In the year 1859, at Titusville, Penn., Col. Edwin Drake drilled the first successful well through rock and produced crude oil. What few called “Drake’s Folly” was the birth of the modern petroleum industry.

The start of Organization of Petroleum Exporting Countries (OPEC) – Officials from Kuwait, Iran, Iraq, Saudi Arabia and Venezuela met in Baghdad in 1960 to discuss how to handle the price cuts imposed by the International oil companies (IOCs). They made an agreement to form the Organization of Petroleum Exporting Countries (OPEC), with the aim of reducing competition between their nations and controlling prices. 

In the next two decades, OPEC expanded to include Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador and Gabon. Many of these nations also took control of their oil reserves between 1960 and 1976, by buying out or forcibly taking shares from the IOCs. The US and USSR controlled oil for a short time, but the control soon shifted to OPEC – as emphasised in 1973 when its members opted to embargo countries supporting Israel in the Yom Kippur war . Increase in global prices was noted from an average of $2.48 in 1972 to $11.58 by 1974 (higher in some parts of the US).

Also this period was marked by the discovery of oil fields in the North Sea, areas controlled by Norway and the UK in which drilling was started in the mid-1970s. This oil – Brent crude – is now used to benchmark prices along with WTI crude. Prices rose rapidly from the year 1979-80, reaching $36.83, as Iran cut production and exports during its revolution and the Iran-Iraq war began. However after that, prices fell quickly due to demand shocks and because other producers increased production, particularly the USSR , which then became the world’s biggest producer of oil by 1988. 

In the year 1990, Iraq invaded Kuwait, and the ensuing Gulf War created a supply shock that sent prices from $14.98 a barrel before the invasion to $41.00 per barrel in September 1991.  The price then continued to fluctuate for the next few years. And due to the fall of the Soviet Union in 1991, Russian oil industry also fell, with production halving over the next decade due to reduced investment. Elsewhere Global demand also fell drastically in 1997 due to the Asian financial crisis, but recovered by 1999 as the region’s economic outlook improved.

In 2003, The US invasion of Iraq created uncertainty about the future supply of oil along with that, Asian demand (especially china) increased tremendously which contributed to a rise from $28.38 in July 2000 to over $146.02 in July 2008. After that, prices made a fall and rebounded as a result of the global financial crisis, and reached  $126.48 following the Arab Spring of 2011, which again created supply shortages. 

As of recent scenario, technological advancements have facilitated increased US shale oil production through hydraulic fracturing. This led to the reduction of OPEC’s influence and caused prices to fall from $114.84 per barrel in June 2014 to under $28.47 in January 2016.  OPEC then responded by colluding with several other countries to implement production cuts, expected to run until at least the end of 2018. Prices rose following the announcement of these cuts but, with the US now able to act as a ‘swing producer’, OPEC’s ability to control prices may be in decline.

In the upcoming years, prices are likely to be dependent on US shale oil production, the OPEC alliance, and demand of Asia.