The higher prices have backfired against the administration both in foreign policy and in domestic politics. But they were good for American consumers and kept the inflation rate low. The higher prices that followed OPEC's 1999 production cuts, on the other hand, allowed Russia to pump money into its war in Chechnya, allowed Iraq to manipulate the market and push prices to new heights, blighted Asia's economic recovery, angered consumers throughout the United States and could reignite inflation here. But Energy officials have acknowledged that during his 1999 discussions with Saudi Oil Minister Ali Naimi, Richardson shared U.S. views on an oversupplied market and expressed concern about extreme price volatility. The Saudis were ready to help restore prices.
Oil prices are sensitive to small changes.
An oversupply of less than 3 percent of world demand can make prices fall, as they did in 1997-98. A small undersupply can cause prices to soar, as they have done since last fall. But such instability is unusual. For the decade leading up to their '97-98 fall, prices had exhibited remarkable stability, with the exception of a price spike during the Persian Gulf War. Several factors in the late '90s contributed to falling prices and eventual oversupply.