A year ago, in reviewing the problems of oil supplies and Western security, I focused on the deplorable developments that had occurred during 1979, and emphasized the grave dangers involved if most of the oil-consuming nations remained dependent on oil from the Organization of Petroleum Exporting Countries, and were unable to achieve effective international coordination of their energy policies. It now appears appropriate to examine how circumstances have changed--or remained unchanged--during the intervening year, and to suggest lines of action, for both the short and medium term, that should be pursued vigorously.
The year 1979 was one of grievous setbacks for the future security of the oil supply of the Western world, its economic and financial prospects, its strategic capabilities, and its political stability.
For the last five years the world has been trying to cope with a set of problems triggered by the sudden oil price explosion of late 1973: the availability of oil to cover future energy demand, the economic and financial upheaval attending the jump in oil prices, and the utilization of a flood of petrodollars by OPEC countries for their national development and other purposes. These three issues are intimately interrelated and interact on each other; they can thus be properly assessed only in conjunction with each other.
Rarely, if ever, in postwar history has the world been confronted with problems as serious as those caused by recent changes in the supply and price conditions of the world oil trade. To put these changes into proper perspective, they must be evaluated not only in economic and financial terms but also in the framework of their political and strategic implications.
In the brief period since the late summer of 1970, Tripoli, Caracas, Tehran and then Tripoli again have witnessed unprecedented demands upon the international oil industry by major oil-producing countries, dramatic confrontations with threats to withhold essential oil supplies, and far- reaching "settlements." As a result, the economic terms of the world trade in oil have been radically altered. The balance among oil-producing and exporting countries and oil-consuming and importing countries, and among oil companies themselves appears, at least as of now, to have shifted decisively in favor of the producing countries.