Chapter 33 is entitled 'The Second Shock: The Great Panic".
A newspaper article, possibly by the Shah's employees, harshly criticized the Shah's opponent, the Ayatollah Khomeini.
DISILLUSION AND OPPOSITION
The petrodollars flowing into Iran produced challenges the government failed to meet, resulting in economic chaos, overly rapid urbanization, electric grid failures, high rent prices, and problems with inflation. The over-fast modernization angered Iranians and drove them into the arms of Islamic traditionalists. The Ayatollah Khomeini, fiercely angered by the moderate secularization of the Shah's regime, rose quickly to the top of the opposition with his rhetoric about 'blood and vengeance' (657). Meanwhile, the US was pressuring the Shah to improve the abysmal human rights conditions of Iran.
DOING THE 40-40
Prior to the aforementioned newspaper article, Khomeini's son was mysteriously murdered, setting of a massive set of demonstrations. Whenever Khomeini supporters were killed, a forty-day mourning period would be the occasion for violent protests, often leading to more deaths and yet more forty-day mourning periods. This cycle was called 'the forty-forty.' The opposition between the Shah and the clergy of the nation mounted. The US did not think the Shah could fall. Meanwhile, the Shah's personal health took a downward turn due to leukemia.
LIKE SNOW IN WATER
Pressed between a rock and a hard place, the Shah became increasingly disoriented and felt betrayed. Strikes rocked the nation and Khomeini expertly used the media. The oil strike caused chaos in Iran's oil industry. The Shah instituted martial law. The US failed to make its stance clear, and could not choose sides. Ambassadors and other officials gave contradictory statements on Iran.
TORRENTS OF BLOOD
During a Shiite Holy month (Ramadan?) in 1978, Khomeini began to call for more martyrs, and the Shah was humiliated in a number of ways, including a prank phone call. Oil companies drew up evacuation plans for twelve hundred workers, all the more urgently after a bomb was lobbed at an Exxon Mobile administrator. By Christmas Iran ceased producing oil and became an importer due to the strikes.
I AM FEELING TIRED
Osco evacuated its twelve hundred oil men. The Shah fled the country, pretending -- though no one was fooled -- that he was merely taking a vacation. Tehran rejoiced. The coalition government left behind was quickly replaced by Khomeini's more radical government.
THE LAST MAN OUT
The story of Jeremy Gilbert is an interesting case study in the chaos of what it was to be a white European mistaken for an American in Iran in those days.
PANIC BEGINS
The changes in Iran's politics led to the Second Oil Shcok, in which prices rose from $13 to $34 / barrel. Initially, the absence of Iran's oil was mostly compensated by boosted production from OPEC. Nevertheless, the panic led to a 4-5% loss of supplies leading to an increase in prices by 150%. The ties that held together the oil industry severed and the rapid change in conditions moved the spot market from the periphery of the oil business to the center. Nations responded in contradictory ways, market and political signals were misinterpreted, and emotions ran high. People feared the possible spread of the Iranian revolution to other oil-producing nations. Through most of 1978, companies had been reducing inventories due to high demand, and when the crisis it full it left shortages throughout the system. Hoarding was rampant. The average gas tank went from one-quarter to three-quarters full.
FORCE MAJEURE
British Petroleum was hardest hit by the crisis. Exxon began choosing not to renew contracts. Japan and other nations had to go seek oil, and due to the difficulty of landing long-term contracts, they moved to the spot market. The spot price of oil quickly rose to double the official prices.
LEAPFROG AND SCRAMBLE
In addition to the non-renewal of contracts, companies began to renege on contracts on the grounds of 'force majeure', major devastating changes in conditions which, they argued, rendered the initial contracts null and void. Saudi Arabia, however, stuck to official prices, gaining massive amounts of international diplomatic attention. Yamani, always thinking in terms of long-term power, saw this move by the Saudis as a way to increase their prominence in the oil game at the cost of short-term profits.
LIVING DANGEROUSLY
The Three Mile Island incident occurred, leading people to question nuclear power, previously thought to be the best line of defense against rising petroleum prices. Western countries tried to decrease demand, but had trouble. Countries were forced to trade price for security in the oil buying game. Short-run politics dominated, the goal being to keep voters pacified. Price controls led to gas lines, ironically increasing shortage issues. Large amounts of gas were wasted idling in gas lines, further driving up shortages. The oil industry was quickly demonized in the US, blamed for the lines.
PETROLEUM AND THE PRESIDENT
The high gas prices sealed Jimmy Carter's doom. He angered both the right and left in his handling of oil politics.
THE WORST OF TIMES
Alongside gas price rises, inflation began to set it [note: this was less than a decade after the US abandoned the last vestiges of currency value controls through gold exchanges]. The Saudis increased supplies from 8.5 to 9.5 million barrels per day. Carter pushed synfuels. Carter strong-armed his whole cabinet into resigning.
THE CAT-AND-MOUSE DIALECTIC
Spot prices gently lowered during 1979, but the oil market was in a state of anarchy and bribery became common.
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