It is now generally accepted that the energy problem of the 1970s was no passing phenomenon but marked the end of an era of cheap coal and oil, and the transition to high cost energy. In real terms the price of oil is now more than five times what it was in 1972 (see Figure) and World Bank projections for the years to 1990 indicate an annual increase of 3 percent a year. Now that energy is no longer cheap, it ranks in importance with the classical factors of production -- land, labor and capital -- and its supply and cost must be given due weight in the plans of economic managers at all levels. These considerations apply not only to forms of energy that are traded international, but also to energy that is produced and consumed domestically, and to traditional as well as commercial fuels, because the prices, availability and consumption levels of all forms of energy are inextricably interrelated. Over the next two decades the increased price of oil is expected to cause significant changes in the sources of supply, a large increase in investment in energy production to reduce dependence on imported oil, and greater efforts to make energy use more efficient.
Energy consumption in the developing countries accounts for small part of the world total, but has been growing much faster. During the 1980s commercial energy consumption in these countries is projected to grow at 6.2 percent a year, somewhat more slowly than in the years before the oil price increases starting in 1973. 1 During the 25 years preceding 1973, the relationship between the annual GNP growth of developing countries and their energy demand____________________