Levy, Walter J.
June 1980
Foreign Affairs;Summer80, Vol. 58 Issue 5, p999
This article considers the impact of the 1979 collapse of the Shah's regime in Iran and the decline of the country's oil production on the security of the oil supply of the Western world, its economic and financial prospects, strategic capabilities, and political stability. The year 1979 was one of grievous setbacks for the future security of the oil supply of the Western world, its economic and financial prospects, its strategic capabilities, and its political stability. During the course of 1979, the decline in Iranian oil production was more than made up by other producing countries. And taking account of a virtually unchanged world oil demand, importing countries were able to increase their oil stocks during the year by well over one million barrels a day, more than has been achieved during recent periods. Nevertheless, a temporary decline in world oil production led to apprehensions by importing countries and their oil companies that they might be unable to cover their future needs. Accordingly, importers tried to obtain added supplies and to increase stocks at almost any cost. This, in turn, resulted in panic buying at largely uncontrolled and escalating spot oil prices. Obviously, the Organization of Petroleum Exporting Countries would not maintain its official quotations at a lower level if an increasing proportion of its oil was purchased on the spot market by importing countries or companies at much higher prices.


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