Therefore, right from its beginning, the oil industry was closely related to the availability of markets. Drake’s drill was in response to that demand. In 1853, when Robert Edwin Dietz in New York began producing kerosene lamps, he created a huge market for oil. This was, is and will be true for oil everywhere. In other words, technological advances are rooted in market demands. But why did Drake decide to drill an oil well? The answer is the old adage “necessity is the mother of invention”. In this simplified narrative, Edwin Drake drilled a well close to an oil seep in Titusville to extract oil his persistence and hard work paid off, and that discovery well ushered in the new hydrocarbon age (see The Birth of the Modern Oil Industry). The modern oil industry began in 1859 in Pennsylvania, or so the story goes. Perhaps the history of oil booms and busts offers a realistic perspective on the forces determining oil prices and crises. Predicting oil prices and crises is a great game in today’s economy and geopolitics, but everyone agrees that it is a hard game too. Oil market stability, therefore, provides an optimum functionality for investors, producers, planners, governments, and consumers. High oil prices, if maintained too long, encourage a shifting away from oil, thus hurting the oil industry on the other hand, drastic falls in prices, although temporarily advantageous for consumers, are ‘market crashes’ for the industry, limiting its capability to invest in new exploration and to meet the rising oil demand (rising partly because of low oil prices). What is considered an ‘oil boom’ for the industry is actually an ‘oil shock’ for consumers. And because oil is a basic commodity linked to nearly all of our activities, oil market volatility is quickly transferred to other sectors of society as well. Oil booms and oil busts are both ‘crises’ that disrupt market stability and create confusion in economic, political and industrial circles. Part 2 of this series will be published in due course.įor other articles on this important subject, see the list of GEO ExPro articles in the section headed ‘Further Reading’, at the end of this article. In Part 1 of this two-part article we first review the history of price fluctuations in the modern oil industry from 1859 to 1959. Although supply and demand has been a major factor in these oil crises, the causes and consequences of each episode have varied. OPEC is often blamed for such crises but ever since its emergence in the mid-19th century the oil industry has witnessed periods of relative stability sandwiched by episodes of rapid price rises and falls. Most of us know about the oil shocks of 19 and the market crashes of 19 (which still continues). A Brief History of Booms and Busts: Part I
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |