OIL PRICES
163
As a result of the First Gulf War, petroleum production by Iraq
was defined by the United Nations' sanctions program. In addition, the United Nations allowed Iraq to increase the amount of oil
it could produce and sell; at the beginning of 1998, Iraq exported
approximately 500,000 barrels/day of crude oil, but by the beginning of 1999 Iraq was exporting 2.5 million barrels/day At the same
time, other OPEC countries were reducing production as a means
of controlling oil prices, but this was offset by the increases in Iraqi
crude oil production and oil prices were on a downward slope.
In March 1999, the OPEC members agreed to reduce exports to
the oil consuming countries; at this time Mexico, Norway, and other
(until then non-OPEC) oil-producing countries joined the OPEC
cartel. As demand increased, prices were affected, and by the end
of 1999, oil prices had returned to 1997 levels. The consequences
of price reductions were obvious in a net loss of upstream jobs
and oil rigs no longer in use. From 1999 onwards, new influences
entered the oil price market. China and India added on to the market demand as importers. India had a rapidly increasing economy
thereby placing increasing the demand for oil and, by 2000, prices
had increased to approximately $27 per barrel.
In March 2000, OPEC acted to increase production but when the
OPEC members had agreed to cut production Saudi Arabia agreed
to the biggest individual reduction to offset the increased production
share that Iraq had acquired. However, when increases in production
were being considered, no OPEC member country wanted to relinquish market share in favor of Saudi Arabia, but many of the member
countries had now lost their previous production capacity.
OPEC members began to try to control production to keep crude
oil within a price band ranging from $22 per barrel to $28 per barrel. This range is believed to reflect a balance that provides the
OPEC member nations with the income necessary to meet individual national budgets while maintaining an acceptable market
price. However, at the beginning of 2001, the strain on worldwide
production capacity caused prices to exceed $30 per barrel, but
conservation and the developing recession in the United States
began to drive demand down with an ensuing decrease in oil
prices. As a result, the OPEC member countries initiated production cuts but the commitment to meet quotas had waned and
targets were not met.
At the end of 2001, crude oil prices saw a steady increase and
reached $40 to $50 per barrel by September 2004. In October 2004,
163
As a result of the First Gulf War, petroleum production by Iraq
was defined by the United Nations' sanctions program. In addition, the United Nations allowed Iraq to increase the amount of oil
it could produce and sell; at the beginning of 1998, Iraq exported
approximately 500,000 barrels/day of crude oil, but by the beginning of 1999 Iraq was exporting 2.5 million barrels/day At the same
time, other OPEC countries were reducing production as a means
of controlling oil prices, but this was offset by the increases in Iraqi
crude oil production and oil prices were on a downward slope.
In March 1999, the OPEC members agreed to reduce exports to
the oil consuming countries; at this time Mexico, Norway, and other
(until then non-OPEC) oil-producing countries joined the OPEC
cartel. As demand increased, prices were affected, and by the end
of 1999, oil prices had returned to 1997 levels. The consequences
of price reductions were obvious in a net loss of upstream jobs
and oil rigs no longer in use. From 1999 onwards, new influences
entered the oil price market. China and India added on to the market demand as importers. India had a rapidly increasing economy
thereby placing increasing the demand for oil and, by 2000, prices
had increased to approximately $27 per barrel.
In March 2000, OPEC acted to increase production but when the
OPEC members had agreed to cut production Saudi Arabia agreed
to the biggest individual reduction to offset the increased production
share that Iraq had acquired. However, when increases in production
were being considered, no OPEC member country wanted to relinquish market share in favor of Saudi Arabia, but many of the member
countries had now lost their previous production capacity.
OPEC members began to try to control production to keep crude
oil within a price band ranging from $22 per barrel to $28 per barrel. This range is believed to reflect a balance that provides the
OPEC member nations with the income necessary to meet individual national budgets while maintaining an acceptable market
price. However, at the beginning of 2001, the strain on worldwide
production capacity caused prices to exceed $30 per barrel, but
conservation and the developing recession in the United States
began to drive demand down with an ensuing decrease in oil
prices. As a result, the OPEC member countries initiated production cuts but the commitment to meet quotas had waned and
targets were not met.
At the end of 2001, crude oil prices saw a steady increase and
reached $40 to $50 per barrel by September 2004. In October 2004,