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INDEPTH: OIL
Price fluctuations: A timeline
CBC News Online | April 18, 2006
A complex array of economic, political and environmental factors control the price of oil. But in the past OPEC has been able to affect the price and bring it within the desired range by either boosting or cutting production. As OPEC's control of oil supply diminished over the years, so has its role in stabilizing the world's oil markets. From controlling 60 to 65 per cent of oil production in the 1970s, it has gone to 30 per cent today. Exercising the control that OPEC does have involves anticipating how global events will affect the oil market and acting to balance whatever upset these events might cause. OPEC has come under criticism in the past for making the wrong decisions.
But in 2004, when prices seemed to be spiralling out of control, analysts said that OPEC could no longer regulate the oil market. One strong new force behind the price surge is China's growing economy and the country's thirst for oil. China alone was responsible for a third of the rise in demand over the past three years. Demand in the U.S. is also rising.
Defying fears that higher oil prices would slow it down, the world economy grew by four per cent in 2004, its fastest rate in the past 25 years. That growth slowed to a more typical 3.2 per cent in 2005. The unrelenting rise in the price of oil has economists worried about the onset of inflation, recession or both. The UN World Economic Situations and Prospects Report 2006 notes that inflation has "edged up worldwide," mainly due to oil prices. Consumers are left wondering how they'll cope with the impact of this trend, beyond parking their SUVs for the long term.
This timeline traces recent fluctuations in the price of oil and the contributing factors. (The figures are in U.S. dollars and have been adjusted for inflation.)
October 1973:
OPEC refuses to sell oil to countries that support Israel in the Yom Kippur War, which quadruples prices within a year.
1980:
During the Iran hostage crisis, prices reach their highest level ever of $80 per barrel.
Early 1980s:
The price of oil falls to early 1973 levels of about $38 per barrel. Part of the change is attributed to the natural fall in demand resulting from industrialized countries reducing their dependence on oil during the embargo.
Mid-1980s:
Overproduction and reduced demand causes a crash in oil prices to just above $20.
1990:
The price of oil spikes after Iraq invaded Kuwait, contributing to a global recession.
1997:
OPEC increases production despite the weak Asian economies at the time. The price of oil plummets to $10 a barrel.
March 1999:
OPEC and non-OPEC producers including Russia, Mexico, Norway and Oman cut production to raise oil prices.
2000:
Oil prices top $30 a barrel. There are worries that OPEC will not increase its production to bring the price back into the desired range.
2001:
The slower economic growth in the United States, which some economists are calling the 2001 recession, reduces the demand for oil. OPEC production cuts keep the price within the band.
Sept. 11, 2001:
Attacks on the U.S. hit the economy hard enough to send oil prices below $20 per barrel.
Early 2003:
Economic recovery begins in the fall of 2003 and the price of oil begins to climb again. To compensate for a strike of oil production workers in Venezuela and for nervousness about the possible war in Iraq, OPEC raises its production. It vows to keep the market well supplied in a crisis.
Mid-2003:
At the start of the Iraq war, prices actually fall because of the expectation that the war will end quickly. OPEC reduces production expecting that Iraq would soon begin to contribute to the oil supply.
Late 2003:
Iraq's northern export pipeline is sabotaged and insurgents blow up the UN Baghdad headquarters. The price of oil goes up and hovers above $30. Despite this, OPEC cuts production, to the disappointment of the U.S. administration.
May 2004:
The price of oil hits $40 per barrel. OPEC has raised oil production but not enough to outweigh the uncertainty created by the threat of terrorism in oil-producing countries, the high demand for oil, and the low U.S. oil inventories. The increasingly gloomy fate of Yukos in Russia, responsible for two per cent of the world's oil supply, further destabilizes markets.
October 2004:
The price of oil hits over $50 after a general workers strike in Nigeria and low crude output in the Gulf of Mexico in the aftermath of hurricane Ivan.
July 2005:
The price of oil hits over $60. Analysts say it's fuelled by increased demand, especially in China, and limited U.S. refining capacity. The tension over Iran's nuclear program causes more market jitters. The only OPEC country with spare production capacity is Saudi Arabia.
August 2005:
Oil prices top $70 US a barrel after hurricane Katrina hits the eastern coast of the Gulf of Mexico. Katrina squeezes oil inventories by disrupting offshore drilling.
January 2006:
After a drop in the fall, prices surge back to more than $65 US a barrel as tension mounts in oil producers Iran and Nigeria. The United Nations ponders sanctions against Iran for its nuclear program, while militants block Nigeria's oil supply.
April 2006:
Oil futures rise to more than $70 US a barrel again, after reports from the U.S. that gasoline inventories are down more than expected. Unrest in Nigeria and uncertainty about the international reaction to Iran's nuclear program also affect prices.
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