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Page added on October 17, 2018

Oil weapon has proved a double-edged sword

The oil shocks of 1973/74 and 1979/80 are now mainly remembered for the disruption and hardship they caused in the major oil-consuming countries.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

But they marked a lasting inflection point in the development of the oil market and almost all the changes were adverse to OPEC in the long run.

Following the oil shocks, global oil consumption grew more slowly while non-OPEC production rose more rapidly.

Members of the Organization of the Petroleum Exporting Countries initially benefited from a gusher of windfall revenues, but in the long term the oil shocks were disastrous.

OPEC’s market share fell and its members were left with excess production capacity that remained a problem until the 2000s.

OPEC’s responsibility for the shocks remains debatable: the market was on an unsustainable trajectory before 1973 as low prices boosted consumption without encouraging a similar increase in non-OPEC output.

But the events of the 1970s and 1980s demonstrate clearly why oil cannot be employed as a weapon without doing long-lasting damage to the interests of the producer countries.

OPEC members have never again resorted to the oil weapon – not out of goodwill to consumers but because it did not work and did long-term harm to their own economies.

More generally, the oil shocks demonstrate why very high prices are damaging to the interests of OPEC countries, a lesson that was painfully re-learned when prices collapsed in 2014.

NON-OPEC PRODUCERS

OPEC members were the biggest losers from the oil shocks of the 1970s as surging prices accelerated the development of alternative sources of supply (tmsnrt.rs/2J1jPmI).

In real terms, oil prices quintupled from $11 per barrel in 1970 to $58 in 1974 and then almost doubled again to $110 in 1980 (“Statistical review of world energy”, BP, 2018).

In nominal terms, OPEC members’ export revenues jumped from $14 billion in 1970 to $116 billion in 1974 and $265 billion in 1980 (“Annual statistical bulletin”, OPEC, 2018).

But revenues fell to just $72 billion in 1985 and did not pass their previous peak until 2004, even in nominal terms.

Surging prices accelerated the development of alternative, higher-cost supplies, cutting into OPEC’s market share and contributing to the price collapse of the 1980s.

Between 1970 and 1985, non-OPEC production increased substantially in the Soviet Union (+5 million barrels per day), China (+2 million bpd), the United Kingdom (+2.6 million bpd), Norway (+0.8 million) and Alaska (+1.5 million bpd).

OPEC’s own share of production, which had been increasing and peaked at 52 percent in 1973, fell to just 28 percent by 1985.

DEMAND DESTRUCTION

Rising non-OPEC output was compounded by a large and permanent loss of market share for the entire oil industry in the residential and commercial heating sector as well as in power generation.

In the United States, residential use of petroleum liquids, mostly for heating, declined from a peak of 1.5 million bpd in 1972 to just 0.7 million bpd in 1985 (“Monthly Energy Review”, EIA, Sept. 2018).

Commercial use of petroleum liquids, excluding gasoline, again mostly for heating, declined from a peak of 0.7 million bpd in 1973 to less than 0.5 million bpd in 1985.

Residential and commercial use had grown strongly in the 25 years before 1973/74 as a result of a long period of low real oil prices throughout the 1950s and 1960s.

But following the oil shocks, households, businesses, schools and retailers switched their heating systems from increasingly expensive oil to cheaper natural gas and electricity.

The same switch away from expensive oil to cheaper alternatives, mostly coal and nuclear, occurred in the power generation sector.

U.S. power generation from petroleum liquids had climbed from 48 billion kilowatt hours (kWh) (6 percent of the total) in 1960 to 314 billion kWh (17 percent of the total) in 1973.

But the oil shocks accelerated the construction of coal-fired and nuclear power plants during the 1970s and the 1980s.

Power generation from petroleum liquids had declined to just 100 billion kWh (4 percent of the total) in 1985 and was just 21 billion kWh (0.5 percent of the total) in 2017.

OIL CONSERVATION

Following the oil shocks, petroleum liquids were increasingly restricted to a role as a transport fuel, where their high energy density and ease of handling made them harder to replace than in heating and power production.

Even in the transport sector, gasoline consumption grew more slowly after the shocks as motorists switched to smaller and more fuel-efficient vehicles (sometimes as a result of government mandates).

The same trends towards substitution, conservation and increased efficiency were evident across all the advanced economies, leading to a sharp slowdown in global oil consumption growth after 1973/74.

France and Japan launched major nuclear power programs to reduce their reliance on expensive and unreliable imported oil, and all OECD countries focused on fuel conservation and efficiency.

OECD oil consumption, which had been growingly rapidly before the 1973, fell in 1974 and 1975, and then again throughout 1980-84, and it has never grown as strongly since.

Petroleum’s dominance as a primary energy source has gradually challenged since the oil shocks by other fuels, notably in recent years by natural gas.

Petroleum had gradually increased its share of total global energy consumption from 1.5 percent in 1900 to 19 percent in 1950 and a peak of 44 percent in 1973 (“Our world in data”, University of Oxford, 2018).

Following the oil shocks, however, oil’s share of global energy consumption flat-lined and then fell to just 37 percent in 1985 and as low as 34 percent in 2016.

The oil shocks of the 1970s created long-term problems for OPEC, which is one reason why there has been little appetite to try using the oil weapon again.

Reuters

23 Comments on "Oil weapon has proved a double-edged sword"

Sissyfuss on Thu, 18th Oct 2018 8:54 am

We are transforming from oil shocks to climate shocks which will illuminate the former as trivial.

Chrome Mags on Thu, 18th Oct 2018 10:28 am

Agreed, Sf, It’s already quite a moment in time with climate change effects charging up hurricanes to higher levels, massive fires, heat waves and flooding as feedbacks to us for having used the stuff in the first place in such massive quantities, but imagine what it’s going to be like when sea level has risen 2-6 feet, people are migrating away from coastlines including major cities only to be rejected by neighboring countries – stuck in makeshift camps, sweltering in temp/humidity approaching wet bulb with food & water running low, yet still billions of tons of carbon being emitted annually.

That’s when the conundrum really sets in. At that point it won’t matter if hundreds of millions are still in denial, it will simply be hell on Earth.

Chrome Mags on Thu, 18th Oct 2018 10:44 am

As the conundrum pincers in, here’s an article to lay to rest any ideas about getting serious about this situation at this very late juncture.

http://nymag.com/intelligencer/2018/10/trump-i-have-a-natural-instinct-for-science.html

Trump: My ‘Natural Instinct for Science’ Tells Me Climate Science Is Wrong

“I agree the climate changes, but it goes back and forth, back and forth.”

“My uncle was a great professor at MIT for many years. Dr. John Trump,” he said. “And I didn’t talk to him about this particular subject, but I have a natural instinct for science, and I will say that you have scientists on both sides of the picture.”

“So Trump’s claim to scientific competence rests on his belief that science is a matter of instinct, and this instinct is passed on genetically, as evidenced by his uncle. Those lucky few possessed of this gift can look at two competing hypotheses and know which one is correct, without needing to study the evidence, or even having a clear understanding of what “evidence” means.”

Sissyfuss on Thu, 18th Oct 2018 1:40 pm

That this ignorant buffoon is leader of the free world neutralizes any argument that we are not approaching collapse.

Anonymouse1 on Thu, 18th Oct 2018 2:12 pm

The amero-zionst empire controls the major, dominat actors in ‘OPEC’ org. This is how the uS exerts control over that particular org. The fact that ‘OPEC’ has some member states the uS is actively trying to over-throw is of little consequence. The majority of OPECs member nations, are uS puppet states and clients. The ones that are not, are under constrant threat of war, sanctions, covert and overt sabotage and constant villification in the corporate ‘free-press’. What has ‘OPECs’ response been to any of any of these endless assaults on its members by the great satan(tm)?

[Crickets chirping].

Regardless what the propagandist at rooters would have you believe, ‘OPEC’ does not decide oil prices, or wield oil as a weapon. That is the tactic of the uS\uk\Zionsists. ‘OPEC’ is little more than a whipping boy for the gullible masses.

PSA: Davy dumbass is suffering form bouts of insanity and persistent delusions and he is in desperate need of money for counselling he cannot afford. If you can spare any shekels to send his way, or even some canned food to help him through the winter, send him a PM.

Anontarded1 on Thu, 18th Oct 2018 2:21 pm

oh ok anontard you were saying you want to “ban the toublemakers” or something like that. are you aware my supertards built the intardweb for me to enjoy? russians didn’t build it. ((supertard)) stallman was fighting for freedom to create open source back when very few tards understood why it’s important. nowadays GNU software runs the intardweb.

thanks to intardweb you attack my supertard Davy (pbuh swt).

you guys are impossible. if you want “muh putin” you can keep your rd-180. supertard elon said he’ll “launch for the military for the defense of america”. hehe…bet you get pissed off because “uS” is getting supertards like ducks in a row.

Anontarded1 on Thu, 18th Oct 2018 2:25 pm

oh ok slow down there buddy.

onlooker on Thu, 18th Oct 2018 5:25 pm

The ignorant buffoon is leader of nothing .He and all Western politicians are just puppets whose strings the Titans of money pull.

Anontarded1 on Thu, 18th Oct 2018 6:29 pm

ontard, i’m a libtard, a fomre paultard and a tard. i used to didn’t like trump all that much. I called him the p*ssy grabber but now I call him p*ssy grabber in chief.

anyways, he melted my heart giving israel jerusalem because
https://www.jihadwatch.org/2018/10/palestinian-sharia-judge-the-war-is-not-only-over-this-strip-of-land

plus trump stop jizya to pakistan.

anyways, i’m disappointed that he went after luke 22:36 and degraded teh integrity of the law.

judge: son you used the bumpsky on this guy, you’re guilty.

luke: your honor i used the piece of plastic to club people

judge: you’re making fun of me and the law but I’m oblidged by the law to ban plastic becasue it’s a deadly weapon

you see now?

anyways, other than that I’d say he can grab anything known to a horny man.

Anontarded1 on Thu, 18th Oct 2018 6:33 pm

oh wow what’s the argument about? i hope john kelly goes and the colonel stays. the colonel is awesomer because he’s former director of the gatestone institute

makati1 on Thu, 18th Oct 2018 6:49 pm

Onlooker, we agree on this one. The West is nothing more than slaves to TPTB. The East is also falling in line. The ‘strings’ are becoming visible because TPTB know that time is running out to get their OWG. We will see the end in our lifetime. The end of BAU and the end of freedom. The end of humanity will take longer, but not to many more decades. We shall see.

Anontarded1 on Thu, 18th Oct 2018 7:12 pm

ASWANGE I’M A TARD and a former paultard and you keep saying u’re a lover of humanity, this is fake because i was also a lover of humanity.
then you alternate between that and kicking the anti-american dog i made off granite, i dressed it up to look like it’s alive

I AM THE MOB on Thu, 18th Oct 2018 7:58 pm

Vladimir Putin uses speech to herald end of US hegemony

Russian leader shrugs off poor western relations and stresses growing eastern ties.

Russian president Vladimir Putin shrugged off worsening relations with the west and talked up Moscow’s burgeoning diplomatic friendships in Asia and the Middle East, as he hailed the end of a US-dominated unipolar world.

Giving his annual foreign policy address on Thursday, Mr Putin stressed Russia’s military clout and offered a range of handouts to Moscow’s allies. He said his country was always ready to talk despite a mounting list of accusations of impropriety against his regime from western countries.

“Building up tension and hysteria is not our way . . . We are not creating problems for anyone,” Mr Putin said. “I hope we can build dialogue.”

Russia’s annexation of Crimea in 2014 was the start of western sanctions against Moscow that have been broadened since in response to its military actions in Syria, its alleged meddling in the US presidential election, and its alleged use of a chemical weapon to attack a former spy in the UK.

In a wide-ranging exposition at the annual Valdai forum, Mr Putin continually returned to the idea that US hegemony was the cause of many global ills — but that its twilight offered opportunities for Russia and its friends.

“Empires often think they can make some little mistakes . . . because they’re so powerful,” he said. “But when the number of these mistakes keeps growing, it reaches a level they cannot sustain.”

“A country can get the sense from impunity that you can do anything,” he told an audience at a ski resort close to the southern city of Sochi. “This is the result of the monopoly from a unipolar world . . . Luckily this monopoly is disappearing. It’s almost done.”

Mr Putin said president Donald Trump had listened to his arguments and was not impervious to advice as suggested by some US media, adding that he still thought the US leader was working to restore a good US-Russian relationship.

“It’s better to talk, to have a conversation, than to be like cats and dogs that keep fighting each other,” he said.

More than four years of souring relations with the west has seen Moscow pivot east, strengthening diplomatic and trade ties with China and building influence with Middle Eastern countries such as Turkey and Saudi Arabia.

In his first comments on the disappearance and suspected murder of Saudi dissident Jamal Khashoggi in the country’s Istanbul consulate earlier this month, Mr Putin gave a show of support to the kingdom, saying he currently saw no reason to worsen his warm relations with Riyadh, and suggesting that the US bore some responsibility for his fate.

“He did not live in Russia, but in the US. In this sense, the US bears some responsibility for what happened to him,” Mr Putin said. “In truth, we do not know what happened. So why should we take any steps that could harm our relations with Saudi Arabia?”

The Russian president also announced Moscow would provide Egypt with a $45bn loan to pay for a Russian-built nuclear power project, and outlined plans to supply military technology to Beijing and allow Chinese agriculture companies to invest in Russia’s Far East.

In an extensive section dedicated to outlining why Russia’s nuclear weapons programme was the world’s best, Mr Putin said a new hypersonic missile would be delivered to the Russian army within “a few months”, but that Russia would only use nuclear arms to retaliate after an enemy strike.

https://www.ft.com/content/66657d48-d2f2-11e8-a9f2-7574db66bcd5

Cloggie on Thu, 18th Oct 2018 11:13 pm

“Vladimir Putin uses speech to herald end of US hegemony.”

220 million aging European-Americans, henpecked by 110 million non-whites, led by the nose by perhaps 6-9 million Jews, will not continue to dominate the planet.

Period.

Get used to it. Prepare for retreat. Oh wait, the Donald is doing just that.

Here you can see how the US superceded the British Empire, early 20th century and the graph shows the meteoric rise of China at the cost of the US:

https://goo.gl/images/253918

Won’t be long before China can put the US in its pocket. In the US the original white population is being replaced by third world immigrants on instigation of the dominant Jewish overclass, that intends to ram whites into minority status and is succeeding in doing so.

https://documents1940.wordpress.com/2018/05/21/european-america-is-over/

But, at the very moment whites will realize that their days are over, they will attempt to escape and probably succeed with foreign help. Here an interesting discussion between alt-right leader Richard Spencer and Jewish talkshowhost Chuck Morse:

https://youtu.be/kQiDuZXFhNE

In the end the US will undergo the same fate as the USSR: fall apart along ethnic lines.

Theedrich on Fri, 19th Oct 2018 3:10 am

White guilt stems from masochistic Christianity. Even though American academe is largely atheistic, it retains that illegitimate dropping of the pseudo-Semitic religion of Hellenistic fantasy. Yankee ideologues in higher ed, in particular, are slaves of the Jewish bribe-masters and are also robotic mimics of one another in their guilt-slinging; they are terrified of thinking for themselves, while lying that they are all “original” and “groundbreaking” in their publications and other outgassings. Thus it is only a matter of time before Chinkland, unified in race, surpasses the “leader of the free world.”

Until Christianity is exposed for the pious, anti-White fraud that it is, the nation (and the world) will be trapped in a hall of broken mirrors. This is not to say that everyone must become atheistic; there will always be genuine mystics, psychic healers and shamans who are in contact with the paranormal undergirding of nature, despite the dungheaps of contempt shoveled on them by the omniscient elites who amalgamate them together with all the fake lotus-eaters of Hollywood into the same pot. But the political grip of the so-called “prophetic religions” (Judaism, Cretinity and Islam) is driving the world to its doom. Unless and until these curses are abolished, there will be no chance that there will be an end to the accelerating suicide of the White West.

Dredd on Fri, 19th Oct 2018 7:13 am

The minds of despots are the weapons (Petroleum Civilization: The Final Chapter (Confusing Life with Death)).

Antius on Fri, 19th Oct 2018 9:04 am

A good example of the non-linear nature of human political-economic systems:

https://www.zerohedge.com/news/2018-10-19/mercedes-massacre-daimler-plummets-after-slashing-outlook-european-auto-sector

1) Rising real cost of energy reduces economic profitability, leading to inequality, rising debt, shrinking living standards, etc;

2) Political pressures build, leading to trade protectionism, Brexit, wars, etc;

The combined effect of reduced average prosperity and political instability, leads to economic damage that appears to be out of proportion to the original shock.

Techno-cornucopians point to things like renewable energy and permaculture farming as solutions to declining fossil fuels without really understanding how systematic failure works. Solutions that appear to work with tolerable system costs from a linear systems point of view end up failing miserably in real life, which is in reality a complex and highly non-linear system with many positive feedback effects. Sometimes, seemingly small things can have a disproportionate effect. This is a reality that even Nobel Prize winning economists cannot wrap their heads around. It makes things like recessions, wars and famines very difficult to predict very far into the future.

Antius on Fri, 19th Oct 2018 10:27 am

It would seem that the British appetite for Mercedes is as big as the German and French sales combined.

https://www.zerohedge.com/news/2018-10-19/mercedes-massacre-daimler-plummets-after-slashing-outlook-european-auto-sector

The UK is Europe’s second biggest and the world’s 4th largest market for BMW.

The UK is the third largest recipient of exports from the Netherlands, accounting for 11% by value; the fourth largest for Germany, accounting for 6.6%; 9% for Belgium; 8.3% for Spain; 6.8% for Portugal.

The UK is the largest contributer of tourism to southern Europe and the UK is one of the top importers of consumable food products from the EU.

What was it Cloggie was saying about holding all the cards?

Davy on Fri, 19th Oct 2018 11:17 am

“What was it Cloggie was saying about holding all the cards?”

OH, antius, neder plays “go fish” where you and I play gin rummy or poker.

Cloggie on Fri, 19th Oct 2018 12:15 pm

Brexit is a little bigger than Mercedes Antius or UK tourists to Spain, who will go anyway, even with 100 euro visa.

Ah well, at least you have found a new geopolitical buddy to play gin rummy with. You can have him. He’s a little touchy on “racism”, but he’ll gladly forgive you.

https://www.bloomberg.com/news/videos/2018-09-26/corbyn-says-no-deal-brexit-would-be-a-disaster-for-u-k

https://amp.economist.com/finance-and-economics/2018/09/14/britains-housing-market-could-be-headed-for-disaster

https://www.dailyrecord.co.uk/news/politics/experts-warn-no-deal-brexit-13262391.amp

https://www.independent.co.uk/voices/no-deal-brexit-eu-scenario-affect-impact-uk-cities-liverpool-a8491481.html?amp

https://amp.businessinsider.com/no-deal-brexit-could-cripple-britain-2018-9

All Anglo friendly sources.

Cloggie on Fri, 19th Oct 2018 3:57 pm

For all thise pretending to be “concerned” about Italian finances:

https://www.businessinsider.com/a-politically-explosive-secret-italians-are-over-twice-as-wealthy-as-germans-2013-3?international=true&r=US&IR=T

“A ‘Politically Explosive’ Secret: Italians Are More Than Twice As Wealthy As Germans”

Not a chance in hell that anybody is going to pay taxes Italians refuse to.

Anonymouse1 on Fri, 19th Oct 2018 4:28 pm