Page 419 - Arabia the Gulf and the West

416 Arabia, the Gulf and the West

If we were to take these prices as a basis for revising Gulf postings we would ruin the

existing economic structure of the industrialised countries, as well as of the developing
countries, and very soon the entire amount of money available for financing inter­

national trade would not be enough to pay for our oil. We must be reasonable and act
responsibly as members of the international community.

Domtnus vobiscuni: the blessing had been pronounced, only, alas, to prove so

much mellifluous humbug a mere forty-eight hours later. OPEC met in
conclave throughout 22 and 23 December, and when its meditations were over
the shah called a press conference and spoke, as was his wont, urbi et orbi. The
price of the Gulf marker crude was to go up on 1 January 1974 from $5.11 to
$11.65 a barrel. Prices of other varieties of crude would be raised proportion­
ately, according to the differentials laid down by the producing countries. The

shah, who was rumoured to have pressed for a marker price of $20 a barrel,
graciously explained that the new prices had been arrived at ‘on the basis of
generosity and kindness’ - a delicate allusion, perhaps, to the season of the year
in the West. However, he went on, launching into one of his familiar homilies,

the Western industrial nations would have to mend their ways from now on.

They will have to realise that the era of their terrific progress and even more terrific
income and wealth based on cheap oil is finished.... They will have to find new sources
of energy, tighten their belts. If you want to live as well as now, you’ll have to work for
it.

To help the West adjust to a new regime of austerity, the shah advanced a new
formula for the future determination of oil prices.

We must compare the price of oil with the other sources of energy - what is the real price
for the extraction of shale, the extraction of gas, the liquefaction of coal? The price
should be the minimum that you would have to pay to get shale, for example, or the

liquefaction of gas or coal.. . . How much it costs you to exploit these other sources
should be a basis for the cost of oil.
Two days later, on Christmas Day, the Arab oil ministers meeting in Kuwait

announced, with a nice sense of occasion, the cancellation of the further 5 per
cent cut in oil production projected for January. Instead, production would be
increased by 10 per cent. The obvious connexion between the increase in prices
and the increase in production was virtually ignored by government and press
in Europe. Far from protesting against the ‘whip-sawing’ they had receive ,

they submitted to it abjectly. The spinelessness of Europe’s reaction was
epitomized by an editorial which appeared in the Financial Times on
December. ‘The new price level’, it gushed, ‘is designed to en.c0l]ra^
development of substitute sources of oil and energy.’ The new price «
designed to do nothing of the kind; its sole purpose, whatever hyp

balderdash Muhammad Reza Shah might utter’t0 e it as anything
industrial nations of their treasure and to enrich OPEC. To see t
else was to indulge in fantasies, to make the cardinal error, to whi