Effect of OPEC oil pricing on output, prices, and exchange rates in the United States and other industrialized countries
Following each major oil price increase, real gross national product (GNP) has fallen, unemployment and inflation have risen, and exchange rates have moved erratically. But how do oil price increases produce these effects. This paper discusses some of the macroeconomic consequences of too high and rising oil prices, and some of the policy options that might control these effects. It finds that the high and rising price of oil imports from the Organization of Petroleum Exporting Countries (OPEC) burdens the industrial oil-importing countries in two ways. First, because total expenditures on oil rise relative to income, the potential real standard of living in oil-importing countries falls. Together, the countries of the Organization for Economic Cooperation and Development (OECD), for example, may have paid as much as $150 billion more for oil in 1979 than they would have paid in a competitive oil market. Second, the rising oil price increases unemployment and inflation in ways that are difficult for policymakers in oil-importing countries to manage; on the one hand, the rising oil price produces general inflation, and on the other hand, it depresses domestic demand and employment. Policymakers attempt to control part of the inflation, at the cost of increasing unemployment. The total loss in output from the 1974 to 1975 recession, though part of it may have followed from factors unrelated to oil, was about $350 billion.
- OSTI ID:
- 6383249
- Report Number(s):
- NP-1902629
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
29 ENERGY PLANNING
POLICY AND ECONOMY
DEVELOPED COUNTRIES
EMPLOYMENT
INFLATION
OPEC
ECONOMIC IMPACT
PETROLEUM
PRICES
USA
GOVERNMENT POLICIES
GROSS NATIONAL PRODUCT
MANAGEMENT
QUALITY OF LIFE
ENERGY SOURCES
FOSSIL FUELS
FUELS
INTERNATIONAL ORGANIZATIONS
NORTH AMERICA
OIL-EXPORTING COUNTRIES
020700* - Petroleum- Economics
Industrial
& Business Aspects
294002 - Energy Planning & Policy- Petroleum
290200 - Energy Planning & Policy- Economics & Sociology