Just before Earth Day 2011 when oil was selling for $120 a barrel, former Saudi oil minister Sheikh Yamani put out the idea that oil prices could imminently reach $200 to $300 per barrel. He was referring to the implications of unrest in the Middle East in the wake of the then recent Tunisian riots, which kicked off the poorly named “Arab Spring.”
However, instead of rising, oil prices hovered around $115 for the rest of that year and then started to slide. The slide turned into a collapse over the past year, with oil dipping below $50 per barrel in recent months.
Prices didn’t go into free-fall because turmoil in the Middle East abated: if anything that has gotten worse. The price collapsed because the world is now oversupplied with oil. This has happened once before in modern history.
The first price collapse from petroleum oversupply happened contemporaneous with Earth Day 1986.
