RISK AND VALUATION IN THE PETROLEUM INDUSTRY:THE CONSEQUENCES OF THE ARAB OIL BOYCOTT

When the original contracts between the Organization of Petroleum Exporting Countries (OPEC) and the Arabian‐American Oil Companies (ARAMCO) were signed, the price per barrel of crude was less than $3.00. The prices were stated in U.S. dollars because the dollar was “the” international currency and because it was “as good as gold”. Governments accumulating dollar reserves could convert them into gold at the rate of $35.00 per ounce of gold (guaranteed by the U.S. Government). This tie between the dollar and gold was eliminated by President Nixon's “New Economic Policy” (NEP) enunciated on 15 August 1971.