The world stood on the brink of a new oil shock in 2000, as crude prices rocketed to their highest level for a decade, triggering in turn a series of furious protests in Europe at the soaring cost of fuel.
But crucially the feverish oil market failed to infect the world's leading economies with the sort of inflation and recession that emerged from the last great oil price crises of 1990, 1978/9 and 1973/4.
And as prices dipped towards year-end, analysts predicted a reversal of the trend of spiralling prices next year. Many expect a barrel of oil to sell for closer to 20 dollars than 30 dollars by the end of 2001.
Yet at one point it appeared that the 1970s music and fashion revival was about to spill over into the global petro-economy. A Middle East crisis, a fear of crude shortages, an oil price which tripled in just 18 months.
Suddenly consumer nations were all too aware of their utter dependency on oil to quench their thirsty energy needs, as a barrel of crude rose 40 percent from 25 dollars at the start of the year to $35 by October.
Suddenly producer nations, who just months earlier had endured historic low oil prices, found they had the world over a barrel.
Consumers lost patience. Across Europe, protestors dug in with varying degrees of resolve, picketing fuel depots to vent their anger.
Empty filling stations, queues of motorists, and a cluster of strategically positioned deckchairs: such were the autumn fuel price protests that at one point threatened real chaos in France and Britain.
Oil producers refused to shoulder the blame for the high prices, instead blaming European governments for overtaxing refined products and speculators for driving up the market price of crude.
Yet the genesis of the 2000 oil scare arguably came from the Organisation of Petroleum Exporting Countries (OPEC), which decided in 1999 to cut output dramatically in order to rescue prices from pitiful levels below $10 a barrel.
The move ultimately had the desired effect. The output cut gradually sucked away at crude stocks, so that by September reserves in the United States and Europe were at levels not seen since the 1970s -- when Arab oil exporters last squeezed the western world.
In its defence, OPEC has four times this year moved to correct the measure, agreeing to open the taps once again to pump much-needed volumes to the parched market.
It also agreed a controversial mechanism to trigger output hikes and cuts should the oil price persist outside a range of $22-28 a barrel.
The mechanism quickly lapsed however, as overbearing political factors were rapidly coming into the reckoning.
An ugly explosion of violence between Israel and the Palestinians in October raised the real prospect that Arab exporters might rally to the Palestinian cause, just as they did in 1973. The last thing the market needed was a new Arab embargo.
Iraq then flexed its muscles, cutting off exports amid a row with the United Nations about an oil surcharge that it wanted paid into bank accounts outside UN remit.
But by December market perceptions had changed. US reserves levelled out. OPEC warned of a market glut. Some ministers even urged an output cut. Most players became convinced that there would be enough oil to go round even if the northern hemisphere winter proved cold.
Prices fell heavily, but oil producers from Iran to Venezuela, Mexico to Russia and Indonesia could nonetheless look back on a year of multibillion-dollar windfalls generated by the welcome surge in prices.
Oil consuming countries were meanwhile left to assess the damage of a year of living dangerously, as the higher cost of energy added a few percentage points to inflation figures -- and took the stuffing out of corporate bottom lines.
But there was no recession or stagflation in 2000. Though some Asian countries and corporate heavyweights warned about the impact of high oil prices, most analysts agreed that the world is less dependent on oil than it was in the 1970s.
Indeed, some argued it was market volatility rather than price which presented most headaches to economic managers and corporate executives.
"Commodities are more volatile than any financial market and oil is the most volatile," said Peter Young, oil market analyst at the Royal Bank of Scotland. "It makes it difficult for people to plan what their costs are going to be. It impacts the whole economy enormously."
As for 2001, most analysts expect oil prices to fall gently, but are not expecting the sort of collapse that hit the market in 1998 and 1999.
"We are not in the circumstances we were in two years ago, when the price hit single digits," said oil market watcher Andrew Hartree.
"The downside in this market is limited, it may be $25- oil or $20 oil, but I tend to think it is more likely to be mid-20s where we will average out over next year."—AFP.
©--Agence France Presse.
by Mark Rice-Oxley
© 2000 Mena Report (www.menareport.com)
