The end of abundant and cheap oil

The first oil crisis in 1973 and then the second in 1979 have had the effect of warning signals, favouring the development of 'technological' oil, as illustrated by the tremendous progress observed in the area of offshore oil production.

The evolution of oil prices is shown in Figure 7.1; the price of oil per barrel is expressed both in current US $ and in constant US $ (upper curve). After a long period of very low prices, which followed the first discoveries, the history of oil has become much more turbulent over the last thirty years. In 1973, the first oil crisis resulted from the Yom Kippur war. Then, in 1979, the second crisis followed the Iranian revolution and the Iran-Iraq war. A counter crisis favoured by the development of technological oil and a weakening of the role played by OPEC followed, leading to a new drop in oil prices. It occurred during a period which was marked by the end of the Cold War and the easing of international relations.

Within this context, there was a feeling that the difficulties were over and that plenty of hydrocarbon resources were available. Low prices also had a negative impact on investments concerning technological oil and alternative energy sources.

A revival of political tension, the war in Iraq which followed the Kuwait invasion, the spreading of terrorism, the increase in world demand and

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1940-49 1950-59 1960-69 S/ barrel - Constant US S (2006) $/ barrel - Current US S

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1990-99 2000-06 Year

1940-49 1950-59 1960-69 S/ barrel - Constant US S (2006) $/ barrel - Current US S

1970-79 1980-89

1990-99 2000-06 Year

Figure 7.1 Evolution of the price of crude oil (Source: BP Statistical Review)

a more pessimistic outlook concerning oil reserves led in 2007 and the beginning of 2008 to a sharp increase in the price of oil which reached 100 US $/barrel and then 140 US $/barrel.

The financial crisis of autumn 2008 provoked a new sharp drop in price. Due to these very rapid oscillations, the price of oil tends to become unpredictable in the short term. In the longer term, it appears that the era of cheap and abundant oil is finished and that a general trend towards increasing prices should be observed in the future.

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