The World Refining System and the Oil Products Trade
The principal feature of the “1990 oil price shock is that it is a crisis not only of crude oil supplies but also of oil products. The invasion of Kuwait and the subsequent
embargo of Iraq and Kuwait have resulted in the loss of between 4.5 and 5.16 mb/d of crude oil supplies (see OIES, The First Oil War, August 1990). In terms of actual
product supplies the invasion of Kuwait has only removed between 650 and 750 thousand b/d of combined Kuwaiti and Iraqi export capacity. This represents around
1 per cent of total world product consumption, certainly less than the crude oil shortfall caused by the crisis and yet, in absolute terms, the price differential between crude oil
and many of the lighter products has increased. The product price shock indicates that there is a perceived inflexibility in the world refinery system regardless of whether lost
crude oil supplies can be replaced.