Environmental Engineering Reference
In-Depth Information
price of Arabian Light
crude oil from $3.65 to
$11.65 per barrel dur-
ing the course of that
year.
At the same time,
OPEC's Arab member
states formed OAPEC
(the Organization
of Arab Petroleum
Exporting Companies)
and imposed a politi-
cally motivated oil
embargo against the
US and other countries
supportive of Israel in
the war. Needless to
say, the resulting oil
shortages provoked
crises throughout
industrialized nations
that relied on OPEC
for their crude.
The 1973 oil crisis hit the US hard, with severe
shortages at gas stations and a rota system (based
on the numbers on car numberplates) introduced.
OPEC and the oil market
For the next dozen years, the basis of the pricing system was a “marker”
price for Arabian Light, effectively set by Saudi Arabia (being the domi-
nant producer), as the benchmark for all other crude oil prices. But the
system gradually broke down, largely because trading increased.
This was because many OPEC governments nationalized the upstream
(exploration and production) reserves of international oil companies,
which left companies increasingly short of enough crude for their down-
stream refineries. So the international companies had to look for supplies
elsewhere. By the late 1970s and early 1980s they were beginning to find
this new non-OPEC oil in areas such as the North Sea, the Soviet Union
and Mexico, and from suppliers ready and able to undercut OPEC prices.
As a result, OPEC's market share shrank from 52 percent in 1973 to less
than 30 percent by 1985. Saudi Arabia's attempt in 1985-86 to recover
