Energy in the World Economy, 1950–1992 J OSHUA S. GOLDSTEIN American University XIAOMING H U AN G University of Southern California AN D BURCU AKAN American University Trends in energyproduction, trade, and consumption during 1950–1992 are analyzed, using nine world regions to highlight both North-South energy trade and the regions’ differing patterns of industrialization. Following price shocks in 1973 and 1979, and the price drop of the mid-1980s, the industrialized West adjusted its patterns of energy con- sumption and imports, and the Middle East changed its level of exports. These relationships suggest a cobweb-type model with an equilibrium price for Mideast oil around $30/barrel. This equilibrium could result in zero growth in energy consumption in the industrialized West but contin- ued growth of GDP as energy efficiency increases. Energy prices that are “too high” reduce GDP growth in the short term—to the detriment of both energy importers and exporters—while prices that are “too low” lead in the long term to high dependency on Middle East oil exports, which, in turn, dependson an elusive and costlypolitical stabilityin that region. The analysis highlights the central role of North-South energy trade in the world economy, and the close but changing relationship of energy with overall GDP growth. The harnessing of nonrenewable energy sources (primarily coal, oil, and gas) has been fundamental to the process of world industrialization over the past two centuries. In global North-South relations, patterns of energy production and consumption reflect the underlying physical—that is, nonmonetary—structure of the world economy. Energyisbyfar the largest categoryoftrade in natural resources globally, and a critical element in North-South trade generally. Energy flows International StudiesQuarterly (1997) 41 , 241–266 ©1997 International Studies Association. Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK. Authors’ note : For research support we thank the American University’sSchoolofInternationalService,the East-West Center (Hawaii), and the University of Southern California’s Center for International Studies. For assistance in using the Penn GDP data, we thank Robert Summers. For data on energy prices, and valuable comments on a previous draft, we thank Michael Lynch. Valuable comments were also received at presentationsat the Universityof Denver’s Graduate School of International Studies, Cornell University’s peace studies program, Indiana University’s Department of Political Science, the Peace Science Society 1995 conference (Columbus, OH), the University of Maryland’s 1995 “Engagement and Disengagement” conference, and the Council on Foreign Relations’ Persian Gulf study group. For research assistance we thank Nicole Bair, Jason Silberberg, and Casey Wolfe. Downloaded from https://academic.oup.com/isq/article/41/2/241/1821143 by guest on 09 October 2023