FAISAL AND OIL Driving Toward a New World Order

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Because non-OPEC nations had to pay out so much for foreign oil, they moderated their buying of other imports; that slowed the growth of world trade, which has been a major source of international cooperation since World War II. The U.S.'s relations with its allies also came under strain, and the West seemed without will or unity. For most of the year, Western European nations and Japan refused to follow the U.S.'s call for a united front against the oil producers, essentially because European leaders considered the consumers' bargaining power too feeble.

The U.S. was a major oil exporter through the late 1950s, but then its own demands raced so far ahead of production that it now has to import more than one-third of its supply. The nation's bill for foreign oil pyramided from $3.9 billion in 1972* to $24 billion last year. The $20 billion jump meant that Americans either had to increase their foreign debts greatly or produce and export $20 billion more in goods and services—food, steel, planes, machinery, technology—to pay for oil imports. Unless the oil price comes down or the country sharply reduces its oil imports or substantially increases production, the U.S. will have to spend that extra $20 billion or more every year. This will drain off more of the nation's resources and build up trade debts that future generations will have to pay. In 1974 the rippling effects of rising oil prices contributed three or four percentage points to the U.S. inflation rate of 12%. The oil rise, which Yale Economist Richard Cooper called "King Faisal's tax," reduced Americans' purchasing power and consumption of goods as much as a 10% increase in personal income taxes would have done.

Nations that depend even more on OPEC fared much worse than the U.S. Japan's $18 billion bill for oil imports was the biggest single factor in lifting its inflation rate to a punishing 24%, causing the first real postwar decline in economic growth. Inflation rates doubled in many Western European nations: to 16% in France and Belgium, 18% in Britain, 25% in Italy. To meet its trade deficit, Italy has borrowed more than $13 billion, incurring interest payments of nearly $1 billion a year. Prime Minister Harold Wilson says that the fivefold increase in oil prices aggravated Britain's worst economic crisis since the 1930s, and is severely testing the country's social and political fabric. Only West Germany, The Netherlands and Belgium ran trade surpluses.

For Europeans, life became a little darker, slower, chillier. Heating-oil prices went up 60% to 100%, and thermostats were turned down. In the midst of a French conservation drive in October, President Valéry Discard d'Estaing found his Elysée Palace dining room so cold that he lunched with Premier Jacques Chirac in the library by a crackling fire. Gasoline rose to $1.40 per gal. in West Germany, $1.72 in Italy, $2.50 in Greece. Electrical advertising signs were banned after 10 p.m. in France and during the daytime in Britain. In Athens, the floodlights illuminating the Acropolis were turned off. Throughout Western Europe, energy costs were a cause of the slump in sales of autos, houses and electrical appliances. Layoffs spread in those and other industries. Unemployment hit a postwar high in France. In Germany, foreign workers were being paid bonuses to quit and go back home to