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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Slagle who wrote (67062)8/7/2005 2:33:04 AM
From: elmatador  Read Replies (1) of 74559
 
"The increase in oil prices from $2.75 $10.00 in 1972/73, brought an increment of $75 billion in the oil bill of the importing countries. A sudden transfer of capital of such magnitude and the strategic value of the commodity had to have deep effects in the world economy.

To avoid depressing aggregated demand “...the oil importing countries can expect to increase their sale of goods and services to the oil exporting countries. The rapidity with which this happens will depend on the capacity of the oil-exporting countries to use additional imports of goods and services for domestic consumption and investments (including military programs) —parentheses in the original— the distribution of such imports between those that are delivered more or less immediately and those requiring long lead times,and the priorities attached to such expenditures. Edward R. Fried & Charles Schultze, (Eds.), Higher Oil prices and the World Economy,The World Economy, Washington DC., Brookings Institution, 1975.

The capacity of the oil exporting countries to absorb additional goods and services was clearly underestimated by the analysts, then.

Kuwait’s annual military expenditure was less than a few hundred million dollars before 1974. After the 1974 oil price increase it shot up to more than $1 billion in 1975, and increased to $1.6 billion in 1982.

Saudi military expenditure was more than $9 billion in 1976. Saudi Arabia’s arms procurement be¬tween 1980 and 1982 was $62.5 billion, while its total forces were only 50.000. After the oil boom Brazil became the fifth weapons exporter in a period of ten years. Its biggest client being Iraq and Lybia.
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