The oil and gas markets are intrinsically linked to political and military developments worldwide, with trends influenced by such events as the wars in the Middle East, the Asian and subprime crises and political upheaval in oil and gas producing regions. The major milestones from 1973 to today are described below.
October 1973 – The Yom Kippur War: The Yom Kippur War between Israel and a number of Arab states gave rise to what oil-importing nations termed the "first oil crisis". Here the Organization of Petroleum Exporting Countries (OPECCreated in 1960, OPEC currently has 12 members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia...) used the "oil weapon" by proclaiming an embargo on countries supporting Israel. As a result, the price of crude rose fourfold from less than $15 a barrelUnit of volume measurement for crude oil that is equivalent to approximately 159 liters (0.159 cubic meters)... to more than $50 (at 2011 prices).
1974-1980 – The counter-attack by oil-importing countries: Following cost-cutting measures and rationing – a shock to the West after so many years of growth –, oil-consuming countries reacted by exploring other forms of energy, like nuclear powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output.... They also began developing new technologies that otherwise would have taken longer to get off the ground, paving the way for a production revival in mature U.S. oil fields and offshoreRefers to sea-based oil exploration and production operations, as in "offshore license" or "offshore drilling". production in the North Sea, for example. The result was a global rise in non-OPEC production. In 1974, the International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... was founded with the initial goal of defending the interests of the oil-importing countries of the Organisation for Economic Co-operation and Development (OECDFounded in 1960, the OECD promotes policies that will improve the economic and social well-being of people around the world...).
1980-1981 –The Iranian Revolution: Oil prices doubled from mid-1978 to 1981 during the second oil crisis, as concerns over the Iranian Revolution and the Iran-Iraq War, combined with renewed growth in global consumption, pushed the price of oil up from $50 to $100 a barrel. This time, however, demand fell and technology continued to advance, setting the stage for a price decline in the following years.
1986 – OPEC's annus horribilis: With production continuing to rise in non-OPEC countries, the situation had become unbearable for the cartel by 1985. Saudi Arabia first attempted to stabilize plummeting prices by decreasing production. Then in December 1985, it performed an about-face by announcing that it would sell its crude oilOil that has not been refined. unconditionally at market price in an attempt to claw back market share. The subsequent "oil glut" saw the price of crude collapse to as little as around $30. In late 1986, Saudi Arabia abandoned its failed offensive and allowed OPEC to re-establish production quotas.
September 1980-August 1988 – The long Iran-Iraq War: Iran and Iraq, two of OPEC founding members, embarked on an interminable war that would cost nearly one million lives and inflict severe damage on both countries' oil facilities. Among the many root causes was Iraq's desire to increase its access to the Gulf and consequently boost oil exports.
August 1990-1991 – The Iraqi invasion of Kuwait: Gasoline prices were also one of the main causes of the First Gulf War. Coming out of its bloody combat with Iran, Iraq invaded Kuwait after the emirate directly threatened to put further downward pressure on the price of crude. An international coalition forced the Iraqi troops out. The regime held on to power but had to withstand severe sanctions, including the "Oil-for-Food" program that would remain in place until the Second Gulf War in 2003.
1998 – The Asian financial crisis: The Asian financial crisis took the world by surprise, and OPEC was no exception. After increasing production in 1997, the cartel took a severe blow when the crisis pushed oil prices down to historical lows of less than $20 a barrel. It reacted by slashing production quotas – with disastrous consequences for many oil-producing countries – until prices started to recover.
Late 1990s – The rise of LNGLNG is composed almost entirely of methane. Liquefying the gas reduces its initial volume by a factor of around 600...: Toward the end of the century, liquefied natural gas (LNG) started to occupy a growing place in energy markets. Its share increased by around 7% a year from 2000 to 2012, and now accounts for some 10% of all gas consumed worldwide. And as LNG can be shipped and does not rely on land-based pipes for transportation, it has created a spot marketAn organized international market where traders buy and sell oil for cash... for gas alongside long-term contracts between countries.
March-April 2003 – The Second Gulf War: The United States intervened in Afghanistan shortly after the terrorist attacks of September 11, 2001. Then, after accusing the regime in Bagdad of supporting al-Qaeda terrorists and harboring weapons of mass destruction, the U.S. invaded Iraq backed by an international coalition, albeit a smaller one than in 1990. The offensive and subsequent occupation destroyed the country's infrastructure (bridges, water treatment facilities, power plants, etc.), and brought Iraqi hydrocarbonOrganic compound consisting of carbon and hydrogen. Hydrocarbons are the principal constituents of crude oil, natural gas and petroleum products. production almost entirely to a halt. While OPEC intervention stopped oil prices from soaring during the initial intervention, a significant increase was observed in 2004.
2007 onwards – The shale gasShale gas is found in deeply buried clayey sedimentary rock that is both the source rock and the reservoir for the gas... revolution: After a long period of high conventional oil and gas prices, driven by a spike in global energy consumption, the United States began focusing its efforts on large-scale production of shale oilRefers to liquid hydrocarbons extracted from oil shale (see definition) by heating, pyrolysis or hydrogenation. and gas. This marked the beginning of the "shale gas revolution" (See Close-Up: The U.S. Shale Oil and Gas Revolution).
2007-2008 – Upward price spiral: Strikes in Venezuela, production stoppages in Nigeria and other regional disruptions dragged global oil supply down. At the same time, tax cuts in the U.S. and increasing affluence in China and other emerging economies drove demand – and prices – to dizzying new heights. After selling for $96 in January 2008, the price of BrentBrent is the name given to a relatively light crude oil made from a blend of crudes from 19 oil fields in the North Sea... crude soared to $144 in July of the same year.
Summer 2008 – The U.S. subprime crisis: The collapse of the U.S. property market crippled the country's banking system before spreading to the rest of the world, sparking the worst economic crisis since the Great Depression. Global demand for oil contracted for the first time since 1982-83, falling 0.3% in 2008, just after OPEC had increased production. As a result, oil prices decreased to $35 a barrel.
2009-2014 – The Arab Spring: Oil prices were volatile over the period as Iran threatened to block the Strait of Hormuz, a strategic oil shipping route, and the Arab Spring led to uprisings in several oil-producing countries. This was exacerbated by strong growth, and hence higher demand, in emerging economies. Consequently, oil prices rose steadily and squeezed economic growth worldwide. Some experts even warned of a "creeping oil crisis".
Mid-2014-early 2015: Saudi Arabia grew anxious after the unconventional oilOil that cannot be extracted using current technology or that entails additional technology or costs to produce... and gas boom in the United States began eating away at its market share. In an attempt to reduce the profitability of U.S. producers, it decided to maintain production levels in order to bring down oil prices. At the same time, slowing growth in China and crises in other countries such as Brazil caused demand to rise more slowly. Under the combined weight of these factors, the price per barrel fell to around $60 in early 2015, after having hovered well above $100 since 2011.
2015 to early 2016: The crisis is being dragged out by the standoff between Saudi Arabia and U.S. shale oil producers, which continue to maintain a high level of production. Even if oil demand in 2015 rose by 1.6 million barrels to 94.2 million barrels a day, as forecast by the International Energy Agency (IEA), there is still a large supply glut and the price of oil continues to decline. In January 2016, the price of Brent crude fell below $30 a barrel.