Middle Eastern Oil: An Historical Perspective and Outlook

Mercurial Times ^ | 5/25/02 | Sean Finnegan

[Carry_Okie]

Competition was unbridled in the 1980s (Because REAGAN decontrolled oil prices, that led to an immediate increase in production). The Saudis tried to maintain $34/bbl while the rest of OPEC chased the market with lower prices. Saudi production was cut to its lowest level since 1970. North Sea oil was offered at $30/bbl and that price cut out Nigeria, its direct competitor, which virtually ceased production in 1983. OPEC slashed prices by 15% from $34 to $29/bbl and cut production by 17.5%. This was predicated by the "honor system" being respected and the Saudis played the pivot role. OPEC had finally become a cartel - now they controlled price and production.

I take issue with this. The 1980s was the return of oil to commodity status, as the next several paragraphs state. It accomplished several things, not least of which was to reduce the value of Soviet oil sales with which it had financed its military buildup in the late 70s. Decontrol of oil pricing had more to do with the eventual collapse of the Soviet Union than anything else Reagan did.

[Utah Girl]

Ping

[nunya bidness]

Is this set of numbers in constant dollars (I doubt it)? This was a period of high inflation.

Yes, it's in constant dollars.

Oh come on, Sean! As if 15% inflation, 20% mortgage interest rates, Soviet proxies in Central America, high unemployment, and the Soviet military buildup had nothing to do with it?

Of course they did. But in the context of oil the lobbyists and their congresscritters had their way with Carter. Remember that without regulation cheap oil had proven to be an economic boost.

This is most curious. Why would a Ba'athist regime like Syria take sides against another secular Ba'athist regime, namely Iraq, in favor of a theocracy like Iran?

The problem between Syria and Iraq was less a matter of ideology and more a matter of traditional power struggle. Syria was shackled to Egypt in the realm of transitting oil but not producing it. In addition, the history of the old mandates had left Syria lacking from its inattendent French handlers.

I take issue with this. The 1980s was the return of oil to commodity status, as the next several paragraphs state. It accomplished several things, not least of which was to reduce the value of Soviet oil sales with which it had financed its military buildup in the late 70s. Decontrol of oil pricing had more to do with the eventual collapse of the Soviet Union than anything else Reagan did.

You're combining decontrol of the US market and regulation on the production side of Russian oil. Russia was hamstrung with the former Soviet system and that's what cost them in production costs. They couldn't bank as much to build up their military until they escaped the old system; they're still struggling now. The problem for us is that our market prices are reflective of OPEC but still subsidized to domestic production. Not quite a true free market but certainly better than the old days.

[Sparta]

The second piece from nunya bidness

If you want on or off the Western Civilization Military History ping list, let me know.

[SAMWolf]

Bump for later reading. Thanks for the ping Sparta

[Travis McGee]

Sean's quite a writer and thinker!

[Sparta]

Sean's quite a writer and thinker!

Yes he is.

[snippy_about_it]

Long read but I'll hang on to it.

Thanks Sparta

[sistergoldenhair]

Thanks.

[SunkenCiv]

Ping!

[corbe]

I can't believe I read the 'ho' thing. Very informative

[nunya bidness]

Thanks for taking the time.