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===1979β1980: Oil crisis and 1980s oil glut=== {{Main|1979 oil crisis|1980s oil glut}} [[File:Opecrev.gif|thumb|alt=refer to caption|Fluctuations of OPEC net oil export revenues since 1972<ref>{{cite web|url=http://www.eia.doe.gov/emeu/cabs/OPEC_Revenues/OPEC.html |title=OPEC Revenues Fact Sheet |publisher=US Energy Information Administration |date=10 January 2006 |url-status=unfit |archive-url=https://web.archive.org/web/20080107014809/http://www.eia.doe.gov/emeu/cabs/OPEC_Revenues/OPEC.html |archive-date=7 January 2008 }}</ref><ref name=EIA2015/>]] In response to a wave of [[oil nationalization]]s and the high prices of the 1970s, industrial nations took steps to reduce their dependence on OPEC oil, especially after prices reached new peaks approaching US$40/bbl in 1979β1980<ref>{{cite news |title=Oil Prices Pass Record Set in '80s, but Then Recede |date=3 March 2008 |url=https://www.nytimes.com/2008/03/03/business/worldbusiness/03cnd-oil.html |newspaper=[[The New York Times]]|first=Jad |last=Mouawad |access-date=11 February 2017 |archive-url=https://web.archive.org/web/20170307021046/http://www.nytimes.com/2008/03/03/business/worldbusiness/03cnd-oil.html |archive-date=7 March 2017 |url-status=live }}</ref><ref>{{cite news |url=https://www.bloomberg.com/gadfly/articles/2016-05-18/saudi-aramco-ipo-big-oil-s-world-is-changing |title=It's Saudi Arabia's World. Big Oil Just Lives in It |first=Liam |last=Denning |publisher=Bloomberg News |date=18 May 2016 |access-date=10 March 2017 |archive-url=https://web.archive.org/web/20170203211205/https://www.bloomberg.com/gadfly/articles/2016-05-18/saudi-aramco-ipo-big-oil-s-world-is-changing |archive-date=3 February 2017 |url-status=live }}</ref> when the [[Iranian Revolution]] and [[IranβIraq War]] disrupted regional stability and oil supplies. Electric utilities worldwide switched from oil to coal, natural gas, or nuclear power;<ref>{{cite journal |title=Oil and nuclear power: Past, present, and future |first1=Ferenc L. |last1=Toth |first2=Hans-Holger |last2=Rogner |journal=Energy Economics |volume=28 |issue=1 |date=January 2006 |pages=1β25 |url=http://www.iaea.org/OurWork/ST/NE/Pess/assets/oil+np_toth+rogner0106.pdf |doi=10.1016/j.eneco.2005.03.004 |bibcode=2006EneEc..28....1T |access-date=30 December 2015 |archive-url=https://web.archive.org/web/20071203152254/http://www.iaea.org/OurWork/ST/NE/Pess/assets/oil%2Bnp_toth%2Brogner0106.pdf |archive-date=3 December 2007 |url-status=live }}</ref> national governments initiated multibillion-dollar research programs to develop alternatives to oil;<ref>{{cite web |url=https://www.iea.org/publications/freepublications/publication/renewable_factsheet.pdf |title=Renewables in Global Energy Supply: An IEA Fact Sheet |publisher=International Energy Agency |date=January 2007 |access-date=30 December 2015 |archive-url=https://web.archive.org/web/20160303220128/https://www.iea.org/publications/freepublications/publication/renewable_factsheet.pdf |archive-date=3 March 2016 |url-status=live }}</ref><ref>{{cite press release |url=http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=2718&ArticleID=9542 |title=Renewable Energy: World Invests $244 billion in 2012, Geographic Shift to Developing Countries |publisher=United Nations Environment Programme |date=12 June 2013 |access-date=30 December 2015 |archive-url=https://web.archive.org/web/20160304110442/http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=2718&ArticleID=9542 |archive-date=4 March 2016 |url-status=live }}</ref> and commercial exploration developed major non-OPEC oilfields in Siberia, Alaska, the North Sea, and the Gulf of Mexico.<ref>{{cite book |url=https://books.google.com/books?id=1cJhK-Sd8QgC&pg=PT95 |title=American Power and the Prospects for International Order |first=Simon |last=Bromley |publisher=John Wiley & Sons |year=2013 |isbn=978-0-7456-5841-4 |page=95 |access-date=30 December 2015 |archive-url=https://web.archive.org/web/20160617111649/https://books.google.com/books?id=1cJhK-Sd8QgC&pg=PT95 |archive-date=17 June 2016 |url-status=live }}</ref> By 1986, daily worldwide demand for oil dropped by 5 million barrels, non-OPEC production rose by an even-larger amount,<ref name=Robert/> and OPEC's market share sank from approximately 50 percent in 1979 to less than 30 percent in 1985.<ref name=MarketShare>{{cite news |url=https://www.bloomberg.com/gadfly/interactives/2016-how-opec-won-the-battle-and-lost-the-war/ |title=How OPEC Won the Battle and Lost the War |first=Liam |last=Denning |publisher=Bloomberg News |date=1 June 2016 |access-date=22 February 2017 |archive-url=https://web.archive.org/web/20170222193958/https://www.bloomberg.com/gadfly/interactives/2016-how-opec-won-the-battle-and-lost-the-war/ |archive-date=22 February 2017 |url-status=live }}</ref> Illustrating the volatile multi-year timeframes of typical market cycles for natural resources, the result was a six-year decline in the price of oil, which culminated by plunging more than half in 1986 alone.<ref>{{cite news |title=Worrying Anew Over Oil Imports |newspaper=[[The New York Times]]|date=30 December 1989 |first=Robert D. Jr. |last=Hershey |url=https://www.nytimes.com/1989/12/30/business/worrying-anew-over-oil-imports.html?pagewanted=all |access-date=11 February 2017 |archive-url=https://web.archive.org/web/20170612035248/http://www.nytimes.com/1989/12/30/business/worrying-anew-over-oil-imports.html?pagewanted=all |archive-date=12 June 2017 |url-status=live }}</ref> As one oil analyst summarized succinctly: "When the price of something as essential as oil spikes, humanity does two things: finds more of it and finds ways to use less of it."<ref name=MarketShare/> To combat falling revenue from oil sales, in 1982 Saudi Arabia pressed OPEC for audited national [[production quota]]s in an attempt to limit output and boost prices. When other OPEC nations failed to comply, Saudi Arabia first slashed its own production from 10 million barrels daily in 1979β1981 to just one-third of that level in 1985. When even this proved ineffective, Saudi Arabia reversed course and flooded the market with cheap oil, causing prices to fall below US$10/bbl and higher-cost producers to become unprofitable.<ref name=Robert/><ref name=Ali/>{{rp|127β128,136β137}} These strategic measures by Saudi Arabia to regulate oil prices had profound economic repercussions. As the swing producer in that period, the Kingdom faced significant economic strain. Its revenues dramatically decreased from $119 billion in 1981 to $26 billion by 1985, leading to substantial [[Deficit spending|budget deficits]] and a doubling of its debt, reaching 100% of the Gross Domestic Product.<ref name="Ali2">{{cite book |last1=Al-Naimi |first1=Ali |title=Out of the Desert |date=2016 |publisher=Portfolio Penguin |isbn=978-0-241-27925-0 |location=Great Britain |pages=136β137}}</ref>{{rp|136-137}} Faced with increasing economic hardship (which ultimately contributed to the collapse of the [[Soviet bloc]] in 1989),<ref>{{cite web |title=The Soviet Collapse: Grain and Oil |author-link=Yegor Gaidar |first=Yegor |last=Gaidar |publisher=[[American Enterprise Institute]] |date=April 2007 |access-date=12 January 2016 |url=https://www.aei.org/wp-content/uploads/2011/10/20070419_Gaidar.pdf |quote=Oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms. As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive. |archive-url=https://web.archive.org/web/20160304021426/https://www.aei.org/wp-content/uploads/2011/10/20070419_Gaidar.pdf |archive-date=4 March 2016 |url-status=live }}</ref><ref>{{cite web |title=The Economics Behind the Fall of the Berlin Wall |first=Ryan |last=McMaken |publisher=[[Mises Institute]] |date=7 November 2014 |access-date=12 January 2016 |url=https://mises.org/library/economics-behind-fall-berlin-wall |quote=High oil prices in the 1970s propped up the regime so well, that had it not been for Soviet oil sales, it's quite possible the regime would have collapsed a decade earlier. |archive-url=https://web.archive.org/web/20160306150734/https://mises.org/library/economics-behind-fall-berlin-wall |archive-date=6 March 2016 |url-status=live }}</ref> the "[[Free rider problem|free-riding]]" oil exporters that had previously failed to comply with OPEC agreements finally began to limit production to shore up prices, based on painstakingly negotiated national quotas that sought to balance oil-related and economic criteria since 1986.<ref name="Robert">{{cite book |last=Robert |first=Paul |year=2004 |title=The End of Oil: The Decline of the Petroleum Economy and the Rise of a New Energy Order |location=New York |publisher=[[Houghton Mifflin Company]] |isbn=978-0-618-23977-1 |pages=[https://archive.org/details/endofoilonedgeof00robe_0/page/103 103β104] |url=https://archive.org/details/endofoilonedgeof00robe_0/page/103 }}</ref><ref name="Brief History">{{cite web |url=http://www.opec.org/opec_web/en/about_us/24.htm |title=Brief History |work=OPEC |access-date=16 February 2013 |archive-url=https://web.archive.org/web/20130228051108/http://www.opec.org/opec_web/en/about_us/24.htm |archive-date=28 February 2013 |url-status=live }}</ref> (Within their sovereign-controlled territories, the national governments of OPEC members are able to impose production limits on both government-owned and private oil companies.)<ref name="limit">{{cite news |url=http://www.foxnews.com/printer_friendly_wires/2008Dec30/0,4675,MLMideastLibyaOPECCompliance,00.html |title=Libya orders oil cuts of 270K bpd |agency=Associated Press |date=30 December 2008 |quote=Libya has asked oil companies to slash production by 270,000 barrels per day. Abu Dhabi National Oil Co. told customers in letters dated Dec. 25 that it was cutting ... 10 to 15 percent of all types of ADNOC crude in February. Ecuadorean President Rafael Correa said the South American nation would suspend crude production by Italy's Agip and reduce quotas for other companies to comply with new OPEC cuts. |access-date=8 December 2015 |archive-url=https://web.archive.org/web/20151211182333/http://www.foxnews.com/printer_friendly_wires/2008Dec30/0,4675,MLMideastLibyaOPECCompliance,00.html |archive-date=11 December 2015 |url-status=live }}</ref> Generally when OPEC production targets are reduced, oil prices increase.<ref name="EIA_2014">{{cite web |url=https://www.eia.gov/finance/markets/supply-opec.cfm |publisher=US Energy Information Administration |year=2014 |title=Energy & Financial Markets: What Drives Crude Oil Prices? |access-date=12 December 2014 |archive-url=https://web.archive.org/web/20141213031101/http://www.eia.gov/finance/markets/supply-opec.cfm |archive-date=13 December 2014 |url-status=live }}</ref>
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