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In the mid and late sixties the price of oil averaged US$20 a barrel at current price. With this low price, world demand which was around 30 million barrels a day in the mid sixties surged to 50 million barrels a day in the early seventies. However, fed up with the low price of oil despite the huge increase in demand, the Arabs struck with an oil embargo in 1973. The result was catastrophic for many non-oil producing countries like the Philippines. We managed to float only because of massive loans that Marcos started to accumulate to prop up his martial law regime that began in 1972.
With the embargo the price of oil dutifully surged, reaching to about $50 per barrel in 1978 at current price. During the revolution in Iran in 1979, the price of oil passed $60 a barrel. This shot up finally near the $100 mark in 1980 at current price again when the Iran-Iraq war erupted. From this time on, the Philippine economy finally started to crumble from where the Marcos magic also started to lose its luster that ended with his fall in 1985.
The rise in the price of oil was so damaging that demand for oil finally fell as many countries tried to find ways to reduce their oil consumption like the shift to smaller cars in the United States that was made possible by imports from Japan. The result was for the world price of oil to collapse to just around $30 dollars a barrel in 1986 at current price. It shot back to around $40 a barrel because of Saddam Hussein's invasion of Kuwait in 1990. Because of the sweeping victory of the US-led multinational forces against Saddam, however, the price of oil again collapsed, reaching a low of about $20 dollars a barrel in 1998, similar to what prevailed before the Arab oil embargo.
Overall, for 25 years, demand for oil increased only by around 16 million barrels a day from about 57 million barrels a day in 1973 to 73 million barrels a day in 1998. This was much smaller than the 27 million barrels a day increase in the demand for oil that the world experienced in nine years from 1964 to 1973, prior to the Arab oil embargo. With China and India's economic boom, however, that house a third of the world's population, global demand for oil is again surging fast, reaching more than 85 million barrels a day last year. As a consequence, the price of oil again dutifully increased, crossing the $100 mark per barrel finally on Feb. 19 this year. Since then it has not gone down. It reached its peak last Friday at $139 a barrel.
Where is the price of oil going? Will it continue to go higher or settle down like what happened in the eighties? The answer really depends on the world's big importers of oil, which is the US, in the west, along with China, Japan, and India in Asia now. The US actually produces more than 8 million barrels a day of oil, the next biggest after Russia with more than 9 million barrels a day and Saudi Arabia with more than 10 million barrels a day. The trouble with the US is that it consumes more than 20 million barrels of oil a day. Where is the US getting its supply after its own? The biggest suppliers of oil to the US are Canada, with over 2 million barrels a day shipped to the US. It was followed by Mexico, Saudi Arabia, Venezuela and Nigeria in that order with at least more than a million barrels a day each also shipped to the US. Algeria, Iraq, Angola, and Russia with less than a million barrels a day each shipped to the US makes up the rest of the nine major suppliers of oil to the US in addition to its own.
Worldwide, the next biggest consumer of oil after the US is China with 7.3 million barrels a day against its production of less than 4 million barrels a day. Japan also consumes more than 6 million barrels of oil a day but produced almost nothing of it. No wonder, it is Japan that led in the production of compact cars since the sixties that first found its mark in the US market after the 1973 Arab oil embargo.
When the big oil consuming countries do its work to reduce their demand for oil there is no reason why the surge in the price of oil will not be abated or cut down drastically. This was successfully done in the eighties and there is no reason why it could not be done now with more and better energy-saving technologies now present or in the offing. One good thing about what is happening to the world price of oil these days is that as recently as last Sunday the industrial countries vowed to cut oil use which is also good for combating global warming. Aside from cutting oil use, in their joint statement after their meeting in Aomori, Japan, energy ministers from the US, Japan, Russia, Germany, France, Britain, Italy and Canada, along with China, India and South Korea, also urged oil producers to increase output. This, however, is easier said than done so that the focus is really how to cut oil consumption.
Are we, individually and as a nation, not going to help? What about taking a bus or jeepney ride instead of your SUV sometimes?
