230
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
Supreme Court declared the NRA unconstitutional, the federal
government imposed a tariff on foreign oil.
During World War II, the oil surpluses of the 1930s quickly disappeared. Six billion of the seven billion barrels of petroleum used
by the allies during the war came from the United States. Public
officials again began to show concern that the United States was
running out of oil.
On the other hand, world oil prices were so low that Iran,
Venezuela, and Arab oil producers banded together in 1960 to
form OPEC (the Organization of Petroleum Exporting Countries)
cartel, to negotiate for higher oil prices. By the early 1970s, the
United States depended on the Middle East for a third of its oil and
foreign oil producers were finally in a position to raise world oil
prices. The oil embargo of 1973 and 1974, during which oil prices
quadrupled, and the oil crisis of 1978 and 1979, when oil prices
doubled, underscored the vulnerability of the United States to foreign producers.
The oil crises of the 1970s had an unanticipated side effect. Rising
oil prices stimulated conservation and exploration for new oil
sources. As a result of increasing supplies and declining demand,
oil prices fell from $35 a barrel in 1981 to $9 a barrel in 1986. The
sharp slide in world oil prices was one of the factors that led Iraq
to invade neighboring Kuwait in 1990 in a bid to gain control over
40 percent of Middle Eastern oil reserves.
On the other hand, oil producers operating outside of the
OPEC cartel are responsible for producing 60% of the world's
oil and face increasing production hurdles. However, many of
the non-OPEC producers have older, less productive wells, rising
costs for new projects, and in some cases rising domestic demand
that may cut into exports. Higher prices have made difficult oil
projects more lucrative, leading to increases in unconventional
oil production, but that could change. Declines in non-OPEC production come at a time when investment in new oil production
is more difficult because of tightening credit markets, oil price
volatility, and resource nationalism. While a few producers are
expected to offset some of these declines, new production is coming online more slowly than originally projected and the world is
entering a period of growing demand amidst tightening supplies
(NPC, 2007).
Five of the world's 15 largest oil producers are outside of OPEC;
as of 2008, those countries are Russia, the United States, China,
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
Supreme Court declared the NRA unconstitutional, the federal
government imposed a tariff on foreign oil.
During World War II, the oil surpluses of the 1930s quickly disappeared. Six billion of the seven billion barrels of petroleum used
by the allies during the war came from the United States. Public
officials again began to show concern that the United States was
running out of oil.
On the other hand, world oil prices were so low that Iran,
Venezuela, and Arab oil producers banded together in 1960 to
form OPEC (the Organization of Petroleum Exporting Countries)
cartel, to negotiate for higher oil prices. By the early 1970s, the
United States depended on the Middle East for a third of its oil and
foreign oil producers were finally in a position to raise world oil
prices. The oil embargo of 1973 and 1974, during which oil prices
quadrupled, and the oil crisis of 1978 and 1979, when oil prices
doubled, underscored the vulnerability of the United States to foreign producers.
The oil crises of the 1970s had an unanticipated side effect. Rising
oil prices stimulated conservation and exploration for new oil
sources. As a result of increasing supplies and declining demand,
oil prices fell from $35 a barrel in 1981 to $9 a barrel in 1986. The
sharp slide in world oil prices was one of the factors that led Iraq
to invade neighboring Kuwait in 1990 in a bid to gain control over
40 percent of Middle Eastern oil reserves.
On the other hand, oil producers operating outside of the
OPEC cartel are responsible for producing 60% of the world's
oil and face increasing production hurdles. However, many of
the non-OPEC producers have older, less productive wells, rising
costs for new projects, and in some cases rising domestic demand
that may cut into exports. Higher prices have made difficult oil
projects more lucrative, leading to increases in unconventional
oil production, but that could change. Declines in non-OPEC production come at a time when investment in new oil production
is more difficult because of tightening credit markets, oil price
volatility, and resource nationalism. While a few producers are
expected to offset some of these declines, new production is coming online more slowly than originally projected and the world is
entering a period of growing demand amidst tightening supplies
(NPC, 2007).
Five of the world's 15 largest oil producers are outside of OPEC;
as of 2008, those countries are Russia, the United States, China,