The U.S. had operated an oil quota system since 1959 to protect domestic oil producers from cheap foreign oil. The quota system limited the amount of oil which could be imported into the U.S. to keep imports below 10-12% of total consumption. Obviously, this had the effect of keeping domestic prices above global levels, but the U.S. government purs

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Just over fifty years ago, on June 9th, 1974, U.S. Secretary of State Henry Kissinger and Saudi Prince Fahd bin Abdulaziz Al Saud concluded an inconspicuous agreement between the USA and Saudi Arabia, setting up the “Joint Commission on Economic Cooperation”.

The language in the contract was vague. The commission was supposed to foster closer politi

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In just one year, two key pillars of international cooperation and economic stability had collapsed: the global system of fixed exchange rates, and the reliable supply of oil at a fixed price. It created a huge vulnerability for the U.S., which was by far the largest economy in the world and the largest consumer of oil. Domestic production peaked i

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In 1973, the global system of fixed exchange rates, called the Bretton-Woods system, collapsed. The system had been launched in 1944 to prepare for rebuilding the world economy after the Second World War. At its core was a system of fixed exchange rates with the U.S. dollar as an anchor. The USD itself was tied to gold at a price of $35 per ounce o

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