THE OIL CRISIS: THIS TIME THE WOLF IS HERE
By James E. Akins
"In a recent meeting in Kuwait it was suggested that Arabs accumulate their money and simply float it from country to country, depending on how each country reacts to Arab problems. T'he difficulties of such an action are surely underrated, but the fact that it was considered and debated must give us some pause. Frankly, however, it is a problem I am convinced we will never face. I do not believe the Arabs will ever accumulate anything remotely approximating the figure of $100 billion. Either they will spend the money at home or in the Arab world or they will find adequate investments for it abroad. If they do not, or cannot, they will very likely conclude that the oil had best stay in the ground—and this would cause a problem for the developed world far greater than the floating billions"
"OPEC cannot usefully be compared to other producer cartels. It controls
a product which is irreplaceable in the short run, and is vitally
necessary to the economies of every technologically advanced country.
The main oil producers are not competing with each other for larger
shares of the consumer market—as would be the case in other producer
cartels. Probably the most important reason for OPEC solidarity is that
the key countries, notably Kuwait, Saudi Arabia and Libya, do not need
more income; they are unsure of how they could use it if they had it,
and they fear the international consequences of acquiring too much
"The Kingdom of Saudi Arabia, without doubt, could destroy OPEC. It could
produce oil in much greater quantities than it does today; it could
drive the price of oil down to the mythical $1.00 a barrel, and every
OPEC country would be ruined. But Saudi Arabia would also ruin itself in
the process. Using the economists' expression, Saudi Arabia would not
"maximize" its income; it would only "maximize" its production, and even
its enormous reserves would soon be exhausted. It is difficult to see
what folly could possess Saudi Arabia to take such action; any consumer
government that assumed that Saudi Arabia would (or could) do this
without an internal revolution would be guilty of an even greater folly.