Home/ News / World/  Timeline: How global oil prices fluctuated since the oil shock of 1973

On Monday, oil prices fell to their lowest ($46 per barrel) since spring 2009, prompting the billionaire Prince Al-waleed bin Talal of Saudi Arabia to say that we may never see a $100 per barrel oil. He put it down to simple oil economics - lesser demand and an oversupply.

Here’s a timeline of how global prices have fluctuated since the first oil shock of 1973.

1973 - The Oil Shock (Price of oil - $3/barrel to $12/barrel)

Following Syria and Egypt’s attack on Israel which began the Yom Kippur War, the OAPEC (Organization of Arab Petroleum Exporting Countries) proclaimed an oil embargo against the US for its active involvement in the war. The US supplied Israel with arms through President Richard Nixon’s special airlift plan called Operation Nickel Grass. Soon after, Organization of Oil Exporting Countries, which also includes non-Arab nations, raised the price of oil by 70% to $5.11 a barrel. During the oil shock, the price of oil increased to $12 from $3. Arab countries also reduced oil production by a significant 25% or about 5 million barrels per day (bpd).

1979 - The Second Oil Crisis or The Great Panic (Price of oil - $32.50/barrel)

The second oil crisis (or oil shock) happened thanks to a decline in oil production in Iran (5.8 million bpd in 1978 to 445,000 bpd in 1979), necessitated by the Iranian Revolution of 1979. It resulted in immediate panic, which in turn, drove prices far higher than justified by supply. Price of oil rose to $32.50 in December 1979. However, due to the 1980 Iran-Iraq war that followed soon after, the price of crude oil rose to $39.50 per barrel. The oil shock hit the Detroit automobile industry the hardest, with sales of Japanese small and fuel-efficient cars—Toyota, Honda and Datsun—rocketing over US car makers such as General Motors, Ford and Chrysler.

1986 - Oil price collapse (Price of oil fell from $27/barrel to $10/barrel)

In 1986, oil prices fell from $27 per barrel to $10 per barrel. The collapse in oil prices happened becasuse of reduced demand largely due to slowing economic activity, because of the previous oil shocks. Overproduction meant that prices fell by 46%, the most in six years. The price collapse benefited oil-consuming economies like the US and Japan, while severely affecting oil-producing nations like the then Soviet Union and OPEC countries. The drop in oil prices is considered a major factor in eventual dissolution of the Soviet Union in 1991.

1990 - Iraq invasion of Kuwait (Price of oil - $21/barrel to $46/barrel)

In the wake of Iraq’s invasion of Kuwait in August 1990, the price of oil more than doubled from $17/barrel in July ($21 end-July) to $46/barrel in October that year. The increase in prices was shortlived and for a total of 9 months. After the spike, oil prices went through a four-year period (till 1994) which saw a steady decline.

1998 - Oil crisis of 1998 (Price of oil - $11/barrel in December 1998)

Oil prices played a significant part in the collapse of the Russian economy in 1998. The economic crisis in Asia, particularly in Japan meant that demand for oil significantly declined, hitting Russia’s foreign reserves hard. Countries such as Saudi Arabia and Venezuela declined to cut production. Low oil prices also affected economies like that of Saudi Arabia, which at the time was in a state of political transition. Towards the end of 1998, oil prices plummeted to $11 per barrel.

2003 - The Iraq War (Price of oil - $26.75 before the war i.e March 2003)

In the aftermath of the invasion of Iraq by the US, oil prices spiked again, rising over 38% from August 2003 to August 2004. Iraq, which was producing nearly 6 million barrels per day, stopped production after the invasion by the US-led coalition forces. Prices also spiked because of an increase in demand, especially from developing economies. The two year period between 2003 and 2005 saw a steady surge in prices. By the end of 2005, oil prices rose by 40% throughout the year, ending at $61/barrel.

2008 - The Economic Crisis - Rise and fall (Price of oil - $145/barrel in July to $32 in Dec)

Between 2004 and 2008, oil prices saw a steady rise, primarily because of an unprecedented increase in global demand for oil and falling supply, along with geopolitical reasons like the Israel-Lebanon war. The production by non-OPEC countries decreased significantly, unable to respond to the growing demand. Prices peaked at $145/barrel in July 2008. However, after the then US president George Bush announced that the ban on oil drilling would be lifted, prices fell again. By mid-September 2008, prices fell to $92/barrel. The freefall continued, as it finished the year at $32/barrel.

2011 - The Arab Spring (Price of oil - $96.80 in November 2011)

Continued political turmoil in Arab countries played a significant role in spiking oil prices to $95/barrel. One of North Africa’s biggest producers, Libya stopped production due to the escalation in the political situation there, thereby resulting in a spike. Libya was producing close to 1.5m barrels/day before the conflict began. Equally, countries like China and other emerging economies saw a growth in demand, which saw an increase by 1.2% (~1.1m barrels/day).

2014-present - The freefall (Price of oil - $115/barrel in July 2014 - $46/barrel present)

Oil prices in July 2014 peaked to about $115/barrel. However, prices have been experiencing a freefall for a variety of reasons, beginning with resumption of production and exports from Libya. Conflict-ridden Iraq, which continues to face challenges like the rise of the IS, also started producing and exporting oil. With a weaker demand for oil, and continued rise in supply, oil prices took a beating, plunging to $80 in November. One of the most affected nations - Russia, experienced yet another economic downturn, with the rouble plummeting to 1998 levels. Other oil-dependent economies like Saudi Arabia, Venezuela and Iran are expected to take a hit because of cheap oil.

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Updated: 13 Jan 2015, 03:45 PM IST
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