Instability of trade in petroleum and petroleum products

Instability of petroleum prices
Oil price fluctuations

Nature

The instability of trade in petroleum and petroleum products refers to the frequent and unpredictable fluctuations in the volume, value, and direction of international petroleum trade. This instability arises from factors such as volatile global oil prices, geopolitical tensions, supply disruptions, and changing energy policies. Such unpredictability poses significant challenges for both exporting and importing countries, affecting economic planning, revenue stability, and energy security. The problem is further exacerbated by market speculation and technological shifts, making the petroleum trade highly sensitive to external shocks and contributing to broader economic uncertainty worldwide.

Background

The instability of trade in petroleum and petroleum products emerged as a global concern during the 1970s oil crises, when sudden price shocks and supply disruptions exposed the vulnerability of economies to volatile energy markets. Subsequent decades saw recurring fluctuations driven by geopolitical tensions, market speculation, and technological shifts, prompting international efforts to monitor and mitigate risks. Recognition of this instability deepened as its impacts reverberated through global finance, development, and energy security.

Incidence

Until 1970, the world oil prices never rose higher than US$ 2 a barrel, although oil products were sold at prices several hundred percent above cost. In the 1970s and 1980s, OPEC countries raised the per barrel reference prices from less than US$ 2.00 to $34.00. Since 1979, OPEC's market share has dropped from 63 to 38% of world oil sales. Oil production has grown enormously in China, Latin America and Northern Europe while it has halved in the Middle East. The role of the Arab oil-producing countries and the importance of the Straits of Hormuz to the world economy has dramatically declined not only because of the Iran-Iraq war, but also because of the rapid development of non-petroleum-based sources of energy. The present oil glut has caused production or price roll backs in OPEC and in non-OPEC producers such as the former Soviet Union, Norway and the UK. Oil prices may stabilize around $20-25 a barrel in the 1990s.

Claim

The instability of trade in petroleum and petroleum products is a critical global crisis. Volatile prices and unpredictable supply chains threaten economic stability, fuel inflation, and endanger energy security worldwide. This instability undermines development, disrupts industries, and leaves nations vulnerable to political manipulation. Ignoring this problem risks catastrophic consequences for economies and societies alike. Immediate, coordinated action is essential to stabilize petroleum trade and protect the world from ongoing turmoil and uncertainty.

Counter-claim

The so-called "instability of trade in petroleum and petroleum products" is vastly overstated. Modern markets, diversified suppliers, and strategic reserves have rendered such concerns nearly obsolete. Temporary price fluctuations are normal in any commodity market and do not constitute a significant problem. Global economies have adapted, and alternative energy sources further diminish any real threat. Worrying about petroleum trade instability is an outdated distraction from more pressing global issues.