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 1973 oil crisis, when sudden supply disruptions and price shocks exposed the vulnerability of economies to volatile energy markets. Subsequent crises in 1979 and the 1980s reinforced awareness of the geopolitical and economic complexities underlying petroleum trade. Over time, fluctuating prices, shifting alliances, and technological advances have deepened recognition of the persistent unpredictability characterizing this sector.

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.

Counter-claim

The so-called "instability of trade in petroleum and petroleum products" is vastly overstated and hardly a pressing issue. Global markets have repeatedly adapted to price fluctuations and supply shifts, ensuring continued access and economic stability. Technological advances, diversified suppliers, and strategic reserves further minimize any real risk. In reality, the world’s energy systems are resilient, making concerns about petroleum trade instability largely irrelevant in today’s interconnected and resourceful global economy.