OPEC Oil Prices: Past and Future Expectations

Abstract Drastic increases in the price of oil were experienced in 1973/74 and 1979/80 periods, which resulted in positive and negative impacts on both OPEC oil producing countries and the major oil consumers or industrialized countries. A decade after the first price hike, a fall in oil price occurred (from US$34 to US$ 29 per barrel), and the price of oil has been falling further since the beginning of 1985 with a low record of US $ 12 per barrel. Will the prices go down further? This question is very difficult to answer. It is worth noticing that the main factor affecting oil prices is supply and demand. Various studies predict that there will be an equilibrium between supply and demand after the early 1990's. Due to the limited oil reserves, non-OPEC production will diminish before the early 21st century, after which OPEC production will predominate. At this time OPEC countries are expected to regain their control of oil prices. Subsequently, a moderate price increase is expected during the later half of the 1990's.