impact of high oil prices on freight transportation: modal shift ...

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TECHNICAL REPORT - IMPACT OF HIGH OIL PRICES ON FREIGHT TRANSPORTATION:
MODAL SHIFT POTENTIAL IN FIVE CORRIDORS
OIL PRICES TODAY AND IN THE FUTURE
3.1 THE HISTORY OF OIL PRICES
Since 1970 and prior to 2004 the world has suffered a number <strong>of</strong> <strong>oil</strong> price shocks largely due to the
actions <strong>of</strong> OPEC, and Middle East wars (See Exhibit 6). However, the recent <strong>oil</strong> crisis has resulted in the
nominal price <strong>of</strong> <strong>oil</strong> far exceeding any previous crisis at $140 per barrel. In nominal terms, the refiner
acquisition cost <strong>of</strong> <strong>oil</strong> (which is typically 95 percent <strong>of</strong> domestic market price) did not exceed $40 per
barrel, prior to 2006 and major price spikes were largely due to Middle East wars, such as the Arab <strong>oil</strong>
embargo (1973), Iran/Iraq War (1982), and Persian Gulf War (1992). That situation changed after the
year 2000 when non-supply issues like the growth in world <strong>oil</strong> demand (2003 to 2007) began to <strong>impact</strong>
<strong>oil</strong> <strong>prices</strong>. From a low <strong>of</strong> $10 per barrel in 1999, <strong>oil</strong> <strong>prices</strong> rose quickly in nominal terms to nearly $70
per barrel in 2006 and to $140 per barrel in 2008.
$ per barrel
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
Saudi
Light
1970
1972
Exhibit 6: Major Events and Nominal World Oil Prices, 1970-2008:
Imported Refiner Acquisition Cost
Iranian
Revolution;
Shah Deposed
1974
1976
Iran-Iraq War
Begins; <strong>oil</strong> <strong>prices</strong>
peak
1973 Arab Oil
Embargo
1978
TEMS, INC. OCTOBER 2008
1980
1982
Saudis
abandon
"swing
producer" role;
<strong>oil</strong> <strong>prices</strong>
collapse
1984
1986
Iraq
Invades
Kuwait
1988
1990
1992
Gulf War
Asian economic crisis;
<strong>oil</strong> oversupply; <strong>prices</strong>
fall sharply
1994
Prices rise on OPEC
cutbacks, increased
demand
1996
1998
Prices spike
due to
demand
factors
Prices spike on Iraq war, rapid
demand increases,
constrained OPEC capacity,
low inventories, etc.
2000
Prices fall sharply
on 9/11 attacks;
economic weakness
2002
2004
August-08
$135 (Est)
June-08
$125
PdVSA
workers
strike in
Venezuela
2006
2008
Source: EIA, BLS and TEMS
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