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Carolina Calderón

THE OIL CRISIS OF THE 70`S

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BACKGROUND

• USA depended increasingly onimported oil.

• The Middle Eastern countries had

low oil price.

• In the early 1970s imported oil costonly $2.30 per barrel

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THE OIL CRISIS BEGINS

• The OPEC (Organization Of 

Petroleum Exporting Countries)

agreed to restrain oil productionin order to get higher prices.

• The 1973 Arab-Israel war 

(Egypt and Syria against Israel)• OPEC levied an oil embargo

against Israel's allies (USA)

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• The oil embargo ledto dramaticallyincreased prices for all types of fuel.

• Gasoline shortageensued.

• Automobiles were

paralyzed.

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• OPEC reassumed shipments at aprice of $10.50 a barrel, almost four times the previous price.

• Through the 70’s OPEC keep

supplies tight to force price higher and higher.

• In the early 1980’s a barrel of oil

delivered to USA cost $36

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THE ECONOMIC EFFECTS

• Prices for virtually everythingelse rose in response to highenergy costs, causing record

inflation.•  As inflation and

unemployment rose thecountry experienced severalrecessions.

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 ADJUSTING TO HIGHER PRICES

• To increaseproduction of crudeoil

• To decreaseproduction of crudeoil

•

To protest againstanother OPECboycott

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RECOVERING

•  Alaska pipeline wascompleted

• Significant discoveries

in Mexico, Africa andthe North Sea

• In the mid-1980 there

was and oil glut.

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WHAT HAPPENS WHEN SUPPLY EXCEEDSDEMAND?

• In 1986, world oil prices crashed from the high $20s to$14 per barrel

•  Another crisis: In 1999, oil prices fluctuated in the

range from $10 to $20 per barrel. Due to inflation, werealmost as low as they were in the early 1970s

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• OPEC decided to cutproduction

• OPEC promised to

increase production(long-term price range of $22-$28)

•

The price has fluctuatedbetween $20-$32 per barrel, into 2004

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VICTIMS OF USA SUCCESS

• Exploration becomes morecostly

• The resulting drop in

production devastated theeconomies of Texas andLouisiana

•

Conservations efforts andincentives were abandoned

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OIL PRICE NOWADAYS

 Actual WTI oil price, Tuesday 19/07/2011:

• WTI $ 96.83 intraday high and intradaylow of $ 96.28.

Current price of Brent crude, Tuesday07/19/2011:

• BRENT intraday high of $ 116.90 and

intraday low of $ 116.30.

• Ecuadorian oil price USD 107.51

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SOURCES

http://www.library.pitt.edu/labor_legacy/images/deindustrializationBILL2.jpg

http://www.afscme.org/images/ffch1.gif http://www.uaw.org/publications/jobs_pay/03/no1/pics/compare01.gif 

http://www.pacpubserver.com/new/news/images/roeblingmill.jpg