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PASTOR'S REPORT, July 2, 1979
Page 13
ON THE WORLD SCENE
FROM NOW ON, ONE STEP FROM ECONOMIC COLLAPSE: "OPEC makes it a virtual
certainty that we'll have a recession." That's the blunt assessment of
energy economist John Zamzow to the recent hike by OPEC oil producers in
the price of crude. Prices rose this time an average of 18%. Worse yet,
prices have gone up about 60% in the last six months, due largely to the
cutoff, then limited restoration of Iranian oil, which led to a chaotic
spiral in the cost of "spot" or non-contracted oil.
President Carter, in his gloomiest economic assessment to date now predicts
that a recession is "much more likely than it was before" the June OPEC
decision. The United States, he said, will probably have a "zero growth
rate" for the year. Government experts who handed the President the gloomy
news predict that by 1980 the 11-billion-dollar annual rise in the cost of
imported oil will add two percentage points to the country's inflation
rate, which now is running at a yearly pace of 14 percent. Experts also
see a drop to two percentage points in the nation's growth rate and another
800,000 persons added to the jobless rolls by the end of the next year.
Worst of all, the U.S. and the rest of the free world economies are going
to be sitting on pins-and-needles for a long time. OPEC will probably
raise prices again by year's end. The dollar is likely to start slumping
in value, after a brief upward rise, leading to increased OPEC price
demands, since their product is priced in U.S. currency.
Even though Saudi Arabia has promised to "turn on the tap" more, she no
longer has the political leverage to reign in prices with threats to flood
the market. The market, after Iran, is simply too tight. Even the �ledge
by the industralized countries at the Tokyo economic summit to basically
hold the line on future import levels to the 1979 figures is expected to
do little.
The knife-edge situation is further complicated by complex political dis
putes. The Administration feels it can't lift sanctions against Rhodesia's
Zimbabwe primarily out of fear that Nigeria would cut off oil sales to the
u.s;
And over the weekend, the mercurial Colonel Kaddafy warned he might
cut off all oil exports for 2 to 4 years, just because he didn't like the
manner in which the industrialized countries reacted to the OPEC decision
(they were supposed to applaud an 18% hike?).
The world simply cannot afford another "Iran." Yet there are other "Irans"
which could occur at a moment's notice.
Most troublesome of all, of course, are the unresolved issues in the Middle
East, specifically the Palestinian problem. In the corning issue of Newsweek,
summarized before publication by UPI, Saudi Arabia's oil minister says
the price of a barrel of oil could increase to $50 a barrel and an economic
collapse worse than the Great Depression could strike the West if desperate
Palestinians incerrupt the flow of oil from the Middle East.
Sheik Ahmed Zaki Yamani said the United States must be prepared "to face the
consequences"--a cutoff of Middle East oil--unless it acts to pressure
Israel to allow a Palestinian homeland on the occupied West Bank of the
Jordan River.