Word: petroleum
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Dates: during 1990-1999
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...allow its 13 members to increase production to make up the shortfall of roughly 4.6 million bbl. a day lost in the U.N.-mandated embargo on Iraqi and Kuwaiti crude. In the wake of the cartel's action -- Iraq and Libya did not attend the meeting in Vienna -- petroleum prices dropped about $2 in one day, to $26 per bbl. Toward week's end, however, traders began fretting once again about a possible gulf confrontation and a disruption in energy supplies; with that, the price for October delivery closed at $27.32 per bbl., down 12% for the week...
...just under 3000. But no one could be sure that the worst was over. Some markets, notably bonds, kept right on going down. More important, the threat of war has not begun to fade, and the markets are operating on a frightening equation: war equals oil shortages equals skyrocketing petroleum prices equals an upsurge in general inflation plus sagging profits, lower production and more unemployment -- all at the same time. J. Richard Fredericks, a banking analyst at Montgomery Securities, a San Francisco brokerage, summarizes the thinking: "The gulf crisis has fueled the fears of rising inflation, deficits, recession and stagflation...
...price increases act like a stiff tax increase, pulling money out of consumers' pockets and reducing their ability to buy other products. A rule of thumb is that an annual increase of $8 per bbl. in oil prices reduces economic growth 1 percentage point a year. But petroleum has already risen more than that, and subtracting a point from growth leaves almost nothing. So if prices stay put, says a Bush Administration official, "growth is going to be a giant goose egg for the year. A big fat zero...
ECONOMIC. War in the Middle East could swiftly cut deliveries of oil from Saudi Arabia and the Arab emirates along the Persian Gulf; ship owners would be loath to send tankers into a war zone to pick up their petroleum. Iraqi missiles could damage Saudi oil fields, reducing supplies even after the war was over (though some experts say much of the damage could probably be repaired in a few months). The shortages would exacerbate the already startling run-up in oil prices. How much is anybody's guess, but $50 per bbl. for crude, vs. a bit less than...
...have made a replay of the oil shocks of 1973 and 1979 less likely. Price controls that distorted energy markets have been lifted, and most of the restrictions that made it difficult for industries to shift to whatever fuel is cheapest have been removed. Most vital is the Strategic Petroleum Reserve, 590 million bbl. of crude that the government has been stashing away in salt domes in Louisiana and Texas since 1977. Though the reserve is designed to combat shortages that might arise during a crisis, some members of Congress and many energy economists are pushing the Administration to announce...