Outlook and appraisal [July 1979]

Since the publication of the April Quarterly Economic Commentary, two events have occurred which are likely to have a substantial effect on the Scottish economy in the next few years. Firstly, the OPEC countries have agreed on a rise to between $19 and $23.5 in the price of a barrel of oil. As indicated in the World section, given inelastic demand, the effect of this is to transfer real income from the oil importing countries to the oil exporters. This need not depress world trade if some effective mechanism for recycling the foreign currency which the oil
exporters will accrue can be found. Complete success is unlikely and so, as
suggested earlier, world trade will be reduced by about 1% as a result of the price rise. The Scottish economy relies heavily on trade with the outside world, and therefore must expect some reduction in the demand for Scottish goods from oil importers, though this may be partially compensated by increased exports to OPEC countries.