The history and the Future of Oil Boom-Bust Prices by Robert McNally

The history and the Future of Oil Boom-Bust Prices by Robert McNally.
"We don’t care about oil prices, $30 or $70, they are all the same to us". (Prince Mohammed bin Salman, 2016)

PREFACE
My inspiration to write this book stemmed from a lifelong passion for history and a professional career as an analyst, official, and consultant involved with the global oil market, energy policy, and geopolitics. My introduction to oil was somewhat accidental. After serving as a Peace Corps volunteer in Senegal, West Africa, I headed back to school to pursue a master’s degree in international economics and U.S. foreign policy. My plan was to become a history teacher after graduating. But I needed a part time job to help pay graduate school expenses, and was hired as a research intern at an oil consulting firm.
My unplanned exposure to energy started during a tumultuous period in the oil market and an active one in energy policymaking. The 1990–1991 Gulf War had just ended and the George H. W. Bush administration was beginning to implement new oxygenated fuel regulations on gasoline. Daniel Yergin’s magnificent history of oil, The Prize: The Epic Quest for Oil, Money, and Power, had just been released and, like many, I devoured it with relish. In the course of punching oil market data into spreadsheets and analyzing OPEC and energy regulations, I realized the historical and contemporary oil market combined my main professional interests—economics, policy, and geopolitics—in a thrilling fashion. So my career path changed. I joined the firm after graduating and began a rewarding journey in energy. Though I still would like to be a history teacher one day.
This book elaborates on analyses developed over the past ten years and shared mainly with my colleagues and clients. My central thesis is the recent dramatic swings in oil prices, including the bust since 2014 but also the mid-2000s boom and bust in 2008, need be understood in the historical context of the broader economic and policy drivers that impact the oil market. This required a fresh look at oil’s history, focusing on the critical role that supply control played in achieving the widely cherished goal of stabile oil prices. This focus led to my conclusion that, amid the boom in Asian demand in the early to mid-2000s and the more recent, surprise arrival of U.S. shale production, the most important feature of today’s oil market is the absence of a swing producer able and willing to adjust supply to keep oil prices stable. Since the early 1930s, as this book details, someone has been trying to manage supply to keep oil prices from behaving as they have in the last ten years. No longer having such a swing producer implies a return to price volatility for which we have all but lost living memory and which we will find troublesome to manage. I presented these ideas at academic events and in congressional testimony, published some of the key themes with my co-author Michael Levi in Foreign Affairs in 2011 and 2014, and wrote a paper synopsizing this argument in December 2015 for the Columbia University Center on Global Energy Policy, where I am a fellow.

I decided to write this book to explore more deeply how oil’s history can clarify recent trends and shed light on tomorrow’s path, and to present my findings to the general reader as well as the energy expert.

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