In reviewing record crude oil price runs, you don’t have to look to far back into history to find the greatest nominal price move in history. The price rally actually stemmed from the last time crude market traded under $10/barrel. Over the next nine years, the price of oil rallied over 1,400% before topping out at $145/barrel in 2008. The most impressive phase of this rally took place during the 18 months from Jan. 2007 to July of 2008. The crude market hit an intraday high of $147.27 and a closing high of $145.29 on July 11 and July 3 respectively; these broke and currently hold record intra day and closing figures. The rally from approximately $50/barrel in Jan. 2007 to the closing highs in July equated to 190% rally. One of the fundamentals that influenced the timing of this rally was a 1.7 million barrel per day two phase production cut by OPEC. The cuts were in Nov. 2006 (1.2 mb/day cut) and Feb. 2007 (500 tb/day cut). In looking back at other noteworthy price runs, OPEC member nations seem to have a driving influence on the volatility.
The crude market rally that climaxed in 2008 was an amazing occurrence that will be talked about for some time to come, but the move is relative when compared to other historic rallies on a percentage basis. These other pricing events fell within the 1970s and the first half of the 1980s. In fact, prior to 1973, the price of crude oil pretty much stayed below $5/barrel except during a rally in the 1860s. In October of 1973, OPEC implemented an oil embargo on the U.S. and other European nations who helped Israeli with supply and military support during the Yom Kippur Arab-Israeli conflict. These supplies were necessary for Israel to hold off the Egyptian and Syrian offensives. The embargo was repealed in March of 1974, but not until oil prices had gone through the greatest percentage move to this date. In that 5 month period, oil prices quadrupled from $3 to $12/barrel.
Prices ticked higher over the next half decade leading up to the Iranian Revolution. At the end of 1979, the Shah Mohammed Reza Pahlavi was over thrown and essentially replaced by Ayatollah Khomeini. The year following this executive change, included the Iranian Hostage Crisis and concluded with the commencement of the Iran-Iraq war. Over that period, the crude market price increased by 2.5x that was seen at the beginning of the Iranian Revolution. Over all, in the 8 years from 1973-1981, the oil prices rose approximately 1,200%. This rally was the result of the two greatest intermediate term price rallies in the history of the crude market.
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