OIL CRISIS What would happen if there was no more oil???

GROUP MEMBERS

Priyanka Limbachiya 512

Richa Modi 517

Anjal Surana 536

Priyanka Tiwari 537

Aditi Warang 547

OIL CRISIS, 1973

The 1973 oil crisis began in October 1973 when the members

of the Organization of Arab Petroleum Exporting

Countries (OAPEC, consisting of the Arab members of

the OPEC, plus Egypt, Syria and Tunisia) proclaimed an OIL

embargo.

By the end of the embargo in March 1974, the price of oil

had risen from $3 per barrel to nearly $12.

The oil crisis, or "shock", had many short-term and long-

term effects on global politics and the global economy. It

was later called the first oil shock, with the 1979 oil

crisis being the "second oil shock."

OIL CRISIS OF 1973 – WHY DID IT HAPPEN??

OPEC would decide the price and amount of oil.

President Nixon showed his support of Israel by

giving them $ 2.5 billion worth of arms (weapons)

OPEC nations retaliated against those nations

supporting Israel by putting an embargo on oil

shipments.

EMBARGO – a type of trade barrier in which a

government places restrictions on imports and

exports of certain goods.

Result – the price of gasoline shot way up as its

supply went down, leading to shortages.

1990 OIL PRICE SHOCK

o The 1990 OIL PRICE spike occurred in response to the Iraqi

invasion of Kuwait on August 2, 1990.

o Lasting only 9 months, the price shock was less extreme and of

shorter duration than the previous oil crises of 1973 and 1979-

1980, yet the rise in prices is widely believed to have been a

significant factor in the recession of the early 1990s.

o Average monthly prices of OIL rose from $17 per barrel in

July to $36 per barrel in October. As the U.S.-led coalition

experienced military success against Iraqi forces, concerns

about long-term supply shortages eased and prices began to

fall.

What is OPEC?

The Organization of the Petroleum Exporting

Countries (OPEC), which then comprised 12 countries,

including Iran, seven Arab countries (Iraq, Kuwait, Libya,

Qatar, Saudi Arabia, the United Arab Emirates),

plus Venezuela, Indonesia, Nigeria, and Ecuador, had

been formed at a Baghdad conference on September 14,

1960.

OPEC was organized to resist pressure by the "Seven

Sisters" (seven large oil companies, mostly owned by

U.S., British, and Dutch nationals) to reduce oil

prices and payments to producing countries.

WHAT WAS OPEC’S POINT?

They wanted to get the

attention of the international

community that was supporting

Israel.

OIL CRISIS AFFECTS INDIA’S ECONOMY

India ranks among the top 10 largest oil- consuming

countries

Oil accounts for about 30% of India's total energy

consumption.

Now India imports about 70% of its total oil consumption

and makes no exports.

This naturally would create a supply deficit, as domestic

oil production is unlikely to keep pace with demand.

An IMF report says that among the oil importing

countries, the largest impact on GDP growth and the

balance of payments is expected to be felt in India,

Korea, Pakistan, Philippines, Thailand, and Turkey.

SKEWED BALANCE OF PAYMENTS DUE TO OIL

IMPORTS

Although the entire burden of the spike in price has not

been passed to the domestic consumer, the Indian

government's finances have taken a sufficient hit,

affecting the macroeconomic outlook in India.

India, as a result, will experience deterioration in its

balance of payments, putting downward pressure on

exchange rates.

Ultimately, imports would become more expensive and

exports less valuable, leading to a drop in real national

income.

Global Oil Scenario

o World oil use is expected to grow from about 80 million barrels per day

(mbpd) in 2003 to 98 mbpd in 2015 and 118 mbpd in 2030 as per Energy

Information Administration (EIA), International Energy Outlook (IEO)

2006.

o In the IEO 2006 reference case, world oil prices rise from $31 per barrel

(in real 2004 dollars) in 2003 to $57 per barrel in 2030, and oil’s share of

total world energy use falls from 39 percent to 33 percent.

o To meet the projected increase in world oil demand, total petroleum supply

in 2030 will need to be 38 mbpd higher than the 2003 level of 80 mbpd.

o As per the same report India is expected to consume additional 2.2 mbpd.

OPEC producers are expected to provide 14.6 mbpd of the increase.

WHAT IT WAS LIKE IN 1973

IN OUR WORLD, WHAT ELSE IS

PETROLEUM USED FOR?

When petroleum is refined, its various chemical

parts are separated and some become gasoline,

some asphalt, and other parts become the raw

materials for plastics and rubber for tires and many

more things.

Examples of what can be obtained from petroleum:

crude oil, natural gas, and/or viscous or solid forms

Fuels - like gasoline, diesel, propane (many people

use propane to heat their homes), heating oil

Solvents Diesel Motor Oil Bearing Grease

Ink Floor Wax Ballpoint Pens Football Cleats

Upholstery Sweaters Boats Insecticides

Bicycle Tires Sports Car

Bodies

Nail Polish Fishing lures

Dresses Tires Golf Bags Perfumes

Cassettes Dishwasher Tool Boxes Shoe Polish

Motorcycle

Helmet

Caulking Petroleum Jelly Transparent Tape

CD Player Faucet Washers Antiseptics Clothesline

Curtains Food

Preservatives

Basketballs Soap

Vitamin Capsules Antihistamines Purses Shoes

Dashboards Cortisone Deodorant Footballs

Putty Dyes Panty Hose Refrigerant

Percolators Life Jackets Rubbing Alcohol Linings

Skis TV Cabinets Shag Rugs Electrician's Tape

Tool Racks Car Battery

Cases

Epoxy Paint

One 42-gallon barrel of oil creates 19.4 gallons of

gasoline. The rest (over half) is used to make things

like:Americans

consume

petroleum

products at a

rate of three

and a half

gallons of oil

per day each.

But as you

can see from

this chart

petroleum is

not just used

for fuel!!

TOP 10 NATIONS PRODUCING OIL

Saudi Arabia

United States

Russia

China

Canada

Iran

Iraq

United Arab Emirates

Venezuela

Mexico

TOP 10 NATIONS CONSUMING OIL

United States

China

Japan

India

Russia

Saudi Arabia

Brazil

Germany

South Korea

Canada

INTERNATIONAL CARTEL

Cartel an agreement (alliance) among monopolies or fir

ms from different countries (but operating primarily in one

economic sector) to divide upmarkets and source

s of raw materials, establish monopoly prices,

exploit patents, and take other steps to obtain ma

ximum profits.

International cartels also include domestic cartels and oth

er forms of domestic monopolistic associations.

The petroleum cartel includes seven major oil trusts in

United States, Great Britain and Netherlands. These are

the standard oil company of New Jersey, Standard oil

company of California, Mobil oil, Gulf oil and Texaco in

United States, British Petroleum in Great Britain, and

Royal Dutch-Shell in Great Britain and the Netherlands.

WHERE HAS THE OIL GONE?

UNITED STATES

CANADA

UNITED KINGDOM

INDONESIA*

NORWAY

EGYPT

ARGENTINA

AUSTRALIA

ECUADOR

PROJECTED LIFE OF OIL RESERVES BY COUNTRY:

CHINA

NIGERIA*

ALGERIA*

MALAYSIA

COLOMBIA

OMAN

INDIA

QATAR*

ANGOLA

ROMANIA

YEMEN

BRUNEI

SAUDI ARABIA*

RUSSIA

IRAN*

VENEZUELA*

MEXICO

LIBYA*

BRAZIL

AZERBAIJAN

TRINIDAD

LESS THAN 10 YEARS LESS THAN 50 YEARS LESS THAN 100 YEARS

WHAT WILL IT BE LIKE IN THE YEAR 2175?

YOUR ASSIGNMENT IS TO CREATE A MIND MAP OF

WHAT THE WORLD WOULD BE LIKE IF WE RAN OUT

OF PETROLEUM.

THINK ABOUT HOW YOUR DAILY LIFE WILL BE

AFFECTED?

WHAT WILL THERE BE LESS OF?

WHAT WILL THERE BE MORE OF?

WHAT WILL WE DO DIFFERENTLY?

IT IS THE YEAR 2175

THERE IS NO

OIL/PETROLEUM

NO

TRUCKS

NO

DELIVERIES

ALTERNATE

FORMS OF

FUEL

DISCOVERED

MORE

PEOPLE

WALKING

NO CARS

THAT USE

GASOLINE

NO

PLASTICS

HEAVIER

CONTAINERS

(GLASS,

METAL, ETC