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Moreover, if Faisal and his allies hold prices up, the rest of the world could encounter such compounded problems that 1974 would be remembered as an easy year. With oil at $10 a bbl., OPEC would charge the world an other $600 billion in the next five years. To pay the bill, the 137 nations outside the cartel would have to deliver one-quarter of their total exports to OPEC's elite 13 countries. It would be impossible for the oil importers to transfer so much of their production—or for OPEC nations to absorb it all. The most frightening figure for the future is that OPEC nations stand to accumulate payments surpluses of $250 billion to $325 billion by 1980, and the rest of the world would run up exactly that much of a deficit.* For the countries that have them, surpluses create huge purchasing—and political—power. Conversely, deficits usually lead to recessions, devaluations and decline.
Both the surpluses and the deficits will drop when the OPEC countries expand their buying, lending and investing abroad. In stepping up their domestic development plans, they will have to enlarge their imports. This can be accomplished fairly easily by seven of the OPEC members: Iran, Venezuela, Indonesia, Iraq, Nigeria, Algeria and Ecuador. They have relatively big populations and much poverty—hence much need for internal development. The huge problem is that six other, lightly populated Arab states—Saudi Arabia, Libya, Kuwait, Abu Dhabi, Dubai and Qatar—are collecting far more money than they can possibly spend. These six, embracing only 9.3 million people, earned $54.7 billion from oil last year. For all their industrialization and social welfare, their military and foreign aid, they can dispose of only a fraction of that total, leaving a combined surplus of $38 billion.
Naturally, the Saudis are piling up the biggest surpluses. At present prices and production levels, they will collect a staggering $150 billion over the next five years. But they will be unable to buy or build fast enough to use up even one-third of their oil money on domestic development. By 1980, they stand to have well over $100 billion in surplus—to lend, give away or invest in foreign countries.
The Search for Ways to Recycle
In the chancelleries and countinghouses, everybody is seeking ways for the OPEC countries to lend their surpluses back to the oil importers in a massive "recycling." A hypothetical example of recycling: Italy pays several billions of dollars to Aramco, the marketing agent, for Saudi Arabian oil; Aramco then pays this money to Saudi Arabia, which in turn deposits it in Western banks; the banks then lend it back to the government of Italy. Trouble is, the petrodollar deposits are short-term (the oil countries want the power to pull their money out at a moment's notice), while most loans, to be useful to a government or business, must be for the longer term—anywhere from one to ten years. A further difficulty is that many of the big borrowers are chancy credit risks, including the governments of Italy, Denmark and the developing countries. More and more bankers fear that their institutions will go under if the OPEC depositors withdraw their money or the borrowers default on their loans. Since much of the hot oil money is deposited