The epic oil plunge of the 1980s started out slowly and a bit remotely. To most people, it was just a downward-sloping diagram on the financial page, an abstract reminder of the mysterious world of desert oil wells, filthy-rich Arabs and the irritating antics of OPEC. But suddenly oil's new situation is hitting home with the wallop of a 42-gal. oil barrel dropped on the front porch. Last week consumers, businessmen and traders around the world watched in awe as the price of crude dipped below $10 per bbl. for the first time in almost a decade. Oil, which as recently as January was selling for $26 per bbl., was on a breathtaking--and dangerous--ride down a slippery slope.
For citizens in petroleum-gulping countries from the U.S. to South Korea, oil so cheap is an unexpected and unbelievable windfall. A Vermont homeowner may enjoy a heating-fuel bill cut nearly in half next winter. An Italian consumer can celebrate the lowest inflation in 14 years. A family in Chad stands a better chance of getting adequate food because petrochemical fertilizers have become less expensive. A motorist in the Philippines can enjoy a 30% drop in the price of premium gas.
The fortunate ones can scarcely enjoy their energy feast, however, without noticing the look of distress on the faces of their neighbors. For the same plunge that benefits oil users has battered the regions that produce petroleum. In Saudi Arabia, an Egyptian worker is likely to lose his high- paying job and return home to poverty. A Mexico City family may no longer be able to afford meat and vegetables because government food subsidies have been slashed. A well-drilling entrepreneur in Oklahoma could face bankruptcy and the loss of his business to creditors. A bank loan officer in California may be forced into a different career because the oil-lending business has declined.
Like the petroleum crisis of the past decade, which threatened the industrial might of the West, the oil slide is changing the balance of economic power. The price drop, from a peak of $35 per bbl. in 1981, has greatly reduced the flow of billions upon billions of dollars from consuming countries to the producers. The so-called petrodollar drain of 1979-83 had contributed to the worst global economic slump since the Great Depression. But cheap oil will act as a giant tax cut, or perhaps a lottery jackpot, for the consumers and businesses of such large industrial countries as the U.S., West Germany and Japan. Many economists think that bargain petroleum will bring a go-go era of healthy growth that could last until the early 1990s. Citizens are likely to enjoy a garden of economic delights, including a better chance of finding jobs, and lower prices for petroleum-based products ranging from polyester clothing to phonograph records (see following stories).