#World1990: The Third Oil Crisis - Oil prices tripled in two months.

#World1990: The Third Oil Crisis - Oil prices tripled in two months. ## Iraq lights up Kuwait oilfields - lights up fuel prices In the United States in 1990, while the savings and loan crisis was still unresolved, the third oil crisis broke out again. In the weeks before the crisis broke out, oil prices remained at a two-year low of $14-17. By 2 a.m.

on August 2, after the Iraqi army entered Kuwait, oil prices jumped to $28 a barrel. Subsequently, following the rapid response of the United States, Operation "Desert Shield" was launched, and multinational forces began to gather in Saudi Arabia. By the end of October, the price of oil had risen to US$40 a barrel, and even began to hit the US$50 mark.

This means that oil prices have nearly tripled in just two months. Such a price increase stems from Iraq's unreasonableness: Iraq had already made a plan during the occupation: if it can occupy it, occupy it; if it cannot occupy it, it will completely destroy Kuwait's oil fields during the evacuation - ignite them.

In December 1990, when Iraq realized that complete occupation was hopeless, the Iraqis first blew up ground facilities such as oil gathering stations, pumping stations, oil pipelines, and storage tanks. Detonate the explosive at the wellhead. Of course, the oil field is full of oil. Once detonated, a jet fire will form and continue to burn.

There are about 900 oil wells in Kuwait, of which about 600 were ignited and about 200 were damaged. Hundreds of oil wells were burned for more than half a year, causing great environmental damage and losing about 2.3 million barrels per day of supply. ## Why is the price shock so big this time?

If the invasion in early August meant that about 4.3 million barrels of oil supply from Iraq + Kuwait disappeared from the market (Iraq was unable to sell oil due to sanctions), this was a short-term effect.

Then the Security Council resolution and the build-up of multinational forces at the end of October mean that the Middle East may fall into a military war that will last for several years. This means that 20%-40% of the global oil supply (Saudi Arabia may be dragged into the war) may fall into uncertainty in the medium and long term.

The impact intensity is very high. In the past few years, the big guys in OPEC were still arguing over who secretly produced more and supplied more. This extremely low level of US$14 (the benchmark was US$40 in the 1970s) was the result of Saudi Arabia finally being unable to bear it and letting go of supply.

## High oil prices didn’t last long either Now, suddenly, the oil price has reached US$40. Such a high price has prompted OPEC to immediately take action. Saudi Arabia and other countries have rapidly increased production, and the IEA International Energy Agency has also begun to release about 2.5 million barrels per day of supply to the market.

This rapid response gave the market confidence that "there will not be a systemic shortage." From the beginning of the military, or from the end of the military. When the "Desert Storm" air strikes began on January 17, 1991, oil prices had fallen back to around $22 from the high price of $40 brought about by the tense military buildup at the end of October.

Therefore, the market's extreme concern at the end of October at $40 actually came from the concern that Saudi Arabia might be pushed forward by Iraq and involved in a long-term war.

And once the United Nations forces led by the US military actually take action against Iraq, The possibility of Saudi Arabia's fall has been reduced to an extremely low level - if the US military is really involved, Master Wang can be sure.

What's even more surprising is that the market actually believed that the US military could quickly defeat the Iraqi Army, which was known as the "second largest army in the world" at the time.

## Compare this "oil crisis" in 2026 On the other hand, this time in 2026, the US military really did not dare to attack if something happened (after evaluation, it still did not dare to send ground troops). It was not until it was tied by Iran on June 15 that the 100-day war temporarily subsided.

This "oil crisis" in 2026 even if the oil channel appears for the first time - When the Strait of Hormuz was blocked by (Iran), oil prices only jumped from around US$70 before the war to a maximum of around US$120, a maximum increase of almost 70%.

By the time an agreement was signed to temporarily cease the war, oil prices had basically returned to the pre-war level of $70. Therefore, in comparison, the increase in oil prices from US$14 to US$40 in 1990 may not seem like much, but in fact it is quite different in terms of elasticity.

We can also see: In 1990, Kuwait's production capacity was directly destroyed in ground wars (oil wells were ignited), Iraq's production capacity was completely sanctioned, and the production capacity of Saudi Arabia, the largest oil producer, is also under continued threat.

There will be only a "limited" obstruction of the transportation channel in 2026 - yes, it is not that no oil tankers will pass through the Strait of Hormuz during these 100 days, but they will pass through conditionally and selectively. In addition, the world's major oil consuming countries in 2026 have already built a certain amount of oil reserves.

Not only has oil production been diversified (no longer limited to the Middle East, supply response has become faster), but the use of clean energy has also achieved results (clean energy was only a small fraction in 1990) But if we assume that Americans really dare to enter Iran in 2026, the situation may have to be rewritten.