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The 1990 Oil Shock is Like the Others

M. A. Adelman

Year: 1990
Volume: Volume 11
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-1
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Abstract:
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.



Understanding the 1990 Oil Crisis

Philip K Verleger, Jr

Year: 1990
Volume: Volume 11
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-2
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Abstract:
The cause of the Iraqi invasion of Kuwait on August 2, 1990--and hence of the worldwide energy crisis that it precipitated--was economic, although the issue was one that might not appear immediately relevant to consumers at the pumps. For several months preceding the invasion, Iraqi President Saddam Hussein had been asserting, with some justification, that Kuwait was in effect engaged in economic war with Iraq, stealing oil from the disputed Rumaila field and producing in excess of its OPEC quota.The validity of Iraq's assertions has never been adjudicated by the international community, before or since the invasion. Instead, on August 6 the United Nations imposed an immediate and nearly total embargo on oil exports from Iraq, as well as on Kuwait, which Iraq had by then absorbed. This embargo removed almost 5 million barrels a day of oil from the world market. Most of the lost supply was in the form of crude oil. However, the embargo also forced the shutdown of sophisticated export refineries in Kuwait that at the time of the invasion were producing 750,000 barrels of refined product per day, including a large share of the industrial countries' supply of light products such as gasoline, jet fuel, and heating oil.





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