The sustained and alarming depreciation of the U.S. dollar against some major European currencies and the Japanese yen during 1977 and the early part of 1978 has ushered in a new element of instability in the shaky international monetary system. One of the most critical effects of the dollar devaluation has been a new and unwelcome pressure on the real price of crude oil, which has been steadily shrinking since 1973 (despite the two 10-percent-upward adjustments in October 1975 and December 1976).
Columnists and economic prognosticators have been wondering how long the members of the Organization of Petroleum Exporting Countries (OPEC) are going to tolerate continued declines in the exchange value of their substantial oil export earnings, and acquiesce in the erosion of their dollar-denominated assets. The jitters about OPEC's possible counteractions have been triggered by a series of statements and warnings by OPEC officials regarding the dollar's 1977 performance and its rather uncertain future. Cabinet ministers from Iraq, Indonesia, Kuwait, the United Arab Emirates and Venezuela have expressed their concern publicly, and have formally asked their fellow OPEC members to take concrete actions to stop revenue losses. Even the Iranians and the Saudis, who seem to have considered the dollar's fall as temporary (and a decision on changing the methods of oil pricing or oil payments as premature), have reportedly been nervous about their ability to hold the line against the oil price rise, if the dollar should continue to decline.
OPEC's worries about the continued erosion of its purchasing power, and the market's fears about the oil exporters' reactions, have been both serious and real. Between January 1977 (when the crude oil price was last raised) and April 1978 (when the dollar showed faint signs of stabilization), the U.S. currency depreciated by more than 22 percent against the Swiss franc, 21.5 percent against the Japanese yen, nearly 14 percent against the deutsche mark, 10 percent against the pound sterling, some 6 percent against the French franc, and even a small 3 percent vis-à-vis the Italian lira. While the decline