Chapter

The Two OPEC Recessions (1973–5 and 1979–82)

Christopher Dow

in Major Recessions

Published in print October 2000 | ISBN: 9780199241231
Published online November 2003 | e-ISBN: 9780191596179 | DOI: http://dx.doi.org/10.1093/0199241236.003.0008
 The Two OPEC Recessions (1973–5 and 1979–82)

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The recession of 1973–75 was the first occasion since the war when total output fell absolutely, and it was followed six years later by the recession of 1979–82, when output again showed an absolute fall. The question that this book started out to answer in Ch. 1 was why 1973 was so crucial a turning point: to determine that, one has to look at all the major fluctuations of the economy since 1920, although the recession of 1973–75 and the one that followed in 1979–82 retain a central interest. Each of these two recessions coincided with one of the vast jumps in the world price of oil, known as OPECs I and II, and it is argued that these played a large role in their genesis; although in each case there were also other causes; these two recessions therefore called here the OPEC recessions––there are some important differences between them but also important similarities, and they were both very different from the major recessions that came before the war and the next recession. They are therefore discussed together in this chapter, which takes the story to 1982––the year when the economy can be considered to have emerged from the second of the two recessions. Section 8.1 discusses the background issues––the political developments and the origin of oil price shocks with reference to the UK, Sect. 8.2 seeks to explain the fluctuations of UK demand and output in the period, starting with the 1972 boom––which is seen as one cause of the recession that followed, and Sect. 8.3 considers the general lessons to be derived from the decade; Appendix A8 presents an econometric analysis of the inflationary surges of the 1970s.

Keywords: boom; demand; econometric analysis; fluctuations; oil prices; OPEC; OPEC recessions; output; prices; recession; shock

Chapter.  19716 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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