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Measuring oil supply disruptions: A historical perspective

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  • Huntington, Hillard G.

Abstract

An oil supply disruption in OPEC member countries or in the Persian Gulf region may have unusually large effects on crude oil prices because such a disruption may escalate into wider disruptions within these volatile regions. This analysis reviews and updates several past studies to identify specific events that can be linked to oil supply shocks that remove oil production while increasing world oil prices. Using historical data, it finds that a 10% cut in world oil supplies arising from abrupt and large monthly disruptions of OPEC and Persian Gulf crude oil production correlates with a 35–43% increase in inflation-adjusted crude oil prices. The data also reveal that almost all sudden and large oil supply disruptions occurred prior to 2004, which raises some interesting issues about how to interpret the evidence from studies evaluating the impact of future oil disruptions on either prices or the economy.

Suggested Citation

  • Huntington, Hillard G., 2018. "Measuring oil supply disruptions: A historical perspective," Energy Policy, Elsevier, vol. 115(C), pages 426-433.
    • Handle: RePEc:eee:enepol:v:115:y:2018:i:c:p:426-433
    DOI: 10.1016/j.enpol.2017.12.020
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    References listed on IDEAS

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    3. Yuan, Meng & Zhang, Haoran & Wang, Bohong & Huang, Liqiao & Fang, Kai & Liang, Yongtu, 2020. "Downstream oil supply security in China: Policy implications from quantifying the impact of oil import disruption," Energy Policy, Elsevier, vol. 136(C).
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    6. Balke, Nathan S. & Brown, Stephen P.A., 2018. "Oil supply shocks and the U.S. economy: An estimated DSGE model," Energy Policy, Elsevier, vol. 116(C), pages 357-372.
    7. Balli, Esra & Nazif Çatık, Abdurrahman & Nugent, Jeffrey B., 2021. "Time-varying impact of oil shocks on trade balances: Evidence using the TVP-VAR model," Energy, Elsevier, vol. 217(C).
    8. Wang, Kai-Hua & Wen, Cui-Ping & Liu, Hong-Wen & Liu, Lu, 2023. "Promotion or hindrance? Exploring the bidirectional causality between geopolitical risk and green bonds from an energy perspective," Resources Policy, Elsevier, vol. 85(PB).
    9. Wang, Kai-Hua & Su, Chi-Wei & Umar, Muhammad, 2021. "Geopolitical risk and crude oil security: A Chinese perspective," Energy, Elsevier, vol. 219(C).
    10. Huntington, Hillard G. & Bhargava, Abha & Daniels, David & Weyant, John P. & Avraam, Charalampos & Bistline, John & Edmonds, James A. & Giarola, Sara & Hawkes, Adam & Hansen, Matthew & Johnston, Peter, 2020. "Key findings from the core North American scenarios in the EMF34 intermodel comparison," Energy Policy, Elsevier, vol. 144(C).

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    More about this item

    Keywords

    Q41; Q48; Oil markets; Supply disruptions;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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