ECONOMIC CONSEQUENCES OF INCREASING OIL PRICES ON THE ECONOMIC DEVELOPMENT PROCESS OF THE OIL-DEFICIT DEVELOPING COUNTRIES

The thesis investigates the impact of the energy crisis on the economic development process of the oil-deficit developing countries. The theoretical analysis is supported by empirical studies to present a scientifically balanced research.; International inflation has brought about especially adverse consequences on the economic development process of the oil-deficit developing countries in the 1970s. These nations experienced exceptionally high inflation rates. The inflation therein was mainly of an import-cost push type and was fueled by excessive monetary expansions, economic stagnation, and inflationary expectations. Increasing oil prices, in particular, contributed to import-cost push inflation. The terms of trade tended to deteriorate as a result of the rising import prices relative to export prices. Deterioration in the terms of trade caused financial resources to flow out from these nations to the oil-exporting developing countries. Consequently, their balance of payments deficits grew and their external debt began to accumulate.; The rising prices of fuel and energy-capital intensive inputs undermined the ability of the oil-deficit developing countries to promote agricultural development. This inability is likely to increase their dependence on imported food in the immediate decades. The energy crisis thus brought about an economic disequilibrium in the world economy. The income gap between the oil-deficit developing countries and the oil-exporting developing nations has substantially increased since 1973.