Oil Demand: Dependence or Flexibility?

Iraq’s invasion of Kuwait, the boycott of Iraqi and Kuwaiti oil and the consequent surge of international oil prices mark the third major disruption on the oil market in the past two decades. The export reductions provoked by the Arab-Israeli war of 1973, the Iranian revolution of 1978-79 and the present Gulf crisis are very similar – amounting in each case to around 10 per cent of total world consumption. On all three occasions oil prices skyrocketed: the price of crude oil nearly quadrupled in 1974 and tripled in 1979, while the first three months of the present crisis have already seen spot prices at twice their pre-invasion level.

By: J. M Dargay

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