On this day in economic and financial history...
OPEC flexed its muscles on Oct. 17, 1973 by initiating the first stages of a devastating oil embargo on the United States. In response to American support for Israel in the Yom Kippur War, 10 Arab nations' oil ministers pledged to reduce oil production by 5% per month until Israel withdrew from territory it had claimed in the Six-Day War of 1967. The cutbacks were aimed exclusively at the United States, which The Washington Post claimed would "not be greatly hurt by an embargo, since Arab oil represents only 1.1 million barrels of crude oil a day out of America's total daily consumption of 17 million barrels a day of all petroleum products."
America did not suddenly flip into a severe oil crisis. Rationing and closed gas stations had been a fact of life since the spring of 1973. However, the sudden tightening of oil supplies was too much for a fragile American economy to handle, and it quickly tipped into recession. By November of 1973, OPEC production cutbacks had taken nearly 8% of expected global oil supplies off the market, and global oil prices had quadrupled by the start of the following year.
The Dow Jones Industrial Average (^DJI 0.69%), already in a modest bear market, took a turn for the worse that would shave another 35% off its value by the time it bottomed out in December of 1974. American oil producers were hardly immune, either. Dow component ExxonMobil (XOM 0.39%), which had only changed its name to Exxon the year before, lost virtually the same percentage of its market value as the index did from the start of the embargo to the end of the bear market.
The embargo had one positive effect, however -- it put the United States on the path to smarter oil consumption. Nearly four decades later, the country uses just under two million more barrels of oil each day despite adding 100 million to its population. In 1973, each citizen used 3.4 gallons of oil per day. In 2012, daily oil use per citizen has dropped to 2.5 gallons.
A bank for all of America
Bank of America (BAC 1.70%) was founded on Oct. 17, 1904, in a converted saloon in San Francisco. It was then known as the Bank of Italy, and would not become Bank of America until after a 1928 merger with the Bank of America, Los Angeles.
Bank of America has long been a leader in banking innovation. Its founder, Amadeo Giannini, was one of the earliest bankers to welcome middle-class depositors, and he also established one of the earliest multistate banking operations, despite antitrust efforts that would prevent the formation of a true interstate bank until long after his death. Giannini also helped finance Disney's production of Snow White and Hewlett-Packard's establishment in Silicon Valley.
After Giannini's death, Bank of America continued to operate on the cutting edge. It developed the modern credit card in 1958, and finally managed to grow beyond California without regulatory blockage in 1983. Today, Bank of America is the second-largest bank by total assets in the United States.
Steel yourself
Inventor Henry Bessemer set in motion the construction of much of the modern world with a single patent filed in Britain on Oct. 17, 1855. It was the world's first formal introduction to the Bessemer steelmaking process, which quickly made inexpensive mass production possible around the world. By 1865, the combined steel production of major European powers reached 127,000 tons. In 1869 alone, 110,000 tons of steel rails were laid in the United States. By the turn of the century, American steelmakers could churn out 10 million tons of steel each year.
Inexpensive steel also built some of the world's most powerful corporations at the turn of the century, most notably U.S. Steel (X -2.32%), which became the world's first billion-dollar company when it was created through the merger of Carnegie Steel and National Steel in 1901. U.S. Steel controlled two-thirds of the American steelmaking market when it was formed and was later termed "the most socially damaging of all mergers in U.S. history." At its peak in 1953, U.S. Steel produced nearly 36 million tons of steel on its own.
Ruling the air
The American radio industry got a big boost from the American government during World War I, when it seized radio-related patents and enforced a military monopoly on radio equipment production and use in 1917. The government's radio monopoly was short-lived, but after the war, its assets went into a new private-enterprise monopoly known as the Radio Corporation of America, or RCA, which General Electric (GE 8.28%) created on Oct. 17, 1919.
RCA played an integral role in promoting American radio use, but its greatest contribution to American life may be its work in developing and popularizing television. By 1930, GE had divested itself of RCA in response to an antitrust suit, and after a multiyear and multimillion-dollar research effort, RCA debuted an electronic TV at the 1939 World's Fair. It quickly became a TV market leader, and also had a substantial interest in television programming through its NBC subsidiary, and through ABC, which was spun off from RCA following another federal antitrust suit.
Many years later, GE reacquired its onetime subsidiary, but little of its original operations remain beyond the NBC network. It still competes with ABC, which became a part of Disney's entertainment empire in 1996.
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