Oil ministers agreed on an embargo that would see a gradual reduction in production in 5% increments over time until they had achieved their economic and political objectives; after Libya embargoed all oil shipments to the U.S., Saudi Arabia and all other Arab oil producing nations followed suit leading to the 1973 oil embargo that was equally extended to Western Europe and Japan. The onset of the 1973 oil crisis, when members of the Organization of Arab Petroleum Exporting Countries (OAPEC) announced an oil embargo led to high rises in the price of oil per barrel, from US$3 to nearly $12; the short and long term economic as well as political effects of the oil embargo left devastating impacts all over the world (Ross). Price increases were also imposed in the embargo to accelerate the fall in demand of the new lower level oil supply thereby triggering a market rise in the oil price from $3 to $ 12 per barrel; since the global financial system was already under pressure from the collapsed Bretton Woods Agreement, recessions and high inflation kicked in and persisted up to the early 1980s and oil prices continued to rise until 1986.
From the mid 1980’s to 2003, the inflation-adjusted price of a barrel of oil remained stable at around 25$ per barrel but rose dramatically from 2003 beyond $30 per barrel reaching a high of $60 per barrel in 2005 and its peak was $147.30 in 2008. Many factors have been attributable to these dramatic increases in the prices of oil including the depreciation of the U.S. dollar, subsequent reports of the declining oil reserves, the tension in the Middle East, as well as the heightened speculation over oil prices. Geo-political events as well as natural disasters that are indirectly linked to the global oil market have had a significant impact on oil prices; for instance, the 2006 Israel-Lebanon conflict and