Oil crises: why the price jumped
After 1945 the world ran on cheap oil. Cars, ships, power plants and factories all used it. Most of the oil came from a few countries in West Asia.
In October 1973 a war broke out in West Asia. Some oil-producing countries cut supply and stopped selling to certain countries. Within months the oil price became about 4 times higher. This is the first oil crisis. In 1979 a change of government in Iran cut supply again and prices rose once more: the second oil crisis.
Effects: petrol queues, higher prices for everything, factories slowing down, and in many rich countries stagflation (prices rise but jobs do not). The long fast-growth years after the war came to an end.
How Japan answered the oil shock
Japan has almost no oil of its own, so it was hit hard. Its answer had three parts:
- Save energy: factories and cars were redesigned to use less fuel. Small, efficient cars became popular around the world.
- Change the kind of industry: from heavy, energy-hungry industries (steel, ships) to clean, high-skill ones (electronics, machines, robots).
- Sell more abroad: exports kept the economy growing.
Growth became slower than in the 1960s, but Japan recovered faster than many countries. Later, in the 1980s, a money boom (the bubble) grew and burst in the early 1990s, which began long years of slow growth.
Asian growth: the four "tigers" and others
From the 1960s, South Korea, Taiwan, Hong Kong and Singapore grew very fast. People call them the four Asian tigers. Their recipe was similar:
- Teach many people (schools and skills).
- Build factories that make goods for other countries (export-led growth).
- Save and invest a lot; government and business plan together.
Later Malaysia, Thailand, Indonesia and, after 1978, China followed with their own reforms. Japan helped with money, factories and technology. In 1997 an Asian financial crisis hurt several of these economies, but most recovered. The centre of world production moved toward Asia.
The end of the Cold War
The Cold War was a long rivalry between two blocs, one led by the USA and one by the USSR. Why did it end?
- The Soviet economy was too slow, and arms were very costly.
- People in Eastern Europe wanted freedom and better lives.
- New Soviet leader Gorbachev (from 1985) allowed openness and reform and did not use force to hold the bloc together.
Key dates: 1989 the Berlin Wall opened and communist governments fell across Eastern Europe. 1990 Germany became one country again. 1991 the USSR broke up into 15 states. The world was no longer split into two blocs.
Democratisation and what it meant for Japan
Democratisation means a country moves toward elected governments, free speech and rule by law. It spread in several waves: parts of Latin America in the 1980s, South Korea and Taiwan in the late 1980s and 1990s, and Eastern Europe after 1989. It was not smooth everywhere; some places slid back to strong-man rule.
For Japan, the end of the Cold War meant new tasks. The 1991 Gulf War made people ask what Japan should do for world peace. In 1992 a law let Japan send people to UN peacekeeping missions (without fighting). Markets also opened further, and trade with Asia grew.
Try it: oil price and energy saving
In the 3D, go to the last step. Move the oil slider from 1 to 4 and see the car cost rise. Now lower the energy-per-car slider. Can you get the cost back to where it was? That is exactly what Japan did. At home: look at your family's petrol or gas bill and write down one way to use less.
Key formulas and definitions
- Key dates: 1973 first oil crisis · 1979 second oil crisis · 1989 Berlin Wall opens · 1991 USSR ends
- Oil price in 1973-74: about 4 times higher
- Four Asian tigers: South Korea, Taiwan, Hong Kong, Singapore
- Export-led growth: make goods for other countries, earn money, invest again
- Democratisation: moving toward elected governments, free speech and rule by law
Worked examples
1. In 1972 oil costs 3 dollars a barrel. In 1974 it costs 12. By how many times did it rise?
12 / 3 = 4. The price became 4 times higher.
2. A car factory uses 2 units of energy per car. After redesign it uses 1 unit. By what percent is the energy use cut?
The cut is 2 - 1 = 1 unit out of 2. 1 / 2 = 50 percent.
3. Give two reasons the Cold War ended.
One: the Soviet economy was too weak to keep up the arms race. Two: people in Eastern Europe asked for freedom and Gorbachev did not use force to stop them.
Common mistakes
- Saying the oil crisis happened because oil ran out. It happened because supply was cut and prices jumped.
- Thinking all Asian economies grew the same way. The tigers sold goods abroad; each country had its own mix of policies.
- Saying the Cold War ended with a big war. It ended mostly without fighting, through reform and protest.
- Mixing dates: the Berlin Wall opened in 1989 but the USSR broke up in 1991.