2000s energy crisis

From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under US$25/barrel. During 2003, the price rose above $30, reached $60 by 11 August 2005, and peaked at $147.30 in July 2008. Commentators attributed these price increases to many factors, including Middle East tension, soaring demand from China, the falling value of the U.S. dollar, reports showing a decline in petroleum reserves, worries over peak oil, and financial speculation.

For a time, geopolitical events and natural disasters had strong short-term effects on oil prices, such as North Korean missile tests, the 2006 conflict between Israel and Lebanon, worries over Iranian nuclear plans in 2006,Hurricane Katrina, and various other factors. By 2008, such pressures appeared to have an insignificant impact on oil prices given the onset of the global recession. The recession caused demand for energy to shrink in late 2008, with oil prices collapsing from the July 2008 high of $147 to a December 2008 low of $32. Oil prices stabilized by August 2009 and generally remained in a broad trading range between $70 and $120 through November 2014, before returning to 2003 pre-crisis levels by early 2016.

Energy crisis

An energy crisis is any significant bottleneck (or price rise) in the supply of energy resources to an economy. In popular literature, it often refers to one of the energy sources used at a certain time and place, in particular those that supply national electricity grids or those used as fuel in vehicles.

Industrial development and population growth have led to a surge in the global demand for energy in recent years. In the 00s, this new demand — together with Middle East tension, the falling value of the U.S. dollar, dwindling oil reserves, concerns over peak oil, and oil price speculation — triggered the 2000s energy crisis, which saw the price of oil reach an all-time high of $147.30 a barrel in 2008.

Causes

Government actions like tax hikes, nationalisation of energy companies, and regulation of the energy sector, shift supply and demand of energy away from its economic equilibrium. Market failure is possible when monopoly manipulation of markets occurs. A crisis can develop due to industrial actions like union organized strikes and government embargoes. The cause may be over-consumption, aging infrastructure, choke point disruption or bottlenecks at oil refineries and port facilities that restrict fuel supply. An emergency may emerge during very cold winters due to increased consumption of energy.

1973 oil crisis

The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) proclaimed an oil embargo. By the end of the embargo in March 1974, the price of oil had risen from $3 per barrel to nearly $12 globally; US prices were significantly higher. The oil crisis, or "shock", the embargo caused had many short-term and long-term effects on global politics and the global economy. It was later called the "first oil shock", followed by the 1979 oil crisis, termed the "second oil shock."

Summary

The embargo was a response to American involvement in the 1973 Yom Kippur War. Six days after Egypt and Syria launched a surprise military campaign against Israel to regain territories lost in the June 1967 Six-Day War, the US supplied Israel with arms. In response to this, OAPEC announced an oil embargo against Canada, Japan, the Netherlands, the United Kingdom and the US.

The crisis had a major impact on international relations and created a rift within NATO. Some European nations and Japan sought to disassociate themselves from United States foreign policy in the Middle East to avoid being targeted by the boycott. Arab oil producers linked any future policy changes to peace between the belligerents. To address this, the Nixon Administration began multilateral negotiations with the combatants. They arranged for Israel to pull back from the Sinai Peninsula and the Golan Heights. By January 18, 1974, US Secretary of State Henry Kissinger had negotiated an Israeli troop withdrawal from parts of the Sinai Peninsula. The promise of a negotiated settlement between Israel and Syria was enough to convince Arab oil producers to lift the embargo in March 1974.

1979 energy crisis

The 1979 (or second) oil crisis or oil shock occurred in the United States due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher than justified by supply. The price of crude oil more than doubled to $39.50 per barrel over the next 12 months, and long lines once again appeared at gas stations, as they had in the 1973 oil crisis.

In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. Economic recessions were triggered in the US and other countries. Oil prices did not subside to pre-crisis levels until the mid-1980s.

After 1980, oil prices began a 20-year decline, eventually reaching a 60 percent fall-off during the 1990s. As with the 1973 crisis, global politics and power balance were impacted. Oil exporters such as Mexico, Nigeria, and Venezuela expanded production; the USSR became the top world producer; North Sea and Alaskan oil flooded the market; and OPEC lost influence.