FIGURE 1 World crude oil production and prices

By mid-December, spot prices for crude had declined to well below $30 per barrel. Analysts were beginning to suggest that crude oil prices would once again drop to levels well below $20 per barrel during 1991, assuming a favorable resolution of the Persian Gulf situa-tion. With the initiation of the allied air offen-sive against Iraq on January 16, 1991, oil prices surged again, to more than $30 per barrel. However, it soon became apparent that oil production in the Gulf states would not be ap-preciably affected by the war, nor would ship-ping lanes in the area be disrupted. Oil prices promptly declined to the $20-$25 per barre