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Oil Industry: Boom and Bust Cycle

Explore the impact of the boom-and-bust cycle in the oil industry from the 1973 Oil Crisis to the Persian Gulf War in 1991. Understand the dynamics of the market, OPEC's influence, and the repercussions of fluctuating oil prices.

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Oil Industry: Boom and Bust Cycle

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  1. Oil « Boom & Bust » Cycle Pg. 571-572 Pg. 585 Turnmoil and Progress

  2. Oil Economics • A group of foreign nations created an association to limit competition called the Oragnization of Petroleum Exporting Countries (OPEC) • In 1973 the Arab nations that supplied much of the oil ended shipments to the U.S. because of the U.S. Support of Israel. • The result an « energy crisis ». The price of oil and gasoline rose dramtically.

  3. Oil Economics • Motorists could buy only 3 days a week. • High gas prices stimulated the drilling of more oil wells and increased activity in other areas of the oil industry. • High oil prices lasted into the 1980’s.

  4. Oil Crisis 1973

  5. Boom and Bust Oil Cycle • High oil prices in the 1970s meant that the petorleum industry boomed. • Drilling compaines, pipe manufacturers, and oil well service compaines all shared in the resulting prosperity. • People moved to Texas in large numbers to find employment. • As often happens, « bust » followed « boom ». • Economic hardship gave way to hard times.

  6. Boom and Bust Oil Cycle • The weakening of the OPEC assocation and overproduction of oil lowered the price of oil. • Compaines cut back on drilling and fired employees. • Many people could not pay loans and Texas’s banks lost 3.7 billion dollars.

  7. Persian Gulf War • In 1990 Iraq invaded its oil-rich neighbor, Kuwait. • Iraq seemed to desire the oil of both Kuwait and Saudi Arabia. • In 1991 President George H.W. Bush assembled troops to drive Iraq out of Kuwait and protect the oil reserves of the region. • This operation was known as Desert Storm. • The Gulf War lasted slightly over a month.

  8. Summary • Define the “Boom- and Bust” cycle. • Trace the impact of the “boom-and bust” cycle in the oil industry.

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