This time, almost 15% of traded world oil went off the market. World oil shortages hit Europe, Japan, and the U.S. Demand surged as supply fell. And oil prices jumped from $3 per barrel in 1973 to $14 per barrel in 1978.
Then the real gains came...
Iran was engulfed in civil war from January 1978 to February 1979. The Shah of Iran – Mohammad Reza Shah Pahlavi – was deposed. And Iranian oil production declined from 5 million barrels a day to zero – 5% of the world’s oil supply gone.
Iran took 444 American hostages. The U.S. severed diplomatic ties to the country. And global oil prices doubled in 12 months .
Prices soon spiked again...
In 1980, Iran and Iraq began an eight-year war that threatened oil supplies from the Persian Gulf. The U.S. sent military assets to insure the free flow of oil in the region, but 4 million barrels of oil per day was removed from the global market.
Prices rose from $14 per barrel in 1978 to nearly $37 per barrel in 1980.
From 1967 through 1980, 6% of the world’s oil supply was removed from the market. Prices pushed higher, and an oil boom ensued . Lingerie Thursdays at Michael’s Plum were in full swing. The bank loans were flowing freer and the Rolexes were getting heavier. But as you know by now, every boom comes with a bust in the oil industry . And the world was about to experience one of the largest busts of all time . Bust. In 1981, interest rates were 20%. The U.S. economy was in a recession. World oil consumption began to decline. Oil imports in the U.S. fell
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