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CRISESWar CreatesHeavy Burden on EconomyThe end of the war is not enough to heal the wounds in the Greek and global economies—wounds inflicted by months of international economic uncertainty, weakness in consumerdemand in European and Middle-Eastern markets, the recession in tourism, stock marketinstability, and oil price increases.The end of the war in Iraq mayhave brought rapid decreases ininternational oil prices comparedto pre-war levels, but the Greekeconomy has already suffered.The fact that the price of the crudeoil was over $30 per barrel from Novemberto March, combined with otherinflationary pressures at the beginningof the year, resulted in continuousprice increases for Greek products andservices. Many industrial businesses inthe Greek economy have increasedprices beyond the rate of inflation fortheir products in the past months.Prices for plastics, chemicals, anddyes have increased since their basicraw material is heavily dependent on theprice of crude oil. Other sectors such asmetallurgy, cements, and textiles werealso forced to increased prices since aconsiderable part of their operationalcosts depend on the cost of oil.But households suffered the most, asthe price of heating oil increased by upto 40% from October to February.The war exposed a variety of problemsin the Greek economy, one ofwhich is the country's oil dependence,shown to be greater than any otherEuropean Union member state.“Oil crises usually lead to inflation spikes because rawmaterials become overpriced, which in turn leads to anincrease in product and labor costs, creating a viciouscircle of continuous price increases”.Greece is a "champion"of oil consumptionRecent data show the share of oil in thetotal annual Greek energy consumptionis 67.95%, whereas the EuropeanCommunity average is just 49.4%.Natural gas meets a major part ofthe energy needs in Europe—24.2% ofthe European average—whereas inGreece it accounts for 2% of total annualenergy consumption.Two oil crises: 1973 and 1980The way the Greek economy reactedduring the major oil crises of 1973and 1980 demonstrates some usefulconclusions about the behavior of theGreek economy during periods of oilprice increases.In the first oil crisis in 1973, whenthe Arab world imposed an oil embargoon countries friendly to Israel, theprice of crude oil increased by 300%.Inflation rocketed in both the U.S. andEurope. In 1974, the inflation rate ofOECD member states was 13.4%,whereas in Greece it was double that—at one point reaching 26.9%.In the second oil crisis at the beginningof the 1980s, after war broke outbetween Iraq and Iran, Greek inflationrose to 24.6% whereas in OECDmember states it averaged 12.8%.10 AEGEAN NEWS SPRING 2003
45International Petroleum Prices: 1970-20024035PRICE PER BARREL ($ U.S.)30252015105019701972197419761978198019821984198619881990199219941996199820002002The Lesson of the Oil CrisesMajor oil crises have demonstrated that oil prices follow an increasing trend every time there is a possibility of warin the Middle East, and immediately after the outbreak of war this trend ends.1973—Oil embargoThe only exception to this was during the Arab-Israeli war, which broke out in 1973 following the oil embargo imposed on theWest by OPEC. Countries friendly to Israel were cut off from Middle Eastern oil supply and crude oil prices rocketed from $2.5per barrel to $6 per barrel. The embargo ended on March 18, 1974, by which time crude oil prices had exceeded $10 per barrel.1979—Iranian RevolutionBy the time the revolution in Iran began in 1979, oil prices had risen to $14 per barrel. OPEC decided to increase prices by14.5%, sending the price to $17 per barrel, and later to $20 after another 15% increase. The price reached $25 per barrelwhen the Iranian regime captured American hostages. President Carter banned Iranian oil imports and Iran, in turn, cancelledall trade contracts with the U.S., resulting in even higher prices.1980—Iran-Iraq warThe outbreak of war between Iran and Iraq saw oil prices skyrocket to $40 per barrel. The high prices eventually came underpressure, and lead to several decreases. The war ended in 1988 with the warring countries signing a truce. Oil prices droppedto $15 per barrel.1991—Iraq Invades KuwaitThe price of crude oil was $15 per barrel before the Iraqi invasion of Kuwait. When "Operation Desert Storm" began, the pricerocketed to $40 per barrel. Then the price of oil started falling and on the February 27, 1991, when the war ended, it had againfallen to below $15 per barrel.SPRING 2003 AEGEAN NEWS 11
Page 1: Aegean NewsT H E Q U A R T E R L Y
Page 5 and 6: contents8AkisTsohatzopoulosdiscusse
Page 7 and 8: Dimitris MelissanidisAn Interview w
Page 9 and 10: Greece & Turkey Sign Pipeline Agree
Page 11: Our EuropeSharing the Futurein a Co
Page 15 and 16: PHOTOS: YIORGOS DEPOLLASSPRING 2003
Page 17 and 18: The New Faceof OLP(PIRAEUS PORT AUT
Page 19 and 20: KILKIS SERRESPELLA 1020FLORINA231TH
Page 21 and 22: LUBRICANTSAegean and ChevronTexacoA
Page 23 and 24: Sales and AestheticsOn the UpswingT
Page 25 and 26: offer high-quality services. That i
Page 27 and 28: MARITIME TRADITIONSOcean linersThe
Page 29 and 30: 10Can an ambitious programto promot
Page 31 and 32: FORUMBilateral Trade RelationsHow i
Page 33 and 34: A look that saysTHE AEGEAN IMAGE“

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