There is a distinct possibility that supplies of oil to industrial countries will be restricted from now on to an extent which will significantly affect industrial output. British output may be affected directly by cuts in its own oil supplies, possibly accentuated by reductions in other energy supplies, and indirectly by the impact of cuts on other developed and developing countries. It is not possible to predict the scale or duration of these cuts, nor is there any certainty about the level—in relation to recent trends—to which Middle East supplies will ultimately be restored, and if so, when. There is less reason to be uncertain about the price of oil. It will not go down again and may well go up further.

The question which faced us in mid-November was whether in these circumstances it made sense for us to publish the detailed calculations about prospective developments of the British economy, which we had virtually completed before the oil cuts began and which had already been falsified by events. We have thought it worthwhile for two reasons. First, they give a quantitative framework of reference against which we can discuss, essentially in qualitative terms, the possible impact of oil cuts. Secondly, the quarterly analyses summarised in the main tables are used as benchmarks by many students of the British economy. It is useful to keep the series going, and particularly on this occasion to take note of the fact that the statistical picture of the British economy has recently been modified by the change from the 1963 price base to the 1970 price base as well as by the normal revisions to the national accounts which occur with the publication of the October issue of Economic Trends.

The basic assumption of the forecasts set out in the usual tables, both for the world and for the British economy, is that the increase in the price of oil will ‘stick’, but that supplies of oil will be available to all who wish to buy them. This last assumption has of course already been proved wrong. In the final part of this Appraisal, on page 6, we consider what kind of adjustments may have to be made to these ‘underlying’ forecasts if oil supplies continue to be limited well into 1974. First we will consider an ‘unconstrained’ world.