THE DIFFERENTIAL IMPACT OF RISING ENERGY PRICES UPON DEVELOPED AND DEVELOPING COUNTRIES: 1970-1977

The October 1973 OPEC oil embargo triggered a period of rapidly rising energy prices. This study examines the impact of this era of restricted energy upon continued growth and development of poor, middle-income, and rich countries in the world society. The research objective is to ascertain if increased prices more adversely affected low-income countries (many of whom morally supported the behavior of the OPEC nations) than middle-income and rich countries. A 116-country sample is used and subdivided into five country groupings: poor, middle-income, industrialized, capital surplus oil-exporting, and centrally-planned countries. Country groupings are compared in terms of changes in four energy variables and three development variables for 1970-1973 and 1974-1977. Data are analyzed using the nonparametric Wilcoxon Signed Rank Test. Energy variables used are energy consumption, energy production, energy exports, and energy imports; development variables are Gross National Product (GNP), Consumer Price Index, and Balance of Payments. Data on the energy variables indicated that low-income countries continued to have access to energy during the post-embargo period in spite of higher prices. The average increase in energy consumption was greater for the poorer Lesser Developed Countries (LDC) in the post-1973 than in the pre-1973 years. In contrast, industrialized countries significantly reduced their mean rate of energy consumption. Thus, a slight redistribution of energy resources occurred from the industrialized countries to the rest of the world. Data analysis also revealed that while economic growth declined for all country groupings in the post-embargo years, industrialized countries experienced a greater percentage decrease in growth rates than did developing countries. The differential decrease in the growth of GNP in industrialized countries was statistically significant. All country groupings experienced statistically significant increases in the Consumer Price Index. Findings in terms of the Current Account Balance were indeterminant for all countries because of insufficient sample size. Although the analysis was limited in scope because of data and methodological constraints, it did not support the thesis that the OPEC oil embargo created a set of circumstances which more adversely affected economic growth and development of poorer countries relative to richer countries.