Prof. Enos M.r. Kiremire
2 May 2008
opinion
Windhoek — - The looming serious world-wide dangers of the creeping 3rd oil crisis - imminent global economic recession.
A few days ago, CNN announced that the price of petrol skyrocketed exponentially. The price of crude oil went up to US$120 per barrel, compared to US$20 per barrel in September 2001. This is an incredible price increase of 500% in about 7 years.
The impact of this is currently being felt worldwide. For instance, the price of fuel in Namibia was increased to N$8 per litre (Namibian 10th April, 2008) and electricity went up by 18% (Namibian 16th April, 2008).
According to the CNN, the food prices have, on average, also gone up by 45% world-wide. In Africa, there have been demonstrations against food price increase in Egypt, Cöte D'Ivoire and South Africa.
Clearly, these indicators and many more, are the effects of the 3rd OIL CRISIS that has set in.
An oil crisis brings with it a dramatic price increase in petrol, food items and other essential commodities and services.
Furthermore, it is also accompanied by immense hardships and suffering to the majority of the people. Let us briefly review the global oil crises experienced so far.
Brief review of earlier oil crises
An oil crisis can be regarded as a stress exerted on an equilibrium flow of oil to the world economy. Such a stress disrupts the smooth‚ flow of oil resulting in a relative sudden jump in the oil price. Such a crisis creates a shortage in the oil supply, giving rise to a high demand and an increase in the hoarding of oil by high consumers.
Before the first oil crisis
For almost a quarter of a century the price of oil hardly changed numerically. The following figures underpin this statement. In 1948, the oil price was US$2.50 per barrel.
Nine years later, 1957, the price was around US$3 per barrel. Fifteen years after that in 1972, the price was still around US$3 per barrel.
In this period of 1948-1972 when the oil price was miraculously stable, many countries derived immense economic, social and political benefits.
With the exception of United States, many colonialist super powers were recovering from the negative destructive effects of the Second World War.
Indeed, it was during this period that many colonized countries agitated for political independence and truly nearly 40 African countries attained their political independence, namely Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Democratic Republic of Congo, Côte D'Ivoire, Djibouti, Equatorial Guinea, Gabon, Gambia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritania, Mauritius, Morocco, Niger, Nigeria, Rwanda, Senegal, Somalia, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda and Zambia.
The last African colonies Mozambique, Zimbabwe, Namibia and South Africa had to wage bloody protracted liberation wars before achieving their political freedoms. The main reason for this is that the colonial powers could no longer continue and sustain more wars overseas as they were just recuperating from the devastating effects of the Second World War.
In general, there was economic prosperity world-wide. The independent African countries began economic reconstruction in areas such as education, health and transport, just to mention a few.
Imperialist countries such as Britain, France, Italy, Spain, Germany, and Japan fully recovered from the war effects. The spin-offs of this recovery impacted on the creative arts such as music and the film industry.
The Hollywood industry mushroomed. Science and technology underwent tremendous revolution never experienced before in centuries by its heavy emphasis on research and development (R+D) efforts. The imperialist countries realized that supremacy in science and technology was directly linked to military supremacy and hence greater chances of leverage to control world strategic resources.
With the devastating effects of the two atomic bombs that were dropped onto Japan still fresh in their mind, the colonial powers intensified their military research with the heaviest possible funding. This resulted in modern submarines, tanks, military jet fighters, pilotless jetfighters, warships, satellite technology, computer technology, space exploration, star war machinery, etc. That period (1948-1972) laid the strong foundation for today's common scientific utilities such as colour TV, laptops and mobile phones.
The First Oil Crisis, 1972 -1974: Oil price increase of 300%
The Yom Kippur War
On October 06, 1973, Egypt and Syria attacked Israel. The United States and Western Allies as well as Japan supported Israel. Members of the OPEC countries at the time, namely Saudi Arabia, Iran, Iraq, Abu Dhabi, Kuwait, and Qatar imposed an oil embargo (limited or comprehensive) on the USA, Netherlands, Portugal, Rhodesia, South Africa, France, Japan and the UK.
In addition, the oil price was increased by 17% to US$3.65 per barrel by the OPEC countries. This gave rise to the first oil crisis, of 1972 to 1974 when the oil price rose from around US$3 to about US$12 per barrel. This was a price increase of about 300% within a period of approximately three years.
The price continued increasing from 1972 and reached its peak in 1974 and went to a minimum of about US$33 per barrel in 1978. This is a period of about seven years.
From the web search, the reason for this increase is stated as being due to the war between Israel on the one hand and Egypt and Syria on the other. This war is also known as Yom Kippur war - named after the Yom Kippur religious holiday of Israel on which Egypt and Syria simultaneously attacked Israel.
While this brought an enormous boom to the net-oil producing nations, it incurred immense untold misery to many other countries. For instance, in the US the New York Stock Exchange lost US$97 billion and, and USA oil imports dropped from 1.2 million barrels per day to 19 000 barrels per day.
Inflation followed by recession hit the USA.
The inflation rate rose from average 4.27% in 1972 to average 10.19% in 1974 in the USA.
Oil rationing became the order of the day. Immense economic hardships gripped the unemployed, marginalized social groups, aging and some young workers.
Schools and offices were forced to close down in order to save on heating oil. Some factories closed or cut down production resulting in laying off workers.
France which had a record of 30 successive high economic growths was halted, giving away to ensuing decades of unemployment.
Second Oil Crisis, 1978-1980: Oil price increase of 490%
The Iraq-Kuwait War (1st Gulf War)
During the beginning of the second oil crisis the oil price rose from about US$13.55 in 1978 to about US$80 per barrel in 1980 giving rise to an increase of approximately 490%.
The oil price continued climbing and reached a maximum of more than US$80 per barrel in 1981 and then it started going down until 1986 - a period of about seven years. There are two reasons implicated for this, namely, the Iranian revolution (1979) and the Iran-Iraq war (1980-1988).
Like the first oil crisis, the 2nd oil crisis also brought tremendous suffering to many countries including the USA.
Oil and energy rationing were also done in the USA. The auto industry had to modify car model manufacturing to meet the demands of fuel shortage.
The inflation rates in Africa rose steeply. For instance, in Zambia the inflation was 18% in 1981 and it rose to 80% in 1990 and again further to 120% in 1991.
In Britain, the number of people unemployed stood at 3.1 million in 1882. The unemployment rates in Australia were 6% in 1980, 9% in 1984 and 6% in 1986.
The unemployment rates in France were 4.2% during 1971-1980 and it rose to 9.3% during 1981-1990. Germany was similarly affected 2.7%(1971-1980) and 7.3% (1981-1990) and Germany 4.5% (1971-1980) and 6.9% (1981-1990).
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