The price of oil is at its lowest since 2004. International events, across many industries, impact the price of crude oil, and the ever-changing nature of international economics makes it extremely difficult to lock in any commodity at a set price.
Market fluctuations, though, are a lot more nuanced than any single cause-and-effect relationship. Here are just 5 significant events that have affected the price of oil since the turn of the millennium, and if there’s anything that these fluctuations have taught us, it’s that price can rebound as quickly as they can plummet.
9/11 – 2001
The tragic events that unfolded across the eastern seaboard on September 11th, 2001 affected thousands of people in the United States, but shockwaves from the crashes also impacted the international oil market. The 9/11 attacks prompted the United States’ “War on Terror,” which only added to the instability in the Middle East.
This unstable environment in one of the world’s most predominant oil producing regions led to major fluctuations in international oil prices. According to CNN Money, crude oil cost around $20 per barrel before 9/11. Five years later, the price had risen above $60 per barrel. In this same time frame, the average price of gasoline in the US rose from $1.66 to more than $3.
Asian Demand – 2005
A growing middle class in Asia comes at a time when global oil production begins to slow and Saudi oil supply reaches an excess. This growing population means greater international demand for crude oil.
According to Ernst & Young (EY), more than two-thirds of the global middle class will reside in the Asia-Pacific region by 2030, and the Chinese middle class alone will total more than one billion by the same year. This growing demand has led many to predict that the Asian middle class will replace the European and American middle class as the primary driver of the global economy — not to mention the biggest consumers of energy.
Credit Crunch – 2008
The financial crisis of 2008 was widely considered the most significant financial malay since the Great Depression. Without national governments coming to the rescue of international banks who had employed questionable lending practices, the crisis may have been much worse.
As it was, it resulted in the failure of many key international businesses and a sharp decline in global consumer wealth. It also preceded four years of downward trends in global economic activity, and led to the European sovereign-debt crisis. According to TIME, the price of crude oil peaked at more than $147 per barrel on July 11th, 2008.
Arab Spring – 2011
A year of unrest in the Middle East began with one man who felt he was treated unfairly by police when he was cited for selling fruits and vegetables without a permit. After his goods were confiscated, rendering him unable to provide for his widowed mother and six siblings, the man set himself on fire in front of a government building in Tunisia.
The act set off a wave of protests and demonstrations throughout the Arab world. While some countries were successful in overthrowing long-time dictators, and establishing a system for “free and fair elections,” long-term conflict in the Arab League has created an unreliable situation in the world’s most oil-rich region. According to Energy Matters, combined oil production in Libya, Yemen, Sudan, Syria, and Tunisia has dropped by more than two million barrels per day.
OPEC Changes Focus – 2014
Just last year, the Organization of the Petroleum Exporting Countries (OPEC) shifted focus to “maintaining market share.” This move came in the midst of declining global demand and increased oil production in non-OPEC countries. Increased production in three countries in particular, Iran, Iraq, and Libya, meant that OPEC was forced to consider the possibility of increasing its own oil production, rather than limiting output.
According to OilandGas360, OPEC’s decision forced producers “to focus on their most economic acreage and find ways to increase efficiencies in order to maximize their well economics.” The decision reportedly caused both US and international crude to “lose more than 50% of their value.”
Although OPEC’s new policy has caused a steady decline in market capitalization for many US oil companies, the policy has also created greater demand for efficient production. Despite fewer oil rigs in operation in the US, production has remained fairly steady, at least the industry is forced to navigate the next unforeseen crisis.
A Look To The Future
It’s impossible to predict how global events may affect the future of the oil and gas industry, but oil prices are likely to rebound just as quickly as they drop. Thankfully, the industry has situated itself to handle this ever-changing global landscape quite well.