Arab Oil Money

May 17, 1974

Report Outline
World Impact of Oil Price Increases
Consequences in International Affairs
Steps to Alleviate Fuel Price Squeeze
Special Focus

World Impact of Oil Price Increases

Disruptions Arising From Flow of Oil Revenues

Americans are paying more than ever before to drive their cars and heat and light their homes. Crude oil price increases decreed by the petroleum-exporting countries are a hardship to many and a nuisance to nearly all U.S. consumers. The impact of the price rise on the world economy, however, is far more serious. It has already had a spectacular effect on the international monetary system, transferring vast sums to the oil producers, disrupting the economies of industrial countries, and threatening bankruptcy in some of the poorer ones.

Oil prices have more than quadrupled over the past year. In January 1973 the posted price for Persian Gulf crude—the standard reference in the oil trade—was $2.59 a barrel; a year later it had shot up to $11.65. A handful of nations and sheikdoms stand to reap immense gains from the oil bonanza. Saudi Arabia, the world's largest oil exporter, may earn as much as $19.4 billion this year, in contrast to $1.2 billion in 1970. For the United Arab Emirates, a grouping of seven tiny Persian Gulf states, the statistics are mind boggling. They probably will achieve a gross national product amounting to $20,500 in 1974 for every man, woman and child—more than three times higher than America's per capita GNP. Abu Dhabi, one of the seven Emirates, may record a GNP of $45,000 per inhabitant.

Barring a sudden—and unlikely—turnabout in the world's energy situation, the massive flow of capital to the oil-producing countries is likely to intensify in the future. And it presents enormous problems to virtually every country, including the oil producers. With few exceptions, they do not have the capacity to absorb the influx of currency reserves in their own economies; a way must be found to invest the excess safely. The industrial oil-importing countries are incurring huge balance-of-payments deficits and poor countries are facing economic ruin. Soaring costs of fuel, fertilizer and food dim their hopes for development.

ISSUE TRACKER for Related Reports
Oil and Gasoline Prices
Jun. 22, 2012  U.S. Oil Dependence
Nov. 01, 2011  Future of the Gulf States
Jan. 04, 2008  Oil Jitters Updated
Jul. 2007  Energy Nationalism
Sep. 30, 2005  Domestic Energy Development
Jan. 24, 2003  Oil Diplomacy
Aug. 07, 1998  Oil Production in the 21st Century
Aug. 23, 1991  Oil Imports
Oct. 30, 1987  Persian Gulf Oil
Apr. 04, 1986  Oil Prices
Dec. 23, 1983  Quest for Energy Independence
Sep. 23, 1983  OPEC: 10 Years After the Arab Oil Boycott
May 29, 1981  Western Oil Boom
Aug. 25, 1978  Oil Imports
Feb. 10, 1978  Oil Antitrust Action
Dec. 17, 1976  Alaskan Development
May 17, 1974  Arab Oil Money
Mar. 15, 1974  Oil Taxation
Jul. 18, 1973  Offshore Oil Search
Mar. 28, 1973  Persian Gulf Oil
Nov. 01, 1972  Gasoline Prices
Oct. 14, 1970  Fuel Shortages
Nov. 12, 1969  Alaskan Oil Boom
Dec. 11, 1968  Oil Shale Development
Oct. 26, 1960  World Oil Glut
Sep. 10, 1958  Middle East Oil
Oct. 30, 1951  Oil Nationalization
Aug. 11, 1950  Oil Imports
Apr. 23, 1947  Oil of the Middle East
Jan. 22, 1946  Offshore Oil
Mar. 09, 1944  Oil Supply
Dec. 24, 1935  Oil in World Politics
May 07, 1931  Control of Production in the Oil Industry
Mar. 27, 1929  The Oil Leasing Policy of the New Administration
Jun. 08, 1927  Oil Conservation and Stabilization
Feb. 08, 1926  The Mexican Land and Petroleum Laws
Apr. 18, 1925  The Price of Gasoline
Feb. 11, 1924  Background of the Oil Lease Cases
Sep. 01, 1923  Gasoline
Economic Analyses, Forecasts, and Statistics
International Energy Trade and Cooperation
Regional Political Affairs: Middle East and South Asia