Danger Signs in the Middle East • 345at the 1972 Olympic Games in Munich, the US ambassador to the Sudan,
and a trainload of Soviet Jewish emigrants entering Austria. IDF planes
struck back at Palestinian strongholds, also taking innocent lives. The UN
condemned Israel's reprisals, but not the Palestinian actions that had in¬
spired them.
Meanwhile, the Western press and people began to worry about the
impending energy crisis and the risks of overdependence on oil imports.
Europe and Japan felt especially vulnerable. Since World War II the indus¬
trialized countries had shifted from coal to oil as their main energy source.
As Middle Eastern output skyrocketed, the oil companies had kept their
prices low. They had even lowered them in 1959 and 1960 without con¬
sulting the host governments. As the two sides had agreed by then to split
oil profits fifty-fifty, the companies' unilateral actions lowered the govern¬
ments' incomes. These price cuts may have reflected low production costs
and a glutted oil market, but petroleum and natural gas are irreplaceable
resources as well as the main source of national income for some of the
exporting countries. Five of them (Iran, Iraq, Kuwait, Saudi Arabia, and
Venezuela) met in Baghdad in 1960 and set up the Organization of Petro¬
leum Exporting Countries (OPEC). Later they were joined by Abu Dhabi
(now the United Arab Emirates), Algeria, Ecuador, Indonesia, Libya, Nige¬
ria, and Qatar.
During the 1960s, as long as the world's oil supply kept up with de¬
mand, OPEC kept a low profile. But as its members came to know one an¬
other and learned more about oil economics, the organization became
more assertive. In 1968 it recommended that its members explore for new
resources on their own, buy shares in the oil companies, restrict their con¬
cession areas, and set posted (or tax reference) prices on their products (so
that oil price drops would not reduce government revenues). Two years
later the companies agreed to work toward uniform—and higher—posted
prices and to pay higher taxes levied on their earnings. As world demand
kept rising, the oil exporters started to flex their economic muscles.
What did this mean in terms of prices? As there are many kinds of oil
and pricing arrangements, we can quote only some representative figures.
One barrel (42 US gallons or 159 liters) of Iraqi crude oil sold in 1950 for
US $2.41, dropping to $2.15 by 1960. The price rebounded to $2.41 by
1970, reaching $3.21 in 1971 and $3.40 in 1972. Many would later object to
the fourfold price hike in late 1973, so let us point out that oil had re¬
mained cheap for a generation. What other raw materials or manufactured
goods kept the same prices between 1950 and 1970? The international ac¬
counting unit for oil is the US dollar, whose value plummeted after Wash¬
ington stopped selling gold at $35 per ounce in 1971. The dollar price of an