NOTES ON ECONOMIC DIMENSIONS OF THE OIL MARKET OUTLOOK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00126R000100080002-9
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 5
• Document Creation Date: December 21, 2016
• Document Release Date: May 5, 2008
• Sequence Number: 2
• Publication Date: February 24, 1984
• Content Type: MEMO

Approved For Release 2008/05/05: CIA-RDP87TOO126R000100080002-9
I- `r~ f4
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
OFFICE OF
ASSISTANT SECRETARY
FOR INTERNATIONAL AFFAIRS
F E B 2 4 1984
MEMORANDUM FOR MAURICE ERNST
NATIONAL INTELLIGENCE OFFICER FOR ECONOMICS
CENTRAL INTELLIGENCE AGENCY
FROM: Ernest F. Chase Vv
SUBJECT: Notes on Economic Dimensions of the Oil Market
Outlook
The attached notes and accompanying tables may be of use in
your preparation of the SNIE on the World Oil Market Outlook.
The terms of trade work-up is drawn largely from the Bureau of
Labor Statistics' January 16, 1984 series on alternative measures
of industrial countries' export prices to OPEC. Although less
comprehensive, perhaps our measures of "real" interest rates to
OPEC and national currency oil import prices will also be of
interest. Both draw upon the IMF's International Financial
Statistics.
Attachment: Economic Indicators for OPEC
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STAT
 Approved For Release 2008/05/05: CIA-RDP87TOO126ROO0100080002-9
Dollar appreciation and slower inflation have cushioned the
decline in OPEC's terms of trade. From the first quarter of 1981
to the second quarter of 1983, the index of export prices/unit
values of OPEC's 14 largest import sources declined by 9 percent
(taking dollar appreciation into account; Bureau of Labor Statis-
tics data). As a result, related to the decline in oil export
prices, OPEC's trading terms declined on average by only about 11
percent, compared to a decline of nearly 25 percent for OPEC-U.S.
trade alone. (See Table 1, attached.)
In addition, high "real" or inflation-adjusted interest
rates served to offset cuts in oil prices, particularly for the
OPEC's large net creditor members. For example, since early-1981
when oil prices peaked, U.S. Treasury bill rates have declined
from 14-15 to around 9 percent, or by 5-6 percentage points.
However, in the same time frame, the annual rate of increase in
U.S. export prices to OPEC countries has declined from about 11
to 1-2 percent, or by 9-10 percentage points. Hence, "real" U.S.
interest rates to OPEC have increased substantially -- averaging
nearly 7 percent during 1983 and exceeding 9 percent in some
quarters. (See Table 2)
On the other hand, since the beginning of 1981 dollar appre-
ciation has resulted in an average 5 percent increase in national
currency oil import prices for the four largest oil importing
countries overseas. In particular, the French Franc and Italian
Lira price per barrel of oil have increased by 28 and 35 percent.
(See Table 3)
Drafted by: K. Taecker - Treasury/ICE
Reviewed by: E. Chase - Treasury/ICE
February 24, 1984
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 ? Approved For Release 2008/05/05: CIA-RDP87T00126R000100080002-9
Effects of Export Price and Exchange Rate Changes on OPEC Terms of Trade
'Average OPEC Prices
'Dollar-basis Export Price Indices (0II'77-100)'
'tt' OPEC Terms of Trade "tt
(end-period)
3-Country 14-Country
-- OPECIU.S. --
-- OPEC114-Ctry --
(61bbl)
(index)
U.S.
Germany
Japan Average
Average
(ratio)
(index)
(ratio)
(index)
QI'81=100
0I'81=100
1977 Gil
$12.76
100.0
100.0
100.0
100.0
100.0
100.0
1.00
1.00
1978 all
$12.94
101.4 ,
106.8
114.5
118.5
113.1
112.5
0.95
48.1
0.90
47.8
1979 GI
$14.07
110.3
112.6
131.3
129.7
123.6
125.6 ;
0.98
49.7
0.88
46.5
Gil
$18.29
143.3
116.8
131.4
126.7
124.1
127.7 ;
1.23
62.2
1.12
59.5
Gill
$20.29
159.0
120.1
139.1
129.1
128.0
134.3
1.32
67.1
1.18
62.7
QIV
$25.45
199.5
123.1
144.4
125.6
129.1
137.0
1.62
82.2
1.46
77.1
1980 01
$28.87
226.3
127.1
148.6
126.7
132.0
142.4 1
1.78
90.3
1.59
84.2
Gil
$31.26
145.0
128.4
147.2
133.0
134.6
144.9 1
1.91
96.7
1.69
89.6
0111
$32.20
252.4 ;
132.7
150.9
138.4
139.1
150.2 ;
1.90
96.4
1.68
89.0
QIV
$33.66
263.8
136.8
141.3
142.7
140.1
149.0
1.93
97.8
1.77
93.8
1981 QI
$35.28
276.5
140.2
131.9
145.6
140.4
146.5
1.97
100.0
1.89
100.0
Oil
$34.38
269.4
142.5
123.3
141.0
137.4
141.3 ;
1.89
95.9
1.91
101.0
0111
$33.88
265.5
143.7
117.0
138.4
135.3
137.7
1.85
93.7
1.93
102.2
OIV
$33.85
265.3
145.2
127.0
141.0
139.3
143.2
1.83
92.6
1.85
98.2
1982 OI
$33.37
261.5
146.1
124.2
137.4
137.6
141.2
1.79
90.8
1.85
98.1
Gil
$32.96
258.3
146.8
123.3
132.3
135.7
138.4
1.76
89.2
1.87
98.9
Gill
$33.37
261.5 1
147.0
118.7
125.4
132.0
134.4
1.78
90.2
1.95
103.1
OIV
$33.15
259.8
147.5
117.7
122.7
131.0
133.0
1.76
89.3
1.95
103.5
1983 01
$29.11
228.1
148.0
122.9
127.9
134.4
135.2
1.54
78.2
1.69
89.4
Oil
$28.55
223.7 1
148.3
119.5
126.9
133.3
133.4
1.51
76.5
1.68
88.9
Gill
$28.46
223.0
150.3
114.1
125.0
132.1
n.a.
1.48
75.2
n.a.
U.I.
0IV
$28.54
223.7
B.A.
a.a.
n.a.
n.e.
a.a. ;
n.a.
R.A.
n.a.
A.Z.
1984 Feb
$28.56
223.8
Source Notes: It OPEC Prices: Export weighted average for OPEC crudes at the end of each period; Treasury compilation.
It Export Unit Price Indices: Compiled by the U.S. Bureau of Labor Statistics and expressed on a dollar
equivalent basis (i.e., to show exchange rate effects). 14-Country average is weighted by shares of
exports to OPEC; includes export unit value indices where export price indices are unavailable.
tt Terms of Trade: Computed by Treasury; index base set to OI'81 (when oil prices peaked).
TreasuryllCE
February 7, 1984
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 Approved For Release 2008/05/05: CIA-RDP87TOO126R000100080002-9
U.S. 'Real' Interest
Rates to OPEC
'T-Bill' U.S. Export
Interest Rate Index
Prices to OPEC
Annual Rate
'Real'
Int Rates
1977
QII
4.83
100.0
1978
QII
6.48
106.8
6.80
-0.30
1979
QI
9.36
112.6
oil
9.38
116.8
9.36
0.02
QIII
9.63
120.1
QIV
11.80
123.1
1980
GI
13.46
127.1
12.88
0.52
QII
10.05
128.4
9.93
0.11
QIII
9.24
132.7
10.49
-1.13
QIV
13.71
136.8
11.13
2.32
1981
QI
14.37
140.2
10.31
3.68
oil
14.83
142.5
10.98
3.47
QIII
15.09
143.7
8.29
6.28
QIV
12.02
145.2
6.14
5.54
1982
Q1
12.89
146.1
4.21.
8.33
oil
12.36
146.8
3.02
9.07
QIII
9.71
147.0
2.30
7.25
QIV
7.93
147.5
1.58
6.25
1983
GI
8.08
148.0
1.30
6.69
oil
8.42
148.3
1.02
7.32
QIII
9.19
150.3
2.24
6.79
QIV
8.79
Notes
** 'T-Bill' Rate ** Period average; source - IFS
** U.S. Export Price Index ** source - BLS
** U.S. Export Price Changes ** compiled by Treasury
from BLS
'Real' Rate: compiled by Treasury ** 'T-Bill' rate deflated Ly
export price change.
Treasury/ICE
February 22, 1983
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 Approved For Release 2008/05/05: CIA-RDP87TOO126R000100080002-9
- Ave. International -
- - - - - Foreign Currency Price of Imported Crude - - - - -
- Ave. Change in -
- Crude Oil Price 2 -
--- Japan --- -- V.Germany --
--- Italy --- --- France ---
- For. Cur. Prices >-
($Ibbl)
(5-Chg) (Indext) (YIbbI)
(Indez)(OKlbbl) (Index) (Llbbl)
(Indez)(FF/bbl)
(Index)
(%-Chg) (Index)
1978 al
$12.96
2882
26.2
11048
59.4
Gil
$12.94
-0.2%
36.1
2649
14.5
26.9
13.9
11058
10.2
58.2
12.5
-3.3%
33.5
0111
$12.92
-0.2%
36.0
2444
12.3
25.0
13.3
10640
9.8
56.0
11.8
-6.2%
31.4
OIV
$12.98
0.5%
36.2
2526
11.7
23.7
11.7
10770
9.5
54.3
11.0
-0.1%
31.4
1979 01
$14.94
15.1%
41.7
3127
15.0
27.9
13.0
12548
11.2
64.2
12.6
20.3%
37.8
Oil
$19.96
33.6%
55.7
4331
25.7
36.9
20.3
16622
17.4
85.5
19.9
35.2%
51.1
Gill
$21.84
9.4%
60.9
4877
40.0
38.1
27.7
17516
24.2
89.6
27.8
7.9%
55.1
QIV
$26.81
22.8%
74.8
6426
59.4
46.4
34.8
21555
31.4
107.8
35.0
26.1%
69.5
1980 QI
$30.29
13.0%
84.5
7563
92.1
58.8
53.8
27210
48.8
135.7
53.0
22.6%
85.2
Gil
$32.06
5.8%
89.5
6976
99.9
56.4
65.3
26889
60.9
131.0
64.4
-5.1%
80.9
0111
$32.69
2.0%
91.2
6937
91.7
59.2
65.8
28179
63.0
137.3
65.2
2.5%
82.9
QIV
$34.39
5.2%
96.0
6981
91.7
67.4
78.6
32000
75.0
155.3
77.3
7.9%
89.5
1981 al
$35.84
4.2%
100.0
7562
100.0
75.3
100.0
37560
100.0
177.7
100.0
11.7%
100.0
011
$34.62
-3.4%
96.6
7817
103.4
82.8
109.9
41250
109.8
197.9
111.4
7.3%
107.3
0111
$33.91
-2.1%
94.6
7891
104.3
78.8
104.6
39929
106.3
188.8
106.2
-2.0%
105.2
OIV
634.28
1.1%
95.6
7538
99.7
87.3
116.0
41136
109.5
197.0
110.9
1.6%
106.8
1982 01
$32.77
-4.4%
91.4
8078
106.8
79.1
105.0
43322
115.3
204.6
115.1
2.8%
109.8
Gil
$32.89
0.4%
91.8
8354
110.5
80.9
107.4
45497
121.1
224.6
126.4
4.6%
114.8
0111
$32.73
-0.5%
91.3
8821
116.6
82.7
109.8
46558
124.0
233.6
131.5
4.0%
119.5
QIV
632.55
-0.5%
90.8
7649
101.2
77.4
102.7
44594
118.7
218.9
123.2
-9.1%
108.6
1983 01
$28.87
-11.3%
80.6
6911
91.4
70.1
93.0
41717
111.1
209.9
118.1
-8.2%
99.8
Oil
$28.48
-1.4%
79.5
6827
90.3
72.4
96.1
42956
114.4
217.5
122.4
1.3%
101.0
Gill
$28.53
0.2%
79.6
6736
89.1
75.3
100.0
45614
121.4
228.5
128.6
2.1%
103.2
QIV
$28.57
0.1%
79.7
6617
87.5
78.0
103.6
47355
126.1
238.2
134.1
1.3%
104.6
1984 Feb
628.51
-0.25
79.5
6642
87.8
78.1
103.7
48068
128.0
239.7
134.9
0.6%
105.1
- 6 oil price -
--- Japan --- -- V.Cermany --
--- Italy ---
--- France ---
4-Country
Average
($Ibbl) (5-Chg)
(Ylbbl) (5-Chg) (OKlbbl)(%-Chg)
(L/bbl) (%-Chg) (FFlbbi) (%-Chg) (%
-Chg)
QIV'78 to 01'81
$22.86
176.1%
5036
199.4%
51.6
217.5%
26790
248.7%
123.4
227.5%
218.4%
01'81 to Feb'84
(67 .33)
-20.5%
-920
-12.2%
2.8
3.7%
10508
28.0%
62.0
34.9%
5.1%
Q1'78 to Feb'84
$15.53
119.6%
4116
163.0%
54.4
229.2%
37298
346.3%
185.4
341.8%
234.7%
Notes 2 Export weighted average for internationally traded crudes (including spot supplies) at the end of each period.
0* Average of changes in foreign currency prices for international oil supplies weighted by country imports.
The United States and net oil exporters Canada and the U.K. are excluded from the average.
t Index basis: 01-1981 equals 100
TreasuryllCE
February 6, 1984
Approved For Release 2008/05/05: CIA-RDP87TOO126R000100080002-9