1990 oil price shock

The 1990 oil price shock happened after the Iraqi invasion of Kuwait on August 2, 1990, Saddam Hussein's second invasion of an OPEC member. Lasting nine months, the price spike was shorter than the 1973 and 1979 oil crisis. Still, it caused the early 1990s recession in the United States. The average oil price rose from $17 per barrel in July to $36 per barrel in October. The crisis ended after the American-led forces pushed the Iraqis out of Kuwait.

Iraqi invasion of Kuwait


On August 2, 1990, Ba'athist Iraq invaded Kuwait, followed by a seven-month occupation of Kuwait and an eventual U.S.-led attack that expelled the Iraqis. When the invasion happened, Iraq owed Kuwait $14 billion of debt that Kuwait had loaned it during the Iran–Iraq War (1980–1988). Iraq also saw Kuwait as overproducing oil, lowering prices and hurting Iraqi oil profits when it was struggling financially.

Right before the invasion, Iraq and Kuwait had been producing a combined  of oil a day. The potential loss of these supplies, coupled with threats to Saudi Arabia's oil, led to a rise in prices from $21 per barrel at the end of July to $28 per barrel on August 6. Oil prices rose to a peak of $46 per barrel in mid-October.

End


The defeat of Iraqi forces offset the threat to oil supplies. The price spike went away within nine months, though the Kuwaiti oil fires set on fire by retreating Iraqi forces were not extinguished until November 1991. It took years for the two countries' combined production to regain its former level.


References

Category:Cold War
Category:Oil crises
Category:History of the Middle East