ABSTRACT
The oil crises of the 1970s and the shockwaves they sent throughout the industrialized countries and the Third World appeared at one point to be ushering in an "Arab Century." But the first half of the 1980s produced a radically different oil reality. New sources of oil were developed outside Organization of Petroleum-Exporting Countries and the Arab Middle East. The chapter examines political and strategic ramifications of the new oil reality with reference to three geographic spheres. On the global level, the industrialized states adopted a more sober view of Arab oil power. In the regional sphere, the sharp drop in oil revenues and a growing balance of payments deficit forced the Arab oil producers to restrict their economic largess, reduce public spending, reduce imports from the West and withdraw foreign currency reserves. For Israel, the new oil reality generated a positive redress of the military balance.
