Almost exactly a year ago, the members of the Organization of Petroleum Exporting Countries (OPEC) raised the price of their oil sharply. With subsequent adjustments, the average price of Middle East oil stood in late 1974 at about $10 per barrel, roughly four times the mid-1973 price.
Accordingly, over the five years 1975 through 1979, the oil-importing countries of the world will pay these OPEC countries a total of at least $600 billion (in 1974 dollars) subject to four conditions:
(1) that the importing countries individually can find the needed means of payment;
(2) that their average annual economic growth continues close to the estimated global rate of about four percent for the next five years, or about two percent per capita;
(3) that there are no major changes in the structure or stability of international political relations;
(4) that the price of Middle East oil remains near the $10 level.
Whether or not any of these conditions can be fulfilled is, to say the least, problematical. The first raises the specter of the possible inability of existing international institutions and payments mechanisms to cope with a financial problem of staggering proportions. It is to that problem that we will address our more detailed suggestions further on in this article. The importance of the second speaks for itself; prolonged stagnation of the world economy would surely have most serious human and political consequences. The third, if it were not fulfilled, raises even more nightmarish possibilities, on which one need not dwell here. Among them, the first three assumptions may seem to many to be on the optimistic side. In contrast, some would argue that the fourth assumption ignores the possibility of some drop in the oil price, say to $8 per barrel (in 1974 dollars) or even, a few think, to $6 per barrel. Without judging the likelihood of such changes, let us only note that they would change the volume of the required payments from something over $600 billion to around $500 billion (at $8 per barrel) or to roughly $400 billion (at $6 per barrel)-even if there
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