Oil Price History—Highs and Lows Since 1970

What Makes Oil Prices So Volatile?

Consumer at the gas station refueling car
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Oil prices in the 20th century remained stable, in real terms, until the 1970s. Since then, political, economic, and other changes have rocked the oil landscape. In 2020, the coronavirus pandemic sent prices plummeting. In 2022, the Russia-Ukraine conflict caused prices to skyrocket.

Key Takeaways

  • Traders’ market perceptions influence oil prices more than actual global supply and demand.
  • With shale oil extraction, the United States became the largest oil producer in the world.
  • In 2020, oil prices plunged to a negative value in the wake of an abrupt drop in worldwide demand.
  • Prices have soared past pre-pandemic levels, thanks in part to Russia's invasion of Ukraine. Russia is one of the world's largest oil exporters.

Oil Prices in the 1960s and 1970s

Global oil prices in the 20th century generally ranged between $1.00 and $2.00 per barrel (/b) until 1970. That's about $10/b to $30/b when adjusted for inflation. The United States was the world's dominant oil producer at that time, and it regulated prices. Domestic oil was plentiful. Cheap oil and gas expanded interstate highways, interstate trucking, and auto ownership became part of the American Dream. But multiple changes have occurred since then.

In 1960, Saudi Arabia and other foreign oil-exporting nations formed the Organization of Petroleum Exporting Countries (OPEC). They wanted more control over their most valuable natural resource. In 1971, regulators allowed U.S. companies to pump as much oil as they wanted. They began using up surplus reserves. As supply fell, prices rose. America became vulnerable to future shortages.

OPEC didn't begin to flex its pricing muscle until President Richard Nixon effectively took the U.S. dollar off the gold standard in 1971. The value of the dollar plummeted, taking oil revenues down with it.

OPEC halted oil exports to the United States in 1973. Its primary goal was to boost oil prices. It also wanted to punish America for its support of Israel in the Yom Kippur War. Congress created the Strategic Petroleum Reserve to ensure an adequate supply of petroleum products and prevent future shortages.

Why Oil Prices Are Volatile

Since the 1970s, oil prices have become more volatile. They're affected by more than the laws of supply and demand. Oil prices are determined in the short run by oil futures contracts on the commodities markets. This means that in the short run, commodities traders can also affect oil prices. They can drive prices up even if they only think there will be a surge in demand, such as during the summer driving season. They can lower prices if they think there will be a dropoff in demand. That usually occurs as demand falls in the winter.

U.S. Shale Oil Production

In 2015, new U.S. production of shale oil increased the global oil supply. By Jan. 20, 2016, the addition to supply had driven global oil prices down to a 13-year low of around $26/b. By November, OPEC had had enough. It cut production to revive prices. By April 2019, global prices topped $71/b. They remained above $55/b until February 2020; by March 2020, when Covid-19 affected the entire global economy, oil prices began falling more rapidly, soon reaching record lows. 

Note

Though oil prices fluctuate due to constantly changing economic conditions, 2022 prices are predicted to be more steady than the previous years.

Coronavirus Pandemic

In January 2020, many governments began restricting travel and closing businesses to stem the coronavirus pandemic. As a result, oil demand began falling. In the first quarter of 2020, oil consumption averaged 94.4 million barrels per day (b/d), down 5.6 million b/d from the prior year.

Through the first quarter, OPEC and its members were abiding by an agreement to limit production. That agreement expired on March 31, 2020. At the March 6, 2020, meeting, Russia refused to lower production. OPEC responded by announcing it would increase production. As storage facilities filled, prices plummeted into negative territory. No one wanted delivery of oil since there was hardly any place to store it.

In April 2020, prices for a barrel of oil fell to an unprecedented negative oil price: around -$37/b in the United States for West Texas Intermediate (WTI) at Cushing and $9/b internationally for Brent oil. On April 12, 2020, OPEC and Russia agreed to lower output to support prices.

At its April 1, 2021, meeting, OPEC decided to begin increasing production. At its June 1, 2021 meeting, OPEC confirmed it would gradually return 2 million b/d of the adjustments it made to the market.

In July 2021, OPEC announced that it would increase oil production by .4 mb/d monthly until it phased out the lower output it created in 2020.

In February 2022, Russia's invasion of Ukraine caused the price of crude oil to skyrocket far above pre-pandemic prices. Prices rose due to fears over supply issues—Russia is one the world's largest exporters of oil. As of April 2022, oil was trading around $104 per barrel.

Oil Prices by Year: Average, High, Low, and Events

The following chart shows the nominal value for imported crude oil according to the U.S. Energy Information Administration. The first column shows the average annual price. It's followed by the monthly high and low oil prices for that year. The last column shows the reasons and accompanying events responsible for the price variations.

Year Average Low High Causes
1970 $2.96    N.A.    N.A. Regulated prices
1971 $3.17    N.A.    N.A.  
1972 $3.22    N.A.    N.A.  
1973 $4.08    N.A.    N.A.  
1974 $12.52 $9.59 $13.06  OPEC oil embargo ended
1975 $13.95 $12.77 $15.04 Stagflation
1976 $13.48 $13.26 $13.71 Economy recovered
1977 $14.53 $14.11 $14.76 Fed raised and lowered rates
1978 $14.57 $14.40 $14.94 Fed raised and lowered rates
1979 $21.57 $15.50 $28.91 Iran-Iraq War, fed rate 20%
1980 $33.86 $30.75 $35.63 Iran oil embargo
1981 $37.10 $35.43 $39.00 Reagan cut taxes
1982 $33.57 $32.78 $35.54 Recession ends inflation
1983 $29.31 $27.95 $31.40  
1984 $28.88 $28.02 $29.26  
1985 $26.99 $26.21 $27.60  
1986 $13.93 $10.91 $24.93  
1987 $18.14 $16.45 $19.32 OPEC added to supply
1988 $14.60 $12.66 $15.93  
1989 $18.07 $16.04 $20.05  
1990 $21.73 $15.15 $32.88 Gulf War
1991 $18.73 $17.17 $22.30 SPR released oil
1992 $18.21 $16.00 $19.83  
1993 $16.13 $12.56 $18.35  
1994 $15.54 $12.90 $17.52 NAFTA allowed cheap oil from Mexico
1995 $17.14 $16.29 $18.70  
1996 $20.62 $17.48 $23.22  
1997 $18.49 $15.95 $23.02  
1998 $12.07 $9.39 $14.33  
1999 $17.27 $10.16 $24.35 Prices doubled
2000 $27.72 $24.29 $30.56  
2001 $21.99 $15.95 $24.97 Recession and 9/11
2002 $23.71 $17.04 $27.14 Afghanistan War
2003 $27.73 $24.48 $32.23  
2004 $35.89 $30.11 $45.36  
2005 $48.89 $37.56 $58.79 Hurricane Katrina
2006 $59.05 $52.70 $67.99 Bernanke becomes Fed chair
2007 $67.19 $49.57 $85.53 Banking crisis
2008 $92.57 $35.59 $127.77 Financial crisis
2009 $59.04 $36.84 $74.40 Great Recession
2010 $75.83 $71.15 $85.59  
2011 $102.58 $87.61 $113.02  
2012 $101.09 $92.18 $108.54 Iran threatened Straits of Hormuz
2013 $98.12 $90.36 $104.16  
2014 $89.63 $57.36 $100.26 The dollar rose 15%
2015 $46.34 $33.16 $58.89 U.S. shale oil increased
2016 $38.70 $26.66 $46.72 Dollar fell
2017 $48.98 $44.03 $57.44 OPEC cut oil supply to keep prices stable
2018 $61.34 $42.80 $67.79  
2019 $57.95 $49.71 $65.42  
2020 $37.22 $16.74 $53.87 Pandemic reduced demand
2021 $65.85 $49.52 $77.15
2022* (Q1) $94.68 $77.46 $106.00 Russian invasion of Ukraine created uncertainty about global supply

Frequently Asked Questions (FAQs)

Where does the U.S. get its oil?

The top importer of crude oil to the U.S. is Canada, with 61% coming from the country. Other top import countries include Mexico, Saudi Arabia,

Does the U.S. produce any of its own crude oil?

The U.S. produces 18.4 million barrels of oil per day, usually enough to meet its own needs. The reason the U.S. must also import oil is that the refineries in the U.S. aren't capable of refining all the crude oil that comes from the U.S. Overseas oil is often cheaper than U.S. oil.

How does the U.S. dollar affect oil prices?

All oil contracts are traded in U.S. dollars, so oil prices follow the value of the dollar. There is usually an inverse relationship between the dollar and the price of oil, but there have been signs of change in this dynamic.

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