2000s energy crisis
Medium term crude oil prices Jan. 2003 – Nov. 2008, (not adjusted for inflation)
|Also known as||Third oil crisis|
From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. During 2003, the price rose above $30, reached $60 by 11 August 2005, and peaked at $147.30 in July 2008. Commentators attributed these price increases to many factors, including the falling value of the U.S. dollar, reports from the United States Department of Energy and others showing a decline in petroleum reserves worries over peak oil, Middle East tension, and oil price speculation.
For a time, geo-political events and natural disasters indirectly related to the global oil market had strong short-term effects on oil prices, such as North Korean missile tests, the 2006 conflict between Israel and Lebanon, worries over Iranian nuclear plans in 2006, Hurricane Katrina, and various other factors. By 2008, such pressures appeared to have an insignificant impact on oil prices given the onset of the global recession. The recession caused demand for energy to shrink in late 2008, with oil prices falling from the July 2008 high of $147 to a December 2008 low of $32. Oil prices stabilized by October 2009 and established a trading range between $60 and $80.
- 1 New inflation-adjusted records
- 2 Possible causes
- 3 Effects
- 4 Forecasted prices and trends
- 5 End of the crisis
- 6 Possible mitigations
- 7 See also
- 8 Notes
- 9 External links
New inflation-adjusted records
The price of crude oil in 2003 traded in a range between $20–$30/bbl. Between 2003 and July 2008, prices steadily rose, reaching $100/bbl in late 2007, coming close to the previous all time inflation-adjusted record set in 1980.[better source needed] A steep rise in the price of oil in 2008 – also mirrored by other commodities – culminated in an all-time high of $147.27 during trading on 11 July 2008, more than a third above the previous inflation-adjusted high.
High oil prices and economic weakness contributed to a demand contraction in 2007–2008. In the United States, gasoline consumption declined by 0.4% in 2007, then fell by 0.5% in the first two months of 2008 alone. Record-setting oil prices in the first half of 2008 and economic weakness in the second half of the year prompted a 1.2 Mbbl (190,000 m3)/day contraction in US consumption of petroleum products, representing 5.5% of total US consumption, the largest decline since 1980 at the climax of the 1979 energy crisis.
World crude oil demand grew an average of 1.76% per year from 1994 to 2006, with a high of 3.4% in 2003–2004. World demand for oil is projected to increase 37% over 2006 levels by 2030, according to the 2007 U.S. Energy Information Administration's (EIA) annual report. In 2007, the EIA expected demand to reach an ultimate high of 118 million barrels per day (18.8×106 m3/d), from 2006's 86 million barrels (13.7×106 m3), driven in large part by the transportation sector. A 2008 report from the International Energy Agency (IEA) predicted that although drops in petroleum demand due to high prices have been observed in developed countries and are expected to continue, a 3.7 percent rise in demand by 2013 is predicted in developing countries. This is projected to cause a net rise in global petroleum demand during that period.
Transportation consumes the largest proportion of energy, and has seen the largest growth in demand in recent decades. This growth has largely come from new demand for personal-use vehicles powered by internal combustion engines. This sector also has the highest consumption rates, accounting for approximately 55% of oil use worldwide as documented in the Hirsch report and 68.9% of the oil used in the United States in 2006. Cars and trucks are predicted to cause almost 75% of the increase in oil consumption by India and China between 2001 and 2025. In 2008, auto sales in China have been expected to grow by as much as 15–20 percent, resulting in part from economic growth rates of over 10 percent for 5 years in a row.
Demand growth is highest in the developing world, but the United States is the world's largest consumer of petroleum. Between 1995 and 2005, US consumption grew from 17.7 million barrels (2,810,000 m3) a day to 20.7 million barrels (3,290,000 m3) a day, a 3-million-barrels (480,000 m3) a day increase. China, by comparison, increased consumption from 3.4 million barrels (540,000 m3) a day to 7 million barrels (1,100,000 m3) a day, an increase of 3.6 million barrels (570,000 m3) a day, in the same time frame. Per capita, annual consumption by people in the US is 24.85 barrels (3.951 m3), 1.79 barrels (0.285 m3) in China, and 0.79 barrels (0.126 m3) in India.
As countries develop, industry, rapid urbanization and higher living standards drive up energy use, most often of oil. Thriving economies such as China and India are quickly becoming large oil consumers. China has seen oil consumption grow by 8% yearly since 2002, doubling from 1996–2006.
Although swift continued growth in China is often predicted, others predict that China's export dominated economy will not continue such growth trends due to wage and price inflation and reduced demand from the US. India's oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million barrels per day (790×103 m3/d).
Another large factor on petroleum demand has been human population growth. Because world population grew faster than oil production, production per capita peaked in 1979 (preceded by a plateau during the period of 1973–1979). The world’s population in 2030 is expected to be double that of 1980.
Role of fuel subsidies
State fuel subsidies have shielded consumers in many nations from the price rises, but many of these subsidies are being reduced or removed as the cost to governments of subsidization increases.
In June 2008, AFP reported that:
|“||China became the latest Asian nation to curb energy subsidies last week after hiking retail petrol and diesel prices as much as 18 percent... Elsewhere in Asia, Malaysia has hiked fuel prices by 41 percent and Indonesia by around 29 percent, while Taiwan and India have also raised their energy costs.||”|
In the same month, Reuters reported that:
|“||Countries like China and India, along with Gulf nations whose retail oil prices are kept below global prices, contributed 61 percent of the increase in global consumption of crude oil from 2000 to 2006, according to JPMorgan.
Other than Japan, Hong Kong, Singapore and South Korea, most Asian nations subsidize domestic fuel prices. The more countries subsidize them, the less likely high oil prices will have any affect [[sic| [sic]]] in reducing overall demand, forcing governments in weaker financial situations to surrender first and stop their subsidies.
That is what happened over the past two weeks. Indonesia, Taiwan, Sri Lanka, Bangladesh, India, and Malaysia have either raised regulated fuel prices or pledged that they will.
The Economist reported: "Half of the world's population enjoys fuel subsidies. This estimate, from Morgan Stanley, implies that almost a quarter of the world's petrol is sold at less than the market price." U.S. Secretary of Energy Samuel Bodman stated that around 30 million barrels per day (4,800,000 m3/d) of oil consumption (over a third of the global total) is subsidized. But energy analyst Jeff Vail warned that cutting subsidies would do little to reduce global prices.
An important contributor to price increases has been the slowdown in oil supply growth, which has continued since oil production surpassed new discoveries in 1980. The fact that global oil production will decline at some point, leading to lower supply is the main long-term fundamental cause of rising prices. Although there is contention about the exact time at which global production will peak, there are now very few parties who do not acknowledge that the concept of a production peak is valid. However, before the record oil prices of 2008, some commentators argued that global warming awareness and new energy sources would limit demand before the effects of supply could, suggesting that reserve depletion would be a non-issue.
A large factor in the lower supply growth of petroleum has been that oil's historically high ratio of Energy Returned on Energy Invested is in significant decline. Petroleum is a limited resource, and the remaining accessible reserves are consumed more rapidly each year. Remaining reserves are increasingly more technically difficult to extract and therefore more expensive. Eventually, reserves will only be economically feasible to extract at extremely high prices. Even if total oil supply does not decline, increasing numbers of experts[who?] believe the easily accessible sources of light sweet crude are almost exhausted and in the future the world will depend on more expensive unconventional oil reserves and heavy crude oil, as well as renewable energy sources. It is thought by many, including energy economists such as Matthew Simmons, that prices could continue to rise indefinitely until a new market equilibrium is reached at which point supply satisfies worldwide demand.
A prominent example of investment in non-conventional sources is seen in the Canadian tar sands. They are a far less cost-efficient source of heavy, low-grade oil than conventional crude, but when oil trades above $60/bbl, the tar sands become attractive to exploration and production companies. While Canada's tar sands region is estimated to contain as much "heavy" oil as all the world's reserves of "conventional" oil, efforts to economically exploit these resources lag behind the increasing demand of recent years.
Until 2008, CERA (a consulting company wholly owned by energy consultants IHS Energy) did not believe this would be such an immediate problem. However, in an interview with The Wall Street Journal, Daniel Yergin, previously known for his quotes that the price of oil would soon return down to "normal", amended the company's position on 7 May 2008 to predict that oil would reach $150 during 2008, due to tightness of supply This reversal of opinion was significant, as CERA, among other consultancies, provided price projections that were used by many official bodies to plan long term strategy in respect of energy mix and price.
Other major energy organisations, such as the International Energy Agency (IEA), had already been much less optimistic in their assessments for some time. In 2008, the IEA drastically reduced its prediction of production decline from 3.7% a year to 6.7% a year, based largely on better accounting methods, including actual research of individual oil field production throughout the world.
Terrorist and insurgent groups have increasingly targeted oil and gas installations. Such attacks are sometimes perpetrated by militias in regions where oil wealth has produced few tangible benefits for the local citizenry, as is the case in the Niger Delta.
Many factors have resulted in possible and/or actual concerns about reduced supply of oil. The post-9/11 war on terror, Labor strikes, hurricane threats to oil platforms, fires and terrorist threats at refineries, and other short-lived problems are not solely responsible for the higher prices. Such problems do push prices higher temporarily, but have not historically been fundamental to long-term price increases.[clarification needed]
Investment / speculation demand
Investment demand for oil occurs when investors purchase futures contracts to buy a commodity at a set price for future delivery. "Speculators are not buying any actual crude. ... When [the] contracts mature, they either settle them with a cash payment or sell them on to genuine consumers."
Several claims have been made implicating financial speculation as a major cause of the price increases. In May 2008 the transport chief for Germany's Social Democrats estimated that 25 percent of the rise to $135 a barrel had nothing to do with underlying supply and demand. Testimony was given to a U.S. Senate committee in May indicating that "demand shock" from "Institutional Investors" had increased by 848 million barrels (134,800,000 m3) over the last five years, similar to increases in demand from China (920 million barrels (146,000,000 m3)). The influence of Institutional Investors, such as sovereign-wealth funds, was also discussed in June 2008, when Lehman Brothers suggested that price increases were related to increases in exposure to commodities by such investors. It claimed that "for every $100 million in new inflows, the price of West Texas Intermediate, the U.S. benchmark, increased by 1.6%." Also in May 2008, an article in The Economist pointed out that oil futures transactions on the New York Mercantile Exchange (NYMEX), nearly mirrored the price of oil increases for a several year period, however the article conceded that the increased investment might be following rising prices, rather than causing them, and that the nickel commodity market had halved in value between May 2007 and May 2008 despite significant speculative interest. It also reminds readers "Investment can flood into the oil market without driving up prices because speculators are not buying any actual crude... no oil is hoarded or somehow kept off the market," and that prices of some commodities which are not openly traded have actually risen faster than oil prices. In June 2008, OPEC's Secretary General Abdullah al-Badri stated that current world consumption of oil at 87 Mbbl/d (13,800,000 m3/d) was far exceeded by the "paper market" for oil, which equals about 1.36 billion bpd, or more than 15 times the actual market demand.
In response to the possibility that financial speculators artificially inflated the oil market, the U.S. Congress began hearings in June 2008 to discover if actions to "tighten restrictions on pension funds, investment banks and other investors that they say are driving up fuel prices" were necessary.
An interagency task force on commodities markets was formed in the U.S. government to investigate the claims of speculators influence on the petroleum market concluded in July 2008 that "market fundamentals" such as supply and demand provide the best explanations for oil price increases, and that increased speculation was not statistically correlated with the increases. The report also noted that increased prices with an elastic supply would cause increases in petroleum inventories. As inventories have actually declined, the task force concluded market pressures are most likely to blame. Similarly, other commodities which are not subject to market speculation (such as coal, steel, and onions) have seen similar price increases over the same time period.
In June 2008 U.S. energy secretary Samuel Bodman had said that insufficient oil production, not financial speculation, was driving rising crude prices. He said that oil production has not kept pace with growing demand. "In the absence of any additional crude supply, for every 1% of crude demand, we will expect a 20% increase in price in order to balance the market," Bodman said. This contradicts earlier statements by Iranian OPEC governor Mohammad-Ali Khatibi indicating that the oil market is saturated and that an increase in production announced by Saudi Arabia was "wrong". OPEC itself had also previously stated that the oil market was well supplied and that high prices were a result of speculation and a weak U.S. dollar.
In September 2008, a study of the oil market by Masters Capital Management was released which claimed that speculation did significantly impact the market. The study stated that over $60 billion was invested in oil during the first 6 months of 2008, helping drive the price per barrel from $95 to $147 per barrel, and that by the beginning of September, $39 billion had been withdrawn by speculators, causing prices to fall. Research and testimony presented by Rice University, The Federal Reserve Bank of Saint Louis, the Commodity Futures Trading Commission, Citigroup Global Markets and the Levy Economics Institute of Bard College studies argued that excessive speculation, mainly by Wall Street index-fund traders drove up prices, with estimates ranging up to $1 a gallon in inflated gasoline costs. In this sense the crude market was used as a hedge for inflation, while at the same time crude was the source of inflation, creating a feedback loop despite otherwise plentiful oil supply.
Monetary inflation and the value of the US Dollar
The Austrian School of economics holds that price inflation derives from monetary inflation, and its advocates, such as the Ludwig von Mises Institute and congressman Ron Paul, argue that loose monetary policy from the Federal Reserve and other central banks is a major contributor to the increase in oil prices, and the cause of both commodity speculation and dollar devaluation.
Oil is quoted and traded in US Dollars. Therefore by definition the price or value of oil fluctuates based on investors' assessment of the value of oil and US Dollars. This has led to concern among some economists that the principal earned from the sale of oil may lose value in the long run if the U.S. dollar loses real value. Some analysts believe that as much as $25 of the June 2008 prices around $140 were due to dollar devaluation.
The US Dollar price of oil demonstrated a strong positive correlation with the EUR/USD exchange rate from 2006 to 2010.
There is debate over what the effects of the 2000s energy crisis will be over the long term. Some speculate that an oil-price spike could create a recession comparable to those that followed the 1973 and 1979 energy crises or a potentially worse situation such as a global oil crash. Increased petroleum prices are however reflected in a vast number of products derived from petroleum, as well as those transported using petroleum fuels.
Political scientist George Friedman has postulated that if high prices for oil and food persist, they will define the fourth distinct geopolitical regime since the end of World War II, the previous three being the Cold War, the 1989–2001 period in which economic globalization was primary, and the post-9/11 "war on terror".
In addition to high oil prices, from year 2000 volatility in the price of oil has increased notably and this volatility has been suggested to be a factor in the ongoing financial crisis which began in 2008.
Forecasted prices and trends
According to informed observers, OPEC, meeting in early December 2007, seemed to desire a high but stable price that would deliver substantial needed income to the oil producing states, but avoid prices so high that they would negatively impact the economies of the oil consuming nations. A range of 70–80 dollars a barrel was suggested by some analysts to be OPEC's goal.
Some analysts point out that major oil exporting countries are rapidly developing; and because they are using more oil domestically, less oil may be available on the international market. This effect, outlined in the export land economic model, could significantly reduce the oil available for trade and cause prices to continue to rise. Particularly significant are Indonesia (which is now a net importer of oil), Mexico and Iran (where demand is projected to exceed production in about 5 years), and Russia (whose domestic petroleum demand is growing rapidly).
In May 2008, T. Boone Pickens, an influential oil investor who believes the world’s oil output is about to peak, predicted oil prices would hit $150 a barrel by the end of the year. “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 m,” Mr Pickens said in an interview with CNBC. “It’s just that simple.”
In June 2008, Alexei Miller, head of Russian energy giant Gazprom, warned that the price of oil is likely to hit $250 a barrel sometime in 2009. Miller said that while speculation had played a role in oil prices, "this influence was not decisive." Bloomberg reported that, as of mid-June, "At least 3,008 options contracts have been purchased giving holders the right to buy oil at $250 a barrel in December".
Also in June 2008, Shukri Ghanem, head of Libya's National Oil Corporation, said: "I think it [the oil price] will go higher. That is a trend that will continue for some time. The easy, cheap oil is over, peak oil is looming."
On 26 June 2008, OPEC President Chakib Khelil said in an interview: "I forecast prices probably between $150–170 during this summer. That will perhaps ease towards the end of the year." Iran's OPEC governor Mohammad-Ali Khatibi predicts that the price of oil would reach $150 a barrel by the end of this summer.
In November, as prices fell below $60 a barrel, the IEA warned that falling prices may create both a lack of investment in new sources of oil and a fall in production of more expensive unconventional reserves such as the oil sands of Canada. The IEA's chief economist warned, "Oil supplies in the future will come more and more from smaller and more difficult fields," meaning that future production requires more investment every year. A lack of new investment in such projects, which had already been observed, could eventually cause new and more severe supply issues than had been experienced in the early 2000s according to the IEA. Because the sharpest production declines had been seen in developed countries, the IEA warned that the greatest growth in production was expected to come from smaller projects in OPEC states, raising their world production share from 44% in 2008 to a projected 51% in 2030. The IEA also pointed out that demand from the developed world may have also peaked, so that future demand growth was likely to come from developing nations such as China, contributing 43%, and India and the Middle East, each about 20%).
Timothy Kailing argued against the IEA's earlier predictions in a 2008 Journal of Energy Security article. He pointed out the difficulty of increasing production even with vastly increased investment in exploration and production in mature petroleum regions. By looking at the historical response of production to variation in drilling effort, this analysis claimed that very little increase of production could be attributed to increased drilling. This was due to a tight the quantitative relationship of diminishing returns with increasing drilling effort: as drilling effort increased, the energy obtained per active drill rig was reduced according to a severely diminishing power law. This fact means that even an enormous increase of drilling effort is unlikely to lead to significantly increased oil and gas production in a mature petroleum region like the United States.
End of the crisis
By the beginning of September 2008, prices had fallen to $110. OPEC secretary Abdalla El-Badri said that it intended to cut output by about 500,000 barrels (79,000 m3) a day, which he saw as correcting a "huge oversupply" due to declining economies and a stronger U.S. dollar. On 10 September, the International Energy Agency (IEA) lowered its 2009 demand forecast by 140,000 barrels (22,000 m3) to 87.6 million barrels (13,930,000 m3) a day.
As many countries throughout the world entered an economic recession in the third quarter of 2008, prices continued to slide. In November and December, global demand growth fell, and U.S. demand fell 10% overall from early October to early November 2008 (accompanying a significant drop in auto sales).
In their December meeting, OPEC planned to reduce their production by 2.2 million barrels (350,000 m3) per day, though they admitted their resolution to reduce production in October had only an 85% compliance rate.
Petroleum prices had fallen to below $35 in February 2009, but on 6 May 2009 had risen back to mid-November 2008 levels at about $56. The global economic downturn left oil storage facilities with more oil than in any year since 1990, when Iraq's invasion of Kuwait upset the market.
As of May 2011, the price of U.S. WTI crude reached $113, while Brent crude, more indicative of world price due to a supply glut at Cushing Oklahoma, reached $127 a barrel. After several weeks of fluctuating between rising and falling prices, protests in the Middle East and North Africa drove prices up. Although prices were beginning to ease with the calming of the revolution in Egypt, prices spiked to $100 for the first time since September 2008 with the 2011 Libyan civil war.
Attempts to mitigate the impacts of oil price increases include:
- Increasing the supply of petroleum
- Finding substitutes for petroleum
- Decreasing the demand for petroleum
- Attempting to reduce the impact of rising prices on petroleum consumers
In mainstream economic theory, a free market rations an increasingly scarce commodity by increasing its price. A higher price should stimulate producers to produce more, and consumers to consume less, while possibly shifting to substitutes. The first three mitigation strategies in the above list are, therefore, in keeping with mainstream economic theory, as government policies can affect the supply and demand for petroleum as well as the availability of substitutes. In contrast, the last type of strategy in the list (attempting to shield consumers from rising prices) would seem to work against classical economic theory, by encouraging consumers to overconsume the scarce quantity, thus making it even scarcer. To avoid creating outright shortages, attempts at price control may require some sort of rationing scheme.
Economists say that the substitution effect will spur demand for alternate fossil fuels, such as coal or liquefied natural gas and for renewable energies, such as solar power, wind power, and advanced biofuels.
For example, China and India are currently heavily investing in natural gas and coal liquefaction facilities. Nigeria is working on burning natural gas to produce electricity instead of simply flaring the gas, where all non-emergency gas flaring will be forbidden after 2008. Outside the U.S., more than 50% of oil is consumed for stationary, non-transportation purposes such as electricity production where it is relatively easy to substitute natural gas for oil.
Oil companies including the supermajors have begun to fund research into alternative fuel. BP has invested half a billion dollars for research over the next several years. The motivations behind such moves are to acquire the patent rights as well as understanding the technology so vertical integration of the future industry could be achieved.
Bioplastics and bioasphalt
Another major factor in petroleum demand is the widespread use of petroleum products such as plastic. These could be partially replaced by bioplastics, which are derived from renewable plant feedstocks such as vegetable oil, cornstarch, pea starch, or microbiota. They are used either as a direct replacement for traditional plastics or as blends with traditional plastics. The most common end use market is for packaging materials. Japan has also been a pioneer in bioplastics, incorporating them into electronics and automobiles.
Bioasphalt can also be used as a replacement of petroleum asphalt.
United States Strategic Fuel Reserve
The United States Strategic Petroleum Reserve could, on its own, supply current U.S. demand for about a month in the event of an emergency, unless it were also destroyed or inaccessible in the emergency. This could potentially be the case if a major storm were to hit the Gulf of Mexico, where the reserve is located. While total consumption has increased, the western economies are less reliant on oil than they were twenty-five years ago, due both to substantial growth in productivity and the growth of sectors of the economy with little oil dependence such as finance and banking, retail, etc. The decline of heavy industry and manufacturing in most developed countries has reduced the amount of oil per unit GDP; however, since these items are imported anyway, there is less change in the oil dependence of industrialized countries than the direct consumption statistics indicate.
One recourse used and discussed in the past to avoid the negative impacts of oil shocks in the many developed countries which have high fuel taxes has been to temporarily or permanently suspend these taxes as fuel costs rise.
France, Italy, and the Netherlands lowered taxes in 2000 in response to protests over high prices, but other European nations resisted this option because public service financiation is partly based on energy taxes. The issue came up again in 2004, when oil reached $40 a barrel causing a meeting of 25 EU finance ministers to lower economic growth forecasts for that year. Because of budget deficits in several countries, they decided to pressure OPEC to lower prices instead of lowering taxes. In 2007, European truckers, farmers, and fishermen again raised concerns over record oil prices cutting into their earnings, hoping to have taxes lowered. In the United Kingdom, where fuel taxes were raised in October and were scheduled to rise again in April 2008, there was talk of protests and roadblocks if the tax issue was not addressed. On 1 April 2008, a 25 yen per liter fuel tax in Japan was allowed to lapse temporarily.
This method of softening price shocks is even less viable to countries with much lower gas taxes, such as the United States.
Locally decreasing fuel tax can decrease fuel prices, but globally prices are set by supply and demand, and therefore fuel tax decreases may have no effect on fuel prices, and fuel tax increases might actually decrease fuel prices by reducing demand. But this depends on the price elasticity of demand for fuel which is -0.09 to -0.31, meaning that fuel is a relatively inelastic commodity, i.e. increasing or decreasing prices have overall only a small effect on demand and therefor price change.
Transportation demand management has the potential to be an effective policy response to fuel shortages or price increases and has a greater probability of long term benefits than other mitigation options.
There are major differences in energy consumption for private transport between cities; an average U.S. urban dweller uses 24 times more energy annually for private transport as a Chinese urban resident. These differences cannot be explained by wealth alone but are closely linked to the rates of walking, cycling, and public transport use and to enduring features of the city including urban density and urban design.
For individuals, telecommuting provides alternatives to daily commuting and long-distance air travel for business. Technologies for telecommuting, such as videoconferencing, e-mail, and corporate wikis, continue to improve, in keeping with the overall improvement in information technologies ascribed to Moore's law. As the cost of moving information by moving human workers continues to rise, while the cost of moving information electronically continues to fall, presumably market forces should cause more people to substitute virtual travel for physical travel. Matthew Simmons explicitly calls for "liberating the workforce" by changing the corporate mindset from paying people to show up physically to work every day, to paying them instead for the work they do, from any location. This would allow many more information workers to work from home either part-time or full-time, or from satellite offices or Internet cafes near to where they live, freeing them from long daily commutes to central offices. However, even full adoption of telecommuting by all eligible workers might only decrease energy consumption by about 1% (with present energy savings estimated at 0.01–0.04%). By comparison, a 20% increase in automobile fuel economy would save 5.4%.
High energy prices and a slowed economy caused petroleum consumption to reach a three-year low in crude oil imports to the United States in December 2008.
Political action against market speculation
The price rises of mid-2008 led to a variety of proposals to change the rules governing energy markets and energy futures markets, in order to prevent rises due to market speculation.
On 26 July 2008, the United States House of Representatives passed the Energy Markets Emergency Act of 2008 (H.R. 6377), which directs the Commodity Futures Trading Commission (CFTC) "to utilize all its authority, including its emergency powers, to curb immediately the role of excessive speculation in any contract market within the jurisdiction and control of the Commodity Futures Trading Commission, on or through which energy futures or swaps are traded, and to eliminate excessive speculation, price distortion, sudden or unreasonable fluctuations or unwarranted changes in prices, or other unlawful activity causing major market disturbances that prevent the market from accurately reflecting the forces of supply and demand for energy commodities.
- 2000s commodities boom
- 2003 to 2008 world oil market chronology
- World food price crisis
- Hirsch report
- Oil consumption
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