The price of oil for 150 years
3 record 100$
Oil ended the year with a price per barrel below $ 44. After the most violent declining in the history of oil, a lot of people forget that the price of oil, annual average for 2008 was 100 dollars. This event took place only 3 times in one and a half century ...
I want to show a rise in the price of a barrel of oil to over $ 100 in average, is a rare event. You should not underestimate the importance of the next great wave of rising oil prices.
I. 1864 : Oil for lightting.
1864 : one year before John Davison Rockefeller did create the Standard Oil Company. It will then reign on refining in U.S. and the rest of world.
The oil, called rock oil, was transported in barrels of whiskey. Its use was then summed to lubricants, medicinal and lighting. Indeed, the oil has the disadvantage of producing an intense black smoke and gave off a bad odor when it was used in oil lamps. The whale oil was preferred. In 1855, George Bissel helps to eliminate these disadvantages by a new refining process. So demand becomes very important for oil, it is still produced according to traditional methods by draining cloths soaked in oil. Wonderful excitement takes place so, and then oil replaces whale oil. Demand pushed the prices and so prices exceed 100 dollars per barrel (adjusted for inflation) for the first time in 1864. In 1857, in Titusville Pennsylvania, Colonel Drake uses drilling salt technology successfully and therefore invented the first derrick. Despite the strong demand for oil, this technology leads to an overproduction of oil few years later and then oil prices collapse.
The second great wave of increase of this magnitude takes place 113 years later during the Iran / Iraq War in 1980.
II. 1980 : Iran/Irak war
The conflict between the third (Ayatollah Khomeini’s Iran) and the fourth (Saddam Hussein's Iraq) oil’s word producer ignites the Strait of Hormuz and completely disrupts the world oil supply. For Iran, oil production in 1976 is 5.9 millions, in 1981 it is only 1.3 million. For Iraq, oil production in 1976 is 3.4 million, in 1981 it is only 0.9 million. The global market lost 5.8 million barrels / day, representing 10% of world oil production. Added to decline production of these two countries, the passage of oil tankers disrupted in the Strait of Hormuz connecting the Persian Gulf to the Indian Ocean. It then passes more than one quarter of world production of oil through the Strait of Hormuz. Oil prices soared. The price of oil reached 36.83 dollars a barrel per annum on average which is, once adjusted for inflation, 93 dollars. The third wave of increase takes place 28 years later.
III. 2008 : Stagnation of supply
In 2008, in newspaper and television, the first explanation for the rise oil prices is speculative hedge fund, the quality of the information economy was probably better in 1864.
The price of a oil barrel has known this type of "oil fever" only three times in 150 years. It is extremely rare, it has always been caused by a major change in supply or demand:
In 1864, production is inadequate to meet growing demand.
In 1980, sharp decline in supply following the war between the two major oil producers.
In 2008, this is not speculation but stagnation of supply facing a strong demand that exists. It is partly fueled by China's growth, causing the price increase per barrel of oil. Specialists speculation banks are not the oil barrels.
The peaks at 100 dollars a barrel are increasingly close: 116 years separate the peak No. 1 and No. 2, 28 years between No. 2 and No. 3, we can then ask how the peak No. 3 and No. 4?
The price of one oil barrel has approached the 100 dollars three times in the history of oil it is an exceptional event which has always been to cause a lack of oil:
- 1864 : at this time, the production technologies are archaic.
- 1980 : War between producers in a strategic area.
- 2008 : Stagnation of the world oil supply
The next time the oil return to the area of $ 100 (annual average), it probably will come out of a canal 150 years old. The explanation of this phenomenon will be a major structural change : the peak oil.
"Believing with oil, fall is not a reason to fear but an opportunity to buy" John Davison Rockefeller
Dr Thomas Chaize