Event: 1973-74 oil crisis
Location: Rotterdam, Netherlands
Economic cost: The Netherlands GDP growth rate slowed from 5.4% in 1973 to 3.5% in 1974 and 0% in 1975.
Description: In response to the outbreak of the Yom Kippur War, Arab members of the Organisation of Petroleum Exporting Countries raised the price of crude oil by 70% and placed an embargo on exports to countries allied with Israel, including the Netherlands. By January 1974 world oil prices were four times higher than they had been three months earlier.
Damage: The embargo hit Rotterdam hard as it was host to one of the larger spot oil markets. Following the embargo its daily trading dropped by almost one third. Trade in the city’s port also declined, from 313 million tonnes in 1973 to 263 million tonnes in 1974. This drop in trade compromised the port’s development, affecting employment and economic prosperity in the city.
Insight: Historically, instances of oil price volatility have had a knock-on effect on the cost of other commodities and food prices. Such shocks can lead to social unrest, with many experts making the link between the 2011 food price spikes and the Arab Spring – the political turmoil that took place in many countries across North Africa and the Middle East, and which also caused significant supply chain disruption.
Insurance solutions: The Lloyd's market offers cover in relation to Oil price shock. Examples of this include but are not limited to: Trade credit insurance, contract frustration, financial guarantee, other political risk insurance products, surety bonds, construction delay-in-start-up insurance, contingent business interruption, property re/insurance (including strikes, riots and civil commotion wording), marine and energy covers and political violence (coverage for rebellion, revolution, insurrection, civil war and war).
Image: A driver in Boston, Massachusetts, US, pushes his car to a petrol station during the oil crisis in 1973 (Getty Images)
Sources: Macrotrends; R. Loyen et al. (eds.): Struggling for Leadership: Antwerp-Rotterdam Port Competition between 1870-2000 (2003); World Bank
