "disheartening" and that U.S. inflation is at a 30-year high.

In the previous energy crises, Japan and Germany became powerful countries by vigorously developing manufacturing. At the same time, Japan quickly adjusted its energy structure and reduced its dependence on crude oil during the second energy crisis. It is also worth learning from, and our country is also following the same path. Adjusting the energy structure and vigorously developing manufacturing are also ways to strengthen the country.

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