The oil crash’s hidden effects are starting to show

Sunday, April 5, 2015
By Paul Martin

MOISÉS NAÍM
BusinessInsider.com
APR. 5, 2015

What do Russia, Exxon Mobil, and ISIS have in common?

Not much, except that they’re all grappling with an inconvenient but incontrovertible truth: a sudden, significant, and prolonged shift in the price of oil changes the world.

That truth was on display in 1974, and it’s on display again now. Over the course of just a few months in 1973-1974, the price of oil surged from $3 to $12 per barrel. The new price created new global economic powers: oil-producing countries primarily in the Middle East and North Africa.

It also dealt a severe blow to the economies of the United States, Europe, Japan, and other oil importers. The oil shock altered power relations between the world’s main geopolitical players and created new ones.

Higher oil prices had many unexpected consequences—from breeding oil wars to fueling the international spread of Islamic fundamentalism thanks to funding from newly super-rich countries like Saudi Arabia. Today’s drop in crude-oil prices, which began in the summer of 2014, may be as disruptive as the quadrupling of oil prices that created the oil shock of 1974.

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