Puzzling Out The First Oil Shock. History, Politics and the Macroeconomy in a Forty-Year Retrospective

Abstract

The paper aims to understand if the First Oil Shock has produced long-term effects to the international economic system and its fundamentals. Herein a historical perspective will be used as an interpretative tool in order to discern the causes of the events of 1973 and its long-term consequences on the world economy during the four decades following the First Oil Shock. The circumstances and the causes that led to the shock, the events during the conflict, and the changes in the structure of the energy market, play a key role for the analysis and will be investigated according to the historical specificity. In the end, a statistical analysis is developed in order to shed light on the oil price GDP growth conundrum, to discover that for economic growth, volatility matters more than the average price of oil.