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

by Daniel Yergin

Iran had now joined Saudi Arabia on the side of moderation. With those two countries representing 48 percent of OPEC production, they could dictate to the other members, and oil prices would be held in check. Thus the battle between the Shah and the Saudis was ended. The Shah had been won over. Through the half-decade from 1974 to 1978, there were only two rather small OPEC-wide price increases: from the $10.84 set at Tehran in December 1973 to $11.46 in 1975 and to $12.70 at the end of 1977. But inflation was increasing at a more rapid rate, and as had been anticipated, eroding the real price. By 1978, the oil price, when adjusted for inflation, was about 10 percent below what it had been in 1974, immediately after the embargo. In short, by restricting the increases to those two relatively small ones, the real oil price was in fact lowered somewhat. Oil was no longer cheap by any means, but neither had the price, as many feared it would, gone through the roof.