In The News Quiz November 15, 2021
Back to the ‘70s? Oil Shock Driving Prices Higher
A classic motif of the 1970s: long gas-station lines across the U.S. as oil prices skyrocketed amid dwindling supplies. At the center of the energy crisis were the Middle East oil-producing countries (later joined by others in Africa and Latin America), known collectively as Organization of the Petroleum Exporting Countries (OPEC). When OPEC refused to expand production, the result was disrupted economies around the globe. Today, though Americans are not anxiously waiting in service-station lines, oil and gas prices are soaring at a rate not seen in many years—rising some 60 percent since early 2021.
Why are prices rising so fast? And what are the implications for the American (and the global) economy?
As national economies worldwide begin to recover from the pandemic and both individuals and businesses resume full activities, demand for oil and petroleum products like gasoline has increased considerably. This sharp rise in demand comes just as supply has fallen, partly due to global supply-chain issues emerging from COVID and also because two hurricanes (Ida and Nicholas) knocked out portions of the U.S. oil infrastructure in September. Surging natural gas prices—another example of demand outstripping supply—have also affected demand for oil, as manufacturing and individual users shift to oil from more costly natural gas. Finally, a major oil spill off the California coast (In the News, Oct. 5) slowed U.S. production over the past month.
More than most commodities excepting perhaps food, oil price rises have far-reaching effects on the American and indeed global economy. President Biden worried aloud this week that unless OPEC and other oil-producing countries like Russia ramp up production, the global economic recovery spreading in COVID’s wake may stall or even reverse. Energy policy experts noted that the Biden Administration, in addition to pressing other nations for higher production, could also help slow price increases by releasing oil held in the U.S. “Strategic Petroleum Reserve,” the world’s largest stockpile of oil.
The oil-price drama played out amid massive protests in Glasgow, Scotland, host to a United Nations summit on climate change. More than 100,000 protesters in Glasgow, joined by environmental marches in cities around the globe, called for swift and decisive action to curb climate changes—notably including significant reductions in greenhouse gas emissions including, as one Glasgow protester’s sign demanded, “an end to the world’s addiction to oil.”
- L. Jacobson, “Why Are Oil Prices So High? And What Can Be Done About It?” (2021).
- D. Brower, “COP26: Oil Price Soars Even As World Turns Against Fossil Fuels” (2021).