Oil Crisis

12 Key excerpts on "Oil Crisis"

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  The Economics and Politics of China's Energy Security Transition

  • Hongtu Zhao(Author)
  • 2018(Publication Date)
  • Academic Press

    (Publisher)

  With the international energy market entering a new cycle of rising oil price at the end of 20th century, the energy crisis again has become the focus of concern in international community. Some people formulated the third Oil Crisis, the global energy crisis, and the energy crisis in China. New cycle of oil price rising exhibited a rise which was equivalent to the previous two oil crises and made nominal price reach a new record. Therefore, it was called the third Oil Crisis by many analysts. Some scholars named the rising of oil price caused by Iraq’s invasion to Kuwait in 1990 as the third Oil Crisis, and the new rising in the early 21st century as the fourth Oil Crisis. The sharply dropping of the oil price in the mid-1980s and the late 1990s were even called “reverse” oil crises.

  In light of the two oil crises and the regional energy crises in some countries and regions in recent years, energy crisis refers to such a state that the energy supply suffers a large-scale shortage or interruption, resulting in a sharp price rise, and leading to a great impact on the economy and society. Although the huge rise in price is the most prominent feature of the energy crisis, the essential factor to judge the energy crisis is the larger scale energy shortage or interruption and the relatively serious economic and social consequences. By this judgment, although the rise of oil price at the beginning of the 21st century is much bigger, and the highest and average prices of nominal oil price are much higher than those in the past, there are obvious and huge differences concerning the causes of high oil price and especially the consequences.

  In terms of causes, there was a larger scale oil supply disruption and shortage during both oil crises. During the first Oil Crisis, the interruption of the Arab oil embargo continued for 6 months from October 1973 to March 1974, with a daily supply disruption of more than 2.6 million barrels per day. Two interruptions occurred in succession during the second Oil Crisis. First, the 6-month supply interruption of 3.5 million barrels a day from November 1978 to April 1979 was caused by Iran's revolution. Second, 3-month oil supply disruptions of 3.3 million barrels a day, which took place two times in succession, resulted from the Iran–Iraq war in October 1980. From the dozens of disruptions that took place in the international oil market from the 1950s to the present, it can be seen that the scale of disruptions during the two oil crises was the largest, and others were just a few disruptions of short duration or small interruptions. As for the new round of oil price rise since the beginning of the 21st century, the scale, especially the relative size (the proportion of disruptions to the total global energy supply), was less than that in two oil crises, and fewer areas were involved in, though there were several oil supply disruptions caused by the attack on Iraq by the United States and the United Kingdom in March 2002 (3 million barrels per day for 3 months) and the strike of Venezuelan oil workers in December 2002 (2 million barrels daily for 2 months), the Libyan war in 2010, the domestic coup in Nigeria, and Katrina Hurricane.

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  The Global 1970s

  Radicalism, Reform, and Crisis

  • Duco Hellema(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  6Crisis in the World Economy From the mid- to the late 1970s

  By the mid-1970s, economic prospects were rapidly deteriorating everywhere in the world, the result of the Oil Crisis that broke out in the wake of the 1973 October War. Growth declined, inflation increased, and unemployment began to rise. As we have seen in previous chapters, the Oil Crisis and the economic recession of the mid-1970s affected the political atmosphere in large parts of the Western world. Budget cuts and austerity measures became inevitable, while reform plans had to deal with increasing financial problems. The Oil Crisis had a similar or even worse impact in other parts of the world, not least in the developing countries. In this chapter, we pay more systematic attention to the origins and the consequences of this mid-1970s worldwide economic recession. It was in many ways a truly global phenomenon, and as several commentators pointed out at the time, an example of increasing economic interdependence, viz. globalization.

  The Oil Crisis, its global impact, and its economic and political consequences are often presented as the start of a new era. Some authors even suggest that the seventies (in this case the ‘short’ seventies), the period of crisis and malaise, in fact began in 1973, dividing the 1970s into a progressive first half (the culmination of the 1960s, as some historians argue), and a conservative or neoliberal latter period (the start in fact of the eighties). In other words, the Oil Crisis acted as a global ‘game changer’, by undermining hitherto accepted political and economic paradigms and forcing states and other political actors (parties, unions) to adapt to the new circumstances. Yet, such conclusions are too easy. The Oil Crisis was in many ways the result – or culmination – rather than the negation of developments of the preceding years. The decisions of the Arab oil-producing states were a product of the growing non-Western assertiveness we have discussed in Chapter 4

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  Survey of Economic and Social Developments in the Arab Region 2014-2015

  • United Nations Economic and Social Commission for Western Asia(Author)
  • 2015(Publication Date)
  • United Nations Publications

    (Publisher)

  65 Survey of Economic and Social Developments in the Arab Region Impact of the 2014 oil shock on Arab economies Impact of the 2014 oil shock on Arab economies A. Introduction Despite a considerable increase in the use of alternative sources of energy and efficiency improvements, oil remains one of the most strategic commodities in the modern economy. The twentieth century has been labelled the “hydrocarbon century”: at the beginning of the century, global oil output was about 150 million barrels per year; at present this amount is extracted in just a few days. Oil prices are one of the most significant explanatory variables of global growth, but their fluctuations can be intense and unpredictable. Explaining oil price fluctuations and assessing their macroeconomic consequences at the national and global levels has become one of the most recurrent topics in economic literature. Over the past 40 years, researchers have explored the relationship between oil price shocks and macroeconomic performance. The Oil Crisis of 1973 was a particular turning point, and substantial empirical literature on the macroeconomic impact of oil supply appeared thereafter. Some early studies noted that higher prices of energy resources, relative to the prices of labour and capital, resulted in a loss of economic capacity and higher output prices. 1 In 1980, it was estimated that oil shocks depressed real output by 2 per cent in 1974 and by 5 per cent in 1975 (prices rose by 4 per cent in 1974 and by a further 2 per cent in 1975). 2 In 1983, James Hamilton published a seminal study on oil shocks. He looked at how oil prices affected the United States economy with a vector auto regressive (VAR) system, using quarterly data on gross national product (GNP) and other macroeconomic variables. The results were clear: all but one of the post-Second World War recessions in the United States were preceded, typically with a lag of nine months, by a dramatic increase in oil prices.

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  The Age of Global Economic Crises

  (1929-2022)

  • Juan Manuel Matés-Barco, María Vázquez-Fariñas, Juan Manuel Matés-Barco, María Vázquez-Fariñas(Authors)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  On the other hand, the Arab oil embargo on Western countries created new challenges for the latter, which, in their quest to reduce their dependence on this resource, sought new alternative energy sources while trying to reduce their consumption. In this respect, it should be noted that this situation is still having a major impact. We live in a society of continuous and unbridled consumption, and it is only when resources become scarce that we become aware of that reality. While it is true that more and more people are advocating restrictive energy consumption policies to protect the environment, there is still much to be done.

  Finally, it should be noted that the current economic and political situation is forcing different governments to take urgent energy measures. Specifically, following Russia’s invasion of Ukraine in February 2022, international retaliation, and Russia’s cutting off gas supplies to Europe, it seems that we are going to live, or rather, that we are already immersed, in a new energy crisis.

  3.6 References

  • Barciela López, Carlos. La edad de oro del capitalismo (1945–1973). In
    Historia económica mundial. Siglos X-XX
    , ed. Francisco Comín, Mauro Hernández, and Enrique Llopis, 339–389. Barcelona: Crítica, 2010.
  • Cameron, Rondo, and Larry Neal.
    Historia económica mundial: Desde el Paleolítico hasta el presente
    , 4th ed. Madrid: Alianza Editorial, 2015.
  • Caffentzis, George. A Discourse on Prophetic Method: Oil Crises and Political Economy, Past and Future.
    The Commoner
    , no. 13 (2008–2009): 53–71.
  • Carreras, Albert. El siglo XX, entre rupturas y prosperidad (1914–2000). In
    Historia económica de Europa. Siglos XV-XX
    , coord. Antonio Di Vittorio, 301–433. Barcelona: Crítica, 2003.
  • Centeno, Roberto.
    El petróleo y la crisis mundial: Génesis, evolución y consecuencias del nuevo orden petrolero internacional
    . Madrid: Alianza Universidad, 1982.
  • De Prado Herrera, María Luz. De la crisis del petróleo hasta la actualidad. In
    Crisis y desarrollo económico

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  The Age of Oil

  The Mythology, History, and Future of the World's Most Controversial Resource

  • Leonardo Maugeri(Author)
  • 2006(Publication Date)
  • Praeger

    (Publisher)

  In a few years, that culture would create new problems for the oil industry and markets. But once again, oil pundits did not an- ticipate anything at any time before the problems actually materialized. Collapse of Oil Prices and Industry Megamergers 181 CHAPTER 15 CHAPTER 15 The First Oil Crisis of the Twenty-first Century H istory never sleeps and never ends. Above all, it is always ready to shock everyone with its rapid shifts. So it is no surprise that all the pessimistic assumptions about the impending end of the glory days of oil-generated wealth were turned upside down in the first years of the new millennium by a new oil shock. As in the early 1970s, there were many economic reasons that fed the crisis, whose explosion was mainly the result of many years of inade- quate investments in new oil production capacity and infrastructure. However, as in the 1970s, a new political drama anticipated the cri- sis and shaped its psychological background. Once again, that drama erupted from the unsolved problems of the most oil-rich region of the world, the Middle East; this time, though, it took an unprecedented and dreadful form, through the terrorist attacks to the soil of the United States that, on September 11, 2001, destroyed New York’s World Trade Center, a wing of the Pentagon in Washington, and the lives of nearly 3,000 people. All of a sudden, the threat to global security seemed to have no border, no headquarters, no traditional army, no formal rules of engagement. Its elusive nature was held together by a messianic call for ‘‘Holy War’’ against all the alleged oppressors of Islamic values and culture, a war to be conducted by any group of ‘‘good Muslims’’ wherever in the world they felt oppression took place.

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  Energy: The Countdown

  A Report to the Club of Rome: Thierry De Montbrial

  • Robert Lattés, Carroll Wilson(Authors)
  • 2016(Publication Date)
  • Pergamon

    (Publisher)

  The OPEC states themselves would be hit by the reper-cussions. The prospects are so frightening we can only hope the leading participants in this ongoing drama will be sufficiently aware of the conse-quences to prevent any further sharp price increase for political reasons. However, one cannot rule out the possibility of an accident. What would happen, if our lack of foresight and irresponsible behavior led to a crisis because of a physical shortage of oil ? As we have already said elsewhere, the shortage would lead to an economic crisis. In this case, only an eco-nomic slowdown, no matter how it is arrived at, could lower demand for oil to the henceforth limited level of supply. Two extreme hypotheses can be envisioned : — If the shock came at a time of total disorganization of relations 3 On 14 June 1978, the OECD Council of Ministers adopted a concerted action program. This was an innovation calling for coordinated steps to be taken jointly by the 24 member nations. 196 Energy: The Countdown among consuming countries and between consuming and producing countries, the cost of the catastrophe would be untold for everyone involved. Some parties, however, would find themselves in a parti-cularly untenable position; these would be the countries lacking in energy resources of their own and with limited export capability. — If a shock occurred at a time when the consuming and producing countries had prepared for this eventuality, for example by drafting a universal rationing plan, the consequences would undoubtedly be more limited. This brings us once again to a simple idea: thinking and action are needed long in advance to avoid a catastrophe and its consequences. Internationally this means voluntary sacrifices concerning sovereignty. Let us thus prepare to react if the potential energy catastrophe occurs. But, above all, let us prepare to avoid it. It is up to us and us alone. In the final analysis, two main conclusions emerge from Part Two of this study.

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  The Energy Question Volume One: The World

  An International Failure of Policy

  • Edward Erickson, Leonard Waverman(Authors)
  • 2019(Publication Date)
  • University of Toronto Press

    (Publisher)

  We have distinguished a long-term problem fro m present-da y disturbances. The third aspect of the oil supply crisis , which wil l be the subjec t of the remainde r of this paper, relates to th e medium-term. It involves economic an d political issues , some o f which ar e more amenabl e to speculatio n tha n analysis . The problem, as we shal l se e later, is not exclusivel y monopoly power. There ar e complications . The thre e aspect s of the oi l crisis distinguished here are related. The long-term energy problem has been skilfully exploited i n recent years by various lobbies and th e media , especially in the USA , for a variety of motives. The Stat e Depart-ment, worried by the prospects of American impor t dependenc e fo r a strategic commodity, played a significant role in a campaign designed t o promot e a vast energy program. Oil companies have an obvious interest in propagating the belie f that petroleum i s in tigh t suppl y an d OPE C can onl y deriv e benefits from suc h a belief. There i s no doubt tha t a climate o f opinion wa s created which ma y have influenced recen t bargainin g rounds between companie s an d producer countrie s as well as the attitude s o f Arab governments in the present-day situation. On th e other hand , an early awareness of the long-ter m problem b y influencing the tim -ing and the rat e of substitution ma y alte r to som e extent th e energy situatio n in the medium-term. Finally , the present-day difficulties could exten d t o th e medium-term i f political mediation betwee n Israe l and th e Arab s fail t o produc e a satisfac -tory settlement. Bu t they may also help by forcing the hitherto passive govern-ments of the major consumer countrie s to tak e a close look at the whol e energ y situation. The medium-term problem, as we shall repeatedly stress, may be solved 76 The oil game by ne w and imaginative forms of cooperation betwee n produce r and consume r countries.

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  Energy Security

  The External Legal Relations of the European Union with Major Oil and Gas Supplying Countries

  • Sanam S. Haghighi(Author)
  • 2007(Publication Date)
  • Hart Publishing

    (Publisher)

  However, the positive note was that, whereas the Oil Crisis could have touched off a chain reaction of destructive forces, it might in fact have helped to improve international coopera-tion. 74 The anxiety of an oil shortage led some consumers to approach oil-exporting countries directly in order to satisfy their crude oil needs, trying to buy as much as possible at whatever price (panic buying). Major oil companies also failed to take steps to reduce this consumer anxiety. Unlike some who believe that their failure to act was due to impotence, others believe the reason to be the fact that political behaviour of the consumer nations’. See H Maull, ‘Oil and Influence: the Oil Weapon Examined’ in G Treverton (ed), Energy and Security (Farnborough, Gower Publishing, 1980) at 3. 69 Evans, OPEC, Its Member States , above n 58, at 84. 70 The arrangements allowed the Arab oil to be swapped by another country’s energy to be sent to the embargoed country. 71 Evans, OPEC, Its Member States , above n 58, at 84. 72 Ibid . 73 Statement of the Managing Director of the International Monetary Fund, Johannes Witteween, in January 1974. See in general, M Mauksch, Energy and Europe: EEC Energy Policy and Economy in the context of the World Energy Crisis (Brussels, European News Agency, 1975) at 13. 74 See H Schmidt, ‘The Struggle for the World Product: Politics between Power and Morals’ (1974) 52 Foreign Affairs 437 at 437: He believes that each side, the oil-producing and the oil-consuming countries, must learn to understand and appreciate the other’s interests, means and possibilities, since there is no other way of avoiding abortive actions and corresponding reactions. ( ibid at 443) See also GA Pollack, ‘The Economic Consequences of the Energy Crisis’ (1974) 52 Foreign Affairs 452. 54 External Security of Energy Supply in Europe: Historical Overview ‘they welcomed the higher prices and higher profit margins that this panic-buying induced’.

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  The Global Economic Crisis and Consequences for Development Strategy in Dubai

  • Ali Al Sadik, I. Ahmed Elbadawi, Ali Al Sadik, I. Ahmed Elbadawi(Authors)
  • 2012(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  But the belief exists, and in a market, this is all that matters. A Crisis The fundamental question, as mentioned before, is whether the futures market is the appropriate entity for the determination of reference prices for oil in international trade. My personal answer is an emphatic NO. The main reason is that the futures markets and other derivatives markets are only in part oil markets. To put it succinctly, this will not do. Nobody, however, wants to contemplate a change in the oil price regime despite the shock caused by the big price swing that The Oil M a r k et a nd the Fina nci a l Cr isis 57 took the oil price in July 2008 above $140 per barrel and brought it down within six months to a low of $32 per barrel. The reac- tion of the governments of big OECD oil-importing countries was (after an initial and ill-founded outburst against OPEC) to blame weak or insufficient market regulation for this disturbing price cycle. The real causes lie elsewhere. Financial markets have an inherent tendency to overshoot or undershoot. They thrive on volatility. As mentioned earlier on, their relationships to the fundamen- tals of supply and demand in the physical market are far from strong. Finally, the complication for an interpretation of the big price swing is that it occurred at a time when a world financial crisis was brewing, which in the end exploded with grave consequences for the real world economy. The World Financial Crisis Books about the financial crisis are now falling off the shelves, which cannot hold all those that have been written in the past two years. As a result, one can list a large number of presumed causes for the crisis, most of them being culprits, but not any single cause taken on its own appears to be responsible for the emergence and development of the crisis. The real estate boom is seen by some as an important cause, but this begs the question of why the boom emerged and continued for a long time unabated.

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  OPEC: Twenty Years and Beyond

  • Ragaei el Mallakh(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  At the time this paper was completed in June 1980, it seemed possible, if not likely, that Iran’s turbulent policy would be upset again in conflict with the United States or Iraq. However, there was not much more that sanctions or even a blockade could do to Iranian oil exports by then. The exports were already down to perhaps less than 1 million barrels per day (b/d), compared with 5 million b/d in mid-1978. The surplus of supply potentially available elsewhere over effective demand in the crude oil market of spring 1980 was probably two or three times as large as the remaining Iranian exports that might be cut off from the market. So the effects of a renewed crisis there upon the market might be considered very limited in strictly economic terms. Politically, however, a renewed Iranian crisis was still liable to affect the market by contributing yet again to all buyers’ anxiety and some sellers’ self-confidence.

  Profiles of Crisis

  In the amplitude of their effects upon OPEC and world crude production, the two crises were notably similar. Indeed, it is difficult to separate them on a single graph because the fluctuations in supply that they wrought happened at roughly the same level of OPEC production. Even the timing was only a couple of months out of phase. The decline in OPEC output from November 1978 to January 1979 — from a strike in the Iranian oilfields to a shutdown as the revolution erupted — was never quite as sharp or as deep as from September to November 1973, during the Arab oil embargo. (Production in autumn 1978 had never been quite as high as in autumn 1973, however.) In both periods, it took about six months for OPEC production to regain its pre-crisis level, but in 1979, world production took only about three months to recover. There was more non-OPEC supply available to fill in the gap in production. A comparison such as that in figure 1 is a reminder that while OPEC output in 1978–1980 was only at the same general level as in 1973–1975, world output had increased. Since that earlier crisis, there has been slow but substantial growth in world oil production: in net terms, all of it has been outside OPEC.

  The political crisis affecting Middle East crude supplies dragged on much longer in 1979 than in 1973. As noted above, the pressure on supplies did not. In both cases the initial upsurge of prices reflected the understandable fear of importers that the crisis might reduce world crude supply sharply for a significant period, but in neither case did that happen. Both crises are almost lost in annual statistics. Following the Arab embargo, OPEC production in 1974 averaged less than 1 percent lower than in 1973, and world production of crude was virtually unchanged (admittedly, in the few years before, OPEC exports, particularly of Arab crude, had been rising rapidly). In 1979, even OPEC production turned out to be higher than in 1978, in spite of Iran’s brief shutdown and prolonged reduction of exports, and world production reached a record 62.8 million b/d. But the expectations — and, perhaps even more, the fears of political uncertainty — were what mattered.

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  The US, the EC and World Trade

  From the Kennedy Round to the Start of the Uruguay Round

  • Giuseppe La Barca(Author)
  • 2016(Publication Date)
  • Bloomsbury Academic

    (Publisher)

  3 The Oil Shock, the Partial Recovery and their Impact on Trade Policies Across the Atlantic The onset of the Oil Crisis and the disparate responses of the industrial countries The years 1974 and 1975 witnessed an unprecedented slump on both sides of the Atlantic which had its impact on trade relations between the United States and the EC member countries, as well as between the two areas and the rest of the world. Contrary to previous slumps in the nineteenth and twentieth centuries, the reversal of the upwards phase that had marked most of the 1950s and 1960s was accompanied by an inflation upsurge that hit the EC member states and the US. Indeed the years following 1973 are remembered as the years of stagflation. The 1974–5 slump was triggered by an exogenous factor, the so-called Oil Crisis set off by events that took place in the last quarter of 1973. Triggering, however, is not synonymous with cause, or even main cause, of a process. Besides, although its impact on the economies of both sides of the Atlantic was broadly similar, the crisis took partially different features in the US and the EC member states, as context and constraints were not the same in the United States and in the Western European countries, and thus gave rise to different responses in political and economic terms. 1 Two lines of thought compete in explaining the causes of the Oil Crisis. The first perspective emphasizes the distortive impact of the oil import bill, which concurrently pushed up domestic prices and subtracted resources for domestic demand, and the ineffectiveness of the response of the monetary and fiscal authorities. 2 The second one places the stagflation in a wider context in which the oil price hike was not the main causal engine. A Marxist commentator claims that ‘the 1974–75 recession was a classical overproduction crisis and the outcome of a typical phase of decline of the rate of profit’, which pre-dated the leap in oil prices following the Yom Kippur War.

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  Valuing Oil and Gas Companies

  A Guide to the Assessment and Evaluation of Assets, Performance and Prospects

  • Nick Antill, Robert Arnott(Authors)
  • 2000(Publication Date)
  • Woodhead Publishing

    (Publisher)

  Economic assumptions 41 THE 1997 ASIA CRISIS In mid-1997, a currency crisis began to sweep through the 'Tiger economies' of South-East Asia. In retrospect, it became apparent that their rapid growth had been excessively dependent on imported capital, on which an inadequate return was being achieved. Their current accounts were in substantial deficit, and when the capital inflows ceased, a currency crisis ensued. The impact of these events was magnified by an inadequately regulated and inflexible banking system. The result was a collapse of the exchange rates of the currencies concerned, starting with the Thai baht, and a subsequent severe economic contracdon. While the price elasticity of demand for oil in the region is relatively low, the severity of the currency crisis probably had some impact on demand. Even if it had not, the economic contraction clearly did, and demand in the region was reduced by some 2 million barrels a day in 1998, versus previous expectations. Asia had by the mid-1990s come to reach some 2 5 % of world oil demand, but it represented closer to 5 0 % of demand growth. The reversal caused by the crisis was the major factor in the coUapse in oil prices that occurred during 1998, though two mild winters and faster than expected increases in Iraqi oil sales did not help matters. Sensible expectations for the new decade probably comprise the assumption that demand in the region will continue to be considerably faster than in the O E C D countries, but that, along with G D P growth, it wiU not achieve the unsustainable levels of the first half of the 1990s. LDC evolution The time will probably come when greater per capita incomes, greater capital resources, access to more sophisticated technology and an established infrastructure will alter the demand characteristics of these economies into something closer to the US or O E C D European model.

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