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Title: Arab economic strategy in a changing world oil market
Authors: Sayigh, Yusif A.
Keywords: Petroleum industry and trade - Political aspects - Arab countries
Issue Date: 2014
Abstract: During the early 1980s, the international oil market has changed from a sellers' to a buyers' market, that is, from one where the producers-exporters largely determined the price for that volume of exports which the market was willing (and eager) to buy, to one in which the importers-consumers have been able to press the price downwards and are willing only to buy a much smaller volume for the reduced price, than they had been buying by the end of the 1970s. But this identification of the current situation as one of crisis is only good enough as a first approximation. To be useful for the purposes of our analysis, it should be sharpened by several qualifications:' 1) Obviously, what is a crisis for the oil producers (a drop in demand, a drop in export price, a drop in production, and therefore a drop in export revenue) is a welcome development for importers (a smaller import bill, a smaller outward transfer of financial resources, a smaller degree of dependence on the foreign suppliers of a vital and strategic source of energy). 2) The impact of the crisis has hit all the members of OPEC (Organisation of Petroleum Exporting Countries) and OAPEC (Organisation of Arab Petroleum Exporting Countries) but the Arab members of OPEC have suffered a much greater shrinkage in their production and revenues, absolutely and relatively, than the non-Arab members. 3) Non-OPEC exporters (United Kingdom, Norway, Mexico, Canada, and the Soviet Union) have expanded their production over the three years 1980-2. 4) Although demand for, and production and consumption of, energy from all sources combined have dropped since the end of the 1 970s, the drop has been very small (about 1.6 per cent), while the demand for, and the production and consumption of, oil have dropped by about 12 per cent during the same period. In fact, the efforts to conserve energy and the effects of economic stagnation in the Western industrial countries (OECD), have been wholly reflected in the demand for and the supply of oil, with the demand for and supply of every other source of commercial energy actually rising between the end of 1979 and the end of 1981 and, in some instances, the end of 1982. 5) World reserves of coal are five times those of oil, the source of energy with the second largest reserves. Nevertheless, oil remains the largest single source in international trade, and the largest supplier of energy for consumption, despite the decline in its position. 6) It is particularly urgent for the Arab oil producers, who have suffered most in the current oil crisis, to probe deeper into the nature, the causes, the impact, and the implications of the crisis in order to assess its magnitude correctly, to draw the useful lessons it has for them, and to chart the future course of their economies accordingly. 7) Finally, even if the angle of vision is broadened to include the world at large and the field of energy in its entirety, it can be seen that the drop in the price of oil and the development of a buyers' market, will have adverse effects for everybody, to the extent that a lower price for oil will disguise the urgency of, and weaken the incentives for the search for and the development of, new sources of energy, and will expose the world to another era of tightness in oil supplies and soaring prices, possibly within the course of a recurring cycle of strong demand pushing prices sharply upwards, followed by soft demand pushing them downwards. The emergence of such a cyclical pattern will be harmful to orderly economic growth and to the predictability of expectations of supply, demand, and prices. Obviously, this would be damaging to the interests
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