In 1973, Members of the Oraganization of Oil-Exporting Countries (OPEC) reduced oild exports, which more than quadrupled oil prices. what effect did that have on less developed nations?
a. Their development increase rapidly because if the profits they made form oil, and some nations approached the status of developed countries.
b. They were unable to repay foreign loans because they spent so much on oil, and they had to give up large amounts of land to lender nations.
c. They had to borrow money to buy oil, and this increased debt made it difficult or impossible for them to repay foreign loans
d. They formed an international alliance to pressure OPEC to reduce oil prices and to invest in oil exploration in less developed countries
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I agree.
The correct answer is (c) They had to borrow money to buy oil, and this increased debt made it difficult or impossible for them to repay foreign loans.
To arrive at this answer, let's analyze the situation. In 1973, when OPEC reduced oil exports, it caused oil prices to increase by more than four times. This sudden increase in oil prices had a significant impact on less developed nations. Here's how you can think through and arrive at the correct answer:
1. Understand the situation: OPEC's decision to reduce oil exports meant that there was less oil available on the global market. As a result, the demand for oil exceeded the supply, which caused prices to skyrocket.
2. Consider the effect on less developed nations: When oil prices increased dramatically, less developed nations faced several challenges:
a. Increased dependency: Many of these countries heavily relied on imported oil for their energy needs. With oil prices rising, they had to spend more money to buy the same amount of oil. This increased their dependency on oil-producing countries.
b. Increased borrowing: To afford the higher-priced oil, less developed nations had to borrow money from other countries or international organizations. This borrowing was necessary to cover the cost of oil imports, but it also increased their debt burden.
c. Difficulty in loan repayment: The increased debt from borrowing to buy oil made it challenging for these nations to repay their existing foreign loans. The high oil prices meant that a significant portion of their finances went towards purchasing oil, leaving fewer resources available for debt repayment.
3. Evaluate the provided options: Looking at the answer choices, you can eliminate options (a) and (b) because they portray a more positive outcome, indicating rapid development or repayment of loans. The correct answer, (c), aligns with the explanation provided above. Option (d) is not directly associated with the impact of increased oil prices on less developed nations.
Therefore, based on the analysis, option (c) is the one that accurately reflects the effect of increased oil prices on less developed nations.