Econ paper/ 6 pages/ 24 hrs
nimab8
IntroductiontoOilIndustry.pptxil
Put away laptops & cell phones
Name 10 products that use petroleum!
Oil: our BFF of BFFs
http :// oilprice.com/Energy/Energy-General/10-Unexpected-Uses-of-Oil.html
Let’s take a step back: Political economy versus economics
Neoclassical theory/mainstream political science: supply and demand, competition and free trade are the basis of analysis
Methodological individualism; methodological nationalism
Political economy: power; history; social forces; interconnections on a local, regional, global scale
Question: how are prices determined?
Communism/socialism (): a mustached central planner decides
Capitalism/free market (): supply and demand, the empowered consumer
Argument
For most of its history of production and use on a mass scale (late 19th century onward), petroleum/oil prices, flows, volume, have NOT been determined by the free market.
The core product of modern capitalism is not (and cannot be) based on supply & demand
Some of the people involved had mustaches, some didn’t, some had beards, some didn’t, in short facial hair does not explain the price of oil.
When you think of oil/petroleum, what names, locations, images, ideas come to mind?
When we think of oil we usually picture this
Titusville, Pennsylvania “The Valley That Changed The World!”
When we could easily picture this!
Signal Hill oil pump
Signal Hill oil pump
Back to Titusville: Pennsylvania Rock Oil Company
George Bissell 1821-1884
Edwin Drake 1819-1880
First modern oil well struck in 1859 in Titusville
Source: my calculations based on “American Petroleum Industry: 1859-1899”
Average annual price of crude oil per barrel 1862-1873
Average annual price of crude oil per barrel 1862-1899
Source: my calculations based on “American Petroleum Industry: 1859-1899”
Sheikh John bin William Rockefeller
Standard Oil blue barrel (bbl) 42 gallons or 159 liters
International competitors
Ludvig Nobel (Alfred’s brother)
1831-1888
BAKU
Marcus Samuel 1853-1927
DUTCH-SHELL OIL
Rothschild Family
DUTCH-SHELL OIL
Crude oil prices since 1861
19
Ida Tarbell (1857-1944)
The History of the Standard Oil Company, 1904
Break up of SO & Seven sisters
Standard oil of new jersey (esso exxon Exxon Mobil)
Standard oil of new york (SoCoNyMobil Exxon Mobil)
Standard oil of California (SoCal Chevron)
Texas Company (Texaco Chevron)
Royal Dutch Shell
Anglo-Persian Oil Company (BP)
Gulf Oil (Chevron, BP)
Crude oil prices since 1861
STANDARD OIL
1870-1911
TRC/ 7 sisters
1931-1971
OPEC
1971~2005
OIL WARS
1912-1931
22
Lead up to oil in Saudi Arabia
Red Line Agreement 1928 (Turkey Petroleum Company
National Industrial Recovery Act 1933 (Oil Code)
Texas Railroad Commission 1932- 1965 (netback pricing)
Standard Oil of California, SoCal Major Frank Holmes struck oil in 1932 in Bahrain, then Saudi Arabia
Oil Corridor
32
Oil Corridor
Oil Corridor
Ghawar oil field
Discovered 1948
Production 1951
130+ billion barrels
(of which 65 billion
produced);
produces
6% of global daily
oil production
In 2010, ARAMCO
claimed that 65 billion
barrels had been produced
33
Oil Corridor
Crude oil prices since 1861
STANDARD OIL
1870-1911
TRC/ 7 sisters
1931-1971
OPEC
1971~2005
OIL WARS
1912-1931
34
Major oil trade movements
35
Annual Average Posted Prices of Crude Oil Per Barrel of Saudi Arabian Oil F.O.B. Ras Tanura in US Dollars & Deflated by US wholesale price index
Source: my calculations based on ARAMCO/Owen & Pamuk/Ibrahim Oweiss
Oil pricing
Oil discovery until 1970s: posted price (oil company decides price later TRC, splits revenue 50-50 with country after deducting costs)
Price was $1.75/barrel in 1951 and $1.80 in 1971, hardly went up over 20 years
Wave of nationalizations, 1973 War, rise of OPEC (countries assumed control of oil pricing)
OPEC takes pricing control from 7 sisters
First oil shock
Second oil shock
Beginning of 3rd world debt crisis
Saudi Arabia opens floodgates
Gulf War I
Invasion of Iraq
9/11 attacks
Oil since 2005
Sources
The American Petroleum Industry volumes 1 (Age of Illumination: 1859-1899) and 2 (Age of Energy 1899-1959) by Williamson and Daum: Northwestern Press
A History of Saudi Arabia by Madawi al-Rasheed
A History of the Middle East Economies in the 20th Century by Roger Owen and Sevket Pamuk
The Middle East in the World Economy 1800-1914 by Roger Owen
The Prize by Daniel Yergin
A Peace to End All Peace by Daniel Fromkin
10
20
30
40
50
60
70
80
90
100
$ money of the day $ 2003
Penn- sylvanian oil boom
Russian oil exports
begin
Discovery of Spindletop, Texas
Sumatra production begins
Fears of shortage in USA
Post-war reconstruction
Growth of Venezuelan production
East Texas field discovered
Suez � crisis Loss of Iranian supplies
Yom Kippur war
Iranian revolution
Iraq invaded Kuwait
Netback pricing introduced
0 1861-69 1870-79 1880-89 1890-99 1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-03 1861-1944 US average. 1945-1983 Arabian Light posted at Ras Tanura. 1984-2003 Brent dated.
World events
US dollars per barrel
Invasion of Iraq
Asian financial crisis
10
20
30
40
50
60
70
80
90
100
$ money of the day $ 2003
Penn- sylvanian oil boom
Russian oil exports
begin
Discovery of Spindletop, Texas
Sumatra production begins
Fears of shortage in USA
Post-war reconstruction
Growth of Venezuelan production
East Texas field discovered
Suez � crisis Loss of Iranian supplies
Yom Kippur war
Iranian revolution
Iraq invaded Kuwait
Netback pricing introduced
0 1861-69 1870-79 1880-89 1890-99 1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-03 1861-1944 US average. 1945-1983 Arabian Light posted at Ras Tanura. 1984-2003 Brent dated.
World events
US dollars per barrel
Invasion of Iraq
Asian financial crisis
10
20
30
40
50
60
70
80
90
100
$ money of the day $ 2003
Penn- sylvanian oil boom
Russian oil exports
begin
Discovery of Spindletop, Texas
Sumatra production begins
Fears of shortage in USA
Post-war reconstruction
Growth of Venezuelan production
East Texas field discovered
Suez � crisis Loss of Iranian supplies
Yom Kippur war
Iranian revolution
Iraq invaded Kuwait
Netback pricing introduced
0 1861-69 1870-79 1880-89 1890-99 1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-03 1861-1944 US average. 1945-1983 Arabian Light posted at Ras Tanura. 1984-2003 Brent dated.
World events
US dollars per barrel
Invasion of Iraq
Asian financial crisis
Trade flows worldwide (million tonnes)
102.0
50.1
244.2
154.3
208.4
333.7
126.1
25.1
19.7
81.5
70.8 36.4
36.0
35.3
34.0 28.8
21.4
90.6
51.8
120.9
USA Canada Mexico S. & Cent. America Europe & Eurasia Middle East Africa Asia Pacific
Crude Oil Price 1970 2006
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
1970197419781982198619901994199820022006
Year
US $
Nominal Price
Real Price
Chart1
| Year | Year |
| 2.03 | 2.32 |
| 2.29 | 2.49 |
| 3.05 | 3.05 |
| 10.73 | 9.39 |
| 10.73 | 8.37 |
| 11.51 | 8.18 |
| 12.39 | 8.01 |
| 12.7 | 7.64 |
| 17.25 | 9.45 |
| 28.64 | 13.89 |
| 32.51 | 14.18 |
| 32.38 | 12.97 |
| 29.04 | 10.9 |
| 28.2 | 9.97 |
| 27.01 | 9.06 |
| 13.53 | 4.4 |
| 17.73 | 5.57 |
| 14.24 | 4.32 |
| 17.31 | 5 |
| 22.26 | 6.07 |
| 18.62 | 4.86 |
| 18.44 | 4.63 |
| 16.33 | 3.97 |
| 15.53 | 3.67 |
| 16.86 | 3.86 |
| 20.29 | 4.53 |
| 18.68 | 4.08 |
| 12.28 | 2.63 |
| 17.47 | 3.69 |
| 27.6 | 5.69 |
| 23.12 | 4.66 |
| 24.36 | 4.82 |
| 28.1 | 5.43 |
| 36.05 | 6.82 |
| 50.64 | 9.36 |
| 61.08 | 11.02 |
T73
| T73 | Crude Oil Price in Nominal and Real Terms | |||
| (US Dollars Per Barrel) | ||||
| Base: 1973 = 100 | ||||
| Nominal Price adjusted for: | ||||
| Nominal | Exchange | Inflation | Combined | |
| Oil Price 1/ | Rates 2/ | 3/ | 4/ | |
| 1970 | 1.67 | 1.97 | 2.01 | 2.36 |
| 1971 | 2.03 | 2.35 | 2.32 | 2.68 |
| 1972 | 2.29 | 2.47 | 2.49 | 2.68 |
| 1973 | 3.05 | 3.05 | 3.05 | 3.05 |
| 1974 | 10.73 | 11.06 | 9.39 | 9.68 |
| 1975 | 10.73 | 10.86 | 8.37 | 8.47 |
| 1976 | 11.51 | 12.57 | 8.18 | 8.93 |
| 1977 | 12.39 | 13.41 | 8.01 | 8.67 |
| 1978 | 12.70 | 12.60 | 7.64 | 7.58 |
| 1979 | 17.25 | 16.48 | 9.45 | 9.04 |
| 1980 | 28.64 | 27.33 | 13.89 | 13.26 |
| 1981 | 32.51 | 35.66 | 14.18 | 15.55 |
| 1982 | 32.38 | 39.76 | 12.97 | 15.93 |
| 1983 | 29.04 | 38.79 | 10.90 | 14.57 |
| 1984 | 28.20 | 41.44 | 9.97 | 14.66 |
| 1985 | 27.01 | 41.16 | 9.06 | 13.80 |
| 1986 | 13.53 | 16.94 | 4.40 | 5.50 |
| 1987 | 17.73 | 19.88 | 5.57 | 6.25 |
| 1988 | 14.24 | 15.54 | 4.32 | 4.71 |
| 1989 | 17.31 | 19.87 | 5.00 | 5.74 |
| 1990 | 22.26 | 23.38 | 6.07 | 6.38 |
| 1991 | 18.62 | 19.84 | 4.86 | 5.18 |
| 1992 | 18.44 | 19.24 | 4.63 | 4.83 |
| 1993 | 16.33 | 18.88 | 3.97 | 4.60 |
| 1994 | 15.53 | 17.90 | 3.67 | 4.23 |
| 1995 | 16.86 | 18.63 | 3.86 | 4.27 |
| 1996 | 20.29 | 22.60 | 4.53 | 5.04 |
| 1997 | 18.68 | 22.33 | 4.08 | 4.88 |
| 1998 | 12.28 | 14.91 | 2.63 | 3.20 |
| 1999 | 17.47 | 21.67 | 3.69 | 4.58 |
| 2000 | 27.60 | 37.76 | 5.69 | 7.79 |
| 2001 | 23.12 | 32.65 | 4.66 | 6.58 |
| 2002 | 24.36 | 33.13 | 4.82 | 6.56 |
| 2003 | 28.10 | 33.66 | 5.43 | 6.51 |
| 2004 | 36.05 | 40.06 | 6.82 | 7.58 |
| 2005 | 50.64 | 56.32 | 9.36 | 10.41 |
| 2006 | 61.08 | 67.72 | 11.02 | 12.22 |
| 1/ From 1970 to 1981, the Arab Light Official Price (Jan. 1970 to Oct. 1973: 93% of posted A.Light price). As of 1982, the OPEC Spot | ||||
| Reference Basket Price; as of June 16, 2005, the new Basket methodology came into effect (see section on definitions). | ||||
| 2/ Based on weighted average index of currency exchange rates of the countries set forth in the modified Geneva I Agreement | ||||
| vis-a-vis dollar. Weights: OPEC imports from modified Geneva I countries and US. | ||||
| 3/ Based on weighted average consumer price indices of modified Geneva I countries and US | ||||
| (weights: private consumption of modified Geneva I countries and US). | ||||
| 4/ Based on combined indices of exchange rates and inflation. | ||||
| Source : IMF, International Financial Statistics, Direction of Trade Statistics; RBS-National Westminster Bank. |
T73
| Year | Year |
