Since the mid-1980s the world economy has increased its dependence on oil supplies from the Persian Gulf. The oil price response to the Iraqi invasion of Kuwait in August 1990, and the ensuing war between Iraq and allied forces underscore the world’s vulnerability to future oil price shocks, given the long-run trend towards increased dependence upon oil from this region.
The eleventh Energy Modeling Forum (EMF) working group met four times over the 1989-90 period to compare alternative perspectives on international oil supplies and demands through 2010 and to discuss how alternative supply and demand trends influence the world’s dependence upon Middle Eastern oil. Proprietors of eleven economic models of the world oil market used their respective models to simulate a dozen scenarios using standard assumptions. From its inception, the study was not designed to focus on the short-run impacts of disruptions on oil markets. Nor did the working group attempt to provide a forecast of just a single view of the likely future path for oil prices. The model results guided the group’s thinking about many important longer-run market relationships and helped to identify differences of opinion about future oil supplies, demands, and dependence.