The Wrong Lessons of the 1970s

Published on Oct 28, 2006 in the BL

Many comparisons are drawn on what is happening in the Oil front today to what happened during the 1970's and 1990's. Though the outcomes, i.e. oil price increase, are similar, the causes couldn't be more different.

While the previous crises were of a political nature, today it is primarily geological. With record high nominal prices, every producer (possibly with the exception of Saudi Arabia) is pumping at full-tilt. So what worked as a solution during the 1970's will not work today. However, we seem to be blissfully unaware and assume that over time, the issue would somehow resolve itself. The "endgame", as we have repeatedly stressed throughout this series, is going to be very different.