Oil and the OPEC Roller Coaster

The quadrupling of the price of crude petroleum in late 1973 from $2.75 a barrel to $12.50 a barrel led to visions of financial disaster for the industrial countries and for many developing countries such as Brazil and India. The World Bank, headed by Robert McNamara, remembered at Ford for the Edsel and at the Pentagon for the McNamara Line in Vietnam, projected that the financial wealth of oilproducing countries would climb to $300 billion by 1980 and $650 billion by 1985. The specter was that much of the money and the wealth in the West would be transferred to Saudi Arabia, Kuwait, Venezuela, Nigeria, and other OPEC countries, who would stuff dollars into the wells almost as fast as they pumped the oil out. Since OPEC wealth would increase more rapidly than world wealth, it seemed only a matter of time before OPEC would own the world. The Western industrial countries seemed squeezed; the OPEC countries sat on their lifeline. Inflation rates were higher and employment levels lower in both the industrial countries and in the developing countries as a result of the four-fold price hike in oil.