The 40th anniversary of the Arab oil embargo against states that supported Israel during the Yom Kippur War is an appropriate occasion to evaluate the state of the international oil market. The embargo started on October 16th, 1973. The global petroleum system was irrevocably altered by the embargo and the global oil business forever transformed by the wave of oil company nationalizations that followed. So 40 years later, how does the US stand today?
“Since 1973, we’ve heard endless rhetoric and endless hand-wringing about the evils of Opec,” said Robert Bryce, Senior Fellow with the Manhattan Institute’s Center for Energy Policy and the Environment during the recent American Oil and Gas Renaissance Conference held last week in New York. He then argued the US fared extremely well over that time period despite its reliance on Opec-supplied oil.
“In 1973, the US was using 17.3 million barrels of oil per day, today we’re using 18.5 mmb/d of oil. In 1973 the US had a population of 212 million people and a GDP of $5 trillion. Today our population is roughly 315 million people and we have a GDP of roughly $14 trillion – those are chained to 2005 dollars, it’s apples to apples. So what is the punch line here? Since 1973 the US has increased its population by about half, we’ve tripled the size of our economic output and nearly doubled the amount of our per capita GDP, and during that time we’ve raised our oil consumption by just 7%.”
The situation in Opec countries, argued Bryce, is much worse. “What’s happened in the Opec countries? Many things, most of them bad.”
“Unrest in Libya, unrest in Iraq, continuing problems is Iran, sanctions in Iran, Nigeria still a basket case. The per capita GDP in the Opec countries today is less than $8,000. Roughly half the average per capita GDP and roughly one-sixth the US GDP. What’s happened is the Opec countries exported their oil to the US and we got rich while they stayed poor,” said Bryce
He went on to discuss how the US is now better positioned than much of the rest of the world with regard to energy thanks to booming unconventional oil and gas production.
Video of the conference can be viewed on the Manhattan Institute website here.
