The Effects of Changes of Oil Prices on Peripheral Net Importers: A Crude Estimate with Special Reference to LDACs

After 1973–4 the effects of higher oil prices were a subject hotly discussed by politicians as well as by international economists. Usually these effects were exaggerated and OPEC has served as a convenient scapegoat for many international problems, from peripheral debts — which have often been presented as the exclusive effect of recycling OPEC money — to balance of trade problems of oil-importing Peripheral Countries (PCs). Many a politician in the North found previously well-hidden sympathies for the poor, when touching on this topic. Attempts to measure the effects of oil-price changes on PCs objectively or to compare their dimension with other impacts of global economic relations were, by contrast, not so frequently made. One exception is the paper by Raffer (1982), which estimated the dimension of an international development tax on oil exports necessary to compensate net-importing PCs for the impact of higher oil prices. The resulting sums are by definition equivalent to the additional financial burden caused by oil price changes. The period covered are the years 1973–9. Until 1979 — for which only estimates existed at that time — the effect of higher oil prices on net-importing PCs was smaller than the difference between the famous 0.7 per cent aid target and Official Development Assistance (ODA) actually given by OECD countries.