Effect of OPEC oil pricing on output, prices, and exchange rates in the United States and other industrialized countries

Book · Thu Jan 01 04:00:00 EST 1981

OSTI ID:6383249

Fleisig, H

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

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002 -- Energy Planning & Policy-- Petroleum
DEVELOPED COUNTRIES
ECONOMIC IMPACT
EMPLOYMENT
ENERGY SOURCES
FOSSIL FUELS
FUELS
GOVERNMENT POLICIES
GROSS NATIONAL PRODUCT
INFLATION
INTERNATIONAL ORGANIZATIONS
MANAGEMENT
NORTH AMERICA
OIL-EXPORTING COUNTRIES
OPEC
PETROLEUM
PRICES
QUALITY OF LIFE
USA