In some cities, gasoline at the pump
has already slid under $1 a gallon. And
as the«ff'i^%ar gains momentum
as it surely will^and the oil industry's
shrill complaints rise in crescendo as
they surely will it is best to step back
a minute and gain perspective.'
The first thing to observe is that many
of the world's economic problems of the
past 10 years are a direct result of huge
price increases triggered by the OPEC
cartel ttlf higher 0PEC prices were so.
bad, why should tower OPEC'priees not
be helpful now?" asks economist Otto
Eckstein of Data Resources, Inc.
That's the basic question, and beware
of anyone who cant give you a straight
answer to it As DO less an authority than
Secretary of State George Shultz told the
Senate Foreign Relations Committee last
week, a 40 percent diop from the official
$34 per barrel price to $20 would help set
the world on the path to recovery.
It would be "the mirror image," as
New York financial market analyst
Robert Stovall puts it, of the recession
effect of the two huge oil price increases of the "70s.
Walter Heller has likened a $10 per
barrel reduction to a $55 billion cut in
excise taxes and one that doesn't add
to the budget deficit. It would cut the
average homeowner's energy bill by
about $170 a year.
Yet the newspapers and TV channels
are already being flooded by a high-powered propaganda campaign against a big
decline in oil prices. Mexico will go
broke, we are told. The international
monetary system will collapse. Banks
will go belly-up. Conservation will be
stopped dead in its tracks.
Most of this comes from those who
have something to lose the major
producing countries, the banks that
made stupid (and irresponsible) loans
on the anticipation of an ever-rising
price for oil, and highly paid "advisers"
who counseled that OPEC's political
power was unassailable.
In an Oil-Price War, Few
annually, while the ^deg
debtor country, _
By and large, these are the same folks the biggest Third World improvem
"worig economies wouta
'rnird
in
pressed
ent
billion
$3.3
a
see
would
that
who for the past two years argued
to 2.5 percent, their ex^»
2.0
ahead
stTbot
liO-ptii1a
ftum
s
paylttent
of
balance
there was no real oil "glut," just a tem- its
r~~~~'^\
percent
3
ngJby
~fcn
portsjrjgj
ttg<!ordlng
enm.
'
otl
in
porary surplus reflecting recession. barrel ciroo
everywhere would de^ \
rates
Inflation
Inc.
s,
I
Economic
Evans
of
Ernst
David
realof
denial
a
were
ts
These argumen
*, *'
would show an improve- I cline 1.5 to 2.5 percent
ity, intended to cover up a single-mindl
industria
the
in
bill
import
oil
The
billion;
\
$U>
Taiwan,
billiottj
$1.8
ot
ed, vested interest in high oil prices. For ment
billion,
$90
by
drop
would
Phicountries
the
and
example, last year, as Arlon R. Tussing, and Thailand, Turkey each.
'the Third World.
writing in The Public Interest reminds lippines around $1 billion Mexico, whose
losers
big
the
Even
Hamus, Occidental Chairman Armand
reduced by
mer and others were still predicting export earnings would be
no
$6.2 billion; Venezuela, by $6.6 billion; deficit of *17 hillint ni
$lOO-a-barrel oil within 10 years.
, .^
billion.
$18
of
surplus
a
a
show
Indonesi
and
billion;
$7.1
by
Nigeria,
to
begins
cartel
OPEC
Now, as the
any conclusion
reach
to
hard
is
it
'
would
each
billion
$4
by
Algeria
and
downlong
fracture, and oil prices enter a
price decling
that the global economy would
ward slide, the permanent nature of the SM partial offsets tn a $10 rates easing but
trom a tfraro drop in oil price&_
nenetit
interest
lower
\)il surplus can no longer be denied. Some] m terms of
over- The $20-a-barrel number Shultz used
producing countries with heavy debt bury iKeirdebl burden, and in greater
would Ts a nice one to think about. Sara JohaT
dens notably Mexico and Venezuela-4 all export opportunities ' that
"
Son of Data Resources, who did a studs?
'
recovery
global
trom
come
But
will be hurt by lower oil prices.
"
ng ^hat tha
'conciudi
week,
last
testimony
Senate
against that, all the oil-importing count ^ in his
the earth
outweigh
clearly
decline
jtnce
following
the
be
JLries, after suffering 10 years of extortiorP J Shultz said there would
two-year
a
over
impact"
"catalytic
s
I
economie
their
sucked
ate oil prices that
\_^j>eriod if oil went down to $20 per barrel:
dry, will do better.
Real growth rates in the United'
The United States, Europe and Japan
d Europe would increase 1 to OPEC touched off its costly escalation!
Statesan
Brazil,
ies.
beneficiar
s
enormou
be
will