The Prize: The Epic Quest for Oil, Money, and Power

by Daniel Yergin

The ministers in attendance all confirmed their support for $17 to $19 a barrel and agreed on the need for a new quota system to go with it. What would have seemed heresy a few months earlier was now becoming the accepted wisdom. For, amid all the confusion and disarray of this latest oil crisis, a new consensus in favor of $18 a barrel was very definitely emerging out of the wreckage of the old. “It was a process of osmosis,” said Alirio Parra. And not only producers, but consumers liked it, too. The Japanese, as importers of more than 99 percent of their oil, might have been expected to prefer the lowest possible price. That was not the case. Two problems would result if prices were too low. First, this would undercut the large and expensive commitment they had made to alternative energy sources, leading, they were sure, back to higher oil dependence and eventually to renewed vulnerability, and setting the stage for another crisis. Second, since oil constituted a substantial part of Japan’s imports, very low prices would enormously swell Japan’s already-huge trade surplus, further accentuating the severe conflicts with American and Western European trading partners. Thus, one found throughout the Japanese oil industry and government a belief in “reasonable prices,” which happened to come out to about $18 a barrel. The new consensus was evident in the United States, as well—in the government, on Wall Street, in banks, among economic forecasters. The gains from falling oil...