The 1980s oil glut was a serious surplus of crude oil caused

6 min readMay 19, 2021

The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s energy crisis. The world price of oil had peaked in 1980 at over US$35 per barrel (equivalent to $109 per barrel in 2019 dollars, when adjusted for inflation); it fell in 1986 from $27 to below $10 ($63 to $23 in 2019 dollars).[2][3] The glut began in the early 1980s as a result of slowed economic activity in industrial countries due to the crises of the 1970s, especially in 1973 and 1979, and the energy conservation spurred by high fuel prices.[4] The inflation-adjusted real 2004 dollar value of oil fell from an average of $78.2 in 1981 to an average of $26.8 per barrel in 1986.[5]

In June 1981, The New York Times proclaimed that an “oil glut” had arrived[6] and Time stated that “the world temporarily floats in a glut of oil”.[7] However, The New York Times warned the next week that the word “glut” was misleading, and that temporary surpluses had brought down prices somewhat, but prices were still well above pre-energy crisis levels.[8] This sentiment was echoed in November 1981, when the CEO of Exxon also characterized the glut as a temporary surplus, and that the word “glut” was an example of “our American penchant for exaggerated language”. He wrote that the main cause of the glut was declining consumption. In the United States, Europe, and Japan, oil consumption had fallen 13% from 1979 to 1981, “in part, in reaction to the very large increases in oil prices by the Organization of Petroleum Exporting Countries and other oil exporters”, continuing a trend begun during the 1973 price increases.[9]

After 1980, reduced demand and increased production produced a glut on the world market. The result was a six-year decline in the price of oil, which reduced the price by half in 1986 alone.[2]

Production[edit]

OPEC, non-OPEC and world oil production, 1973–2004[10]

Non-OPEC[edit]

During the 1980s, reliance on Middle East production dwindled as commercial exploration developed major non-OPEC oilfields in Siberia, Alaska, the North Sea, and the Gulf of Mexico,[11] and the Soviet Union became the world’s largest producer of oil.[12] Smaller non-OPEC producers including Brazil, Egypt, India, Malaysia, and Oman doubled their output between 1979 and 1985, to a total of 3 million barrels per day.[13]

United States[edit]

In April 1979, US President Jimmy Carter signed an executive order to remove price controls from petroleum products by October 1981 so that prices would be wholly determined by the free market. Carter’s successor, Ronald Reagan, signed an executive order on 28 January 1981, which enacted that reform immediately,[14] allowing the free market to adjust oil prices in the US.[15] That ended the withdrawal of old oil from the market and artificial scarcity, which encouraged an increase in oil production.[citation needed] The US oil windfall profits tax was lowered in August 1981 and removed in 1988, ending disincentives to US oil producers.[citation needed]

Additionally, the Trans-Alaska Pipeline System began pumping oil in 1977. The Alaskan Prudhoe Bay Oil Field entered peak production, supplying 2 million bpd of crude oil in 1988, 25 percent of all US oil production.[16]

The 1980s oil glut was a serious surplus of crude oil caused

Contents

Production[edit]

Non-OPEC[edit]

United States[edit]

Written by Ar Rabble