At Essentra Pipe Protection Technologies, we understand all too well how volatile oil and gas prices can be. Due to world events and economic trading on a global scale, it’s common to see prices up one day and then plummet the next. Undoubtedly, the oil and gas industry has fluctuated for years because of various historical events. Below, Essentra has provided a little information and a brief walk through history on how world events continue to affect the oil and gas industry.
The Organization of Petroleum Exporting Countries, or OPEC, was founded in 1960 by Venezuela, Saudi Arabia, Kuwait, Iraq, and Iran. Its goal is to coordinate and unify member countries’ petroleum policies, thereby ensuring the stability and fairness of the market as well as a steady, efficient supply for consumers. Algeria, Indonesia, Libya, Nigeria, Qatar, and the UAE joined at the end of 1971, being accompanied by a decrease in oil’s purchasing power. The ability to control the price of gas and oil shifted from the United States to OPEC in March of 1971 when Texan companies’ production limits were lifted.
Yom Kippur War
Israel was attacked by Egypt and Syria on October 5, 1973, and thus the Yom Kippur War began. When Israel received support from the US and its allies, some Arab exporters responded with an oil embargo. This caused a net production loss of more than four million barrels per day until March 1974, and during those six months, oil prices rose 400%.
US Price Controls
In response to the oil embargo, the United States enacted price controls on domestic oil and gas, which led consumers to pay 50% above the domestic price for imported oil and led US producers to get less than the world’s market price. Although the price controls softened the recession in the short term, it inhibited US production and exploration.
The Gulf War
In August 1990, Saddam Hussein invaded Kuwait, beginning the Gulf War. The war led to a decrease in oil production and a corresponding increase in the price of crude oil. After the war, oil prices declined steadily, becoming the lowest they’d been since 1973.
OPEC’s Quota Increase and the Asian Economic Crisis
Prices rose yet again in 1994 as the US economy strengthened and the Asia-Pacific region went through a prolonged economic boom. As the world’s oil consumption increased by more than six million barrels per day from 1990-1997, Russia’s production declined by over five million barrels daily. However, prices sank in 1997 as Asia went through an economic crisis and OPEC increased the production quota to 27.5 million barrels daily.
September 11, 2001
OPEC increased production in 2000, but the overshoot led them to cut quotas as a price stabilization method. However, the terrorist attacks of September 11, 2001, caused oil prices to plummet. In November of that year, the spot price of Texas crude was down by 35% over the previous year, and in January 2002, OPEC slashed its quota by almost two million barrels daily. This, along with decreases by other non-OPEC members, caused oil prices to rise to over $25/barrel by March of 2002.
Essentra Pipe Protection Technologies Remains Committed
As history demonstrates, the United States and most other countries are almost always involved in an unpredictable oil and gas price cycle that’s heavily affected by global events. Thus, the industry will undoubtedly continue to be affected and energy prices will rise and fall.
However, Essentra is committed and dedicated to continuing to provide high-quality pipe protection products for our clients and producing companies no matter what. Our goal is to consistently offer you the quality assurance and service you deserve, and to help you deliver on time, every time. Learn more about our products and services here, or freely contact Essentra directly for immediate assistance.