The data concerning world oil prices and global oil consumption as depicted in Figure 8.18 is sourced from the 2021 BP Statistical Review of World Energy. [1]

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Figure 8.18 presents a time-series plot of the world oil price, measured in constant 2020 US dollars, from 1865 to 2021, and the total quantity of oil consumed globally from 1965 to 2021. The chart is used to analyze how short-run and long-run changes in global supply and demand have caused fluctuations in oil prices over time.

Figure 8.18: World Oil Prices in Constant Prices (1865–2021) and Global Oil Consumption (1965–2021)

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

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Source for Figure 8.18: BP Statistical Review of World Energy (2021)

Between the late 1800s and the early 1970s, global oil prices were notably low and stable. This price stability was driven by a significant increase in supply resulting from technological progress, decreased costs of exploration and extraction, and the expansion of global trade. These factors made oil a more abundant and less expensive commodity to produce and transport.

Factors Leading to Low and Stable Oil Prices (Late 1800s–Early 1970s)

The 1970s witnessed a sharp increase in oil prices that destabilized global economies. This shock was initiated by the Organization of the Petroleum Exporting Countries (OPEC), an organization formed in 1960 whose members controlled a significant portion of the world's oil resources. Acting as a cartel, OPEC collectively restricted access to Middle East oil, which enabled them to drive up market prices and increase their joint profits.

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