Oil - Supply and Demand: Accidents Will Happen

After a decade in which oil was an unwelcome item on the climate change agenda, it has now reappeared on the international economic and geopolitical stage. But the oil issue is not what it used to be. There are no oil embargoes; there is not the kind of confrontation between exporters and importers that reached a climax in 1973. Supplies are not disrupted in the way they were following the Iranian revolution in 1979 and the start of the Iran-Iraq war, which took the cost of oil to around $80 at today’s prices. The International Energy Forum, just concluded in Amsterdam, was short on specifics but long in goodwill and heavy with ministerial participation. So, what are today’s oil problems?

The World Today Published 1 July 2004 Updated 16 October 2020 5 minute READ

John Mitchell

Between 1986 and the end of last year the oil price, as indicated by the price of Brent crude, averaged around $25 per barrel at today’s dollar values. It was a price low enough to revive growth in world oil demand – though not in oil’s share of world energy demand – and high enough to encourage the development of oil supplies outside the Organization of the Petroleum Exporting Countries (OPEC), and the expansion of natural gas and other alternatives.

It may not be sufficiently high to support increases in per capita incomes in oil-exporting countries, whose populations are among the most rapidly multiplying in the world. So there is a latent conflict between their expectations and the continuation of what looks like an equilibrium oil price of about $25.

Export-dependent oil economies are also at risk from price fluctuations. These are not new, but for oil they have been extreme. Between 1993 and 1997 the Brent price was below $25.

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