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The 1990 Oil Shock is Like the Others

First I will set out what happened to prices in 1990, then review the long term prospects in the light of the change.Challenge and responseSince 1912, and the first shipments out of the Persian Gulf, the world price of oil has been far above the fording/developing cost of creating new reserves. The result is a huge excess of potential production, which the owners must somehow dam up to maintain the price.Since the OPEC nations took over 20 years ago, the process has been much more turbulent. First, their chief instrument for price-raising has been to provoke a crisis, or take advantage of one. Second, there has usually been not only potential excess supply but actual excess producing capacity. This makes the high price even more insecure.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Security and Geopolitics – Energy Security

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q48 - Energy: Government Policy

Keywords: Oil shocks, Persian Gulf, OPEC, Iraq, Kuwait, Cartel

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-1

Published in Volume 11, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.