Chapter 4: The Rise, Fall and Rise Again of OPEC
Michael Beenstock No event of the period following the Second World War had so sharp and pervasive an impact on the world economy as the series of shocks to the oil market that followed closely on the outbreak of the Arab-Israeli war on 6 October 1973. (Fried and Schultze 1975, 1) DISASTER STRIKES When OPEC (the Organization of Petroleum Exporting Countries) quadrupled the price of oil in 1973/74 it was immediately regarded as an unmitigated disaster. It was as if a bolt of lightning had struck out of a clear blue sky. There was panic in oﬃcial circles. The world appeared to be hostage to OPEC’s whim and fortune. Indeed, this sense of doom and hopelessness only seemed to fulﬁl itself when in 1979 OPEC further doubled the price of oil. The rapid and even unprecedented economic growth enjoyed by the world economy during the post-war period came to an abrupt end in 1973, and a new age of stagﬂation had dawned. The lights appeared to be going out over the world economy. We had taken for granted that such anti-social behaviour could never happen. But the unthinkable had occurred. The OPEC price revolution spawned a great deal of muddled and even stupid thinking. The ‘doomwatchers’ thrived. Suddenly, it was claimed that the world was running out of oil as well as other natural resources (the so-called Club of Rome school as formulated by Meadows et al. 1972). Economic development based on hydrocarbons and other non-renewable resources...
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