Crude oil: Cycles

From $23 to $120: a decade of wild swings

Brent averaged $116.8 a barrel in September 2026, against $68.0 a year earlier and $74.6 five years earlier. That is close to its ten-year high of $120.4; the ten-year low was $23.3. In real 2010 dollars the annual average fell from $101.6 in 2012 to $59.5 in 2025, before this year's spike. Shocks are part of oil's history: the Gulf posted price went from $1.80 in 1970 to $11.65 by December 1973 (Yergin). Short-run demand and supply barely respond to price, so small imbalances cause big swings. Booms call forth new supply, such as shale, and then gluts, as in 1986, 2014 and 2020.

Crude oil, Brent price

Chart: Crude oil, Brent monthly price

Chart: Crude oil, Brent annual real price

Super-cycles in crude oil

Oil has the clearest super-cycles of any commodity, with long booms ended by gluts and short, violent spikes from wars. Real prices were flat and low through the 1950s and 1960s, jumped tenfold in the 1970s, slumped from 1986 to 1999, rose for a decade with China, collapsed again with US shale in 2014, and have since been driven by shocks: COVID in 2020, Russia's invasion of Ukraine in 2022 and the 2026 Iran war and closure of Hormuz. Because short-run demand and supply barely respond to price, small imbalances swing prices widely, and high prices plant the seeds of the next glut by funding new supply.

1. 1973-1981

   The Arab embargo of 1973 and the Iranian revolution of 1979 cut supply while OPEC took control of pricing from the oil majors. Importers built stockpiles and the IEA was founded in 1974. High prices then funded North Sea and Alaska output and cut demand.

   Gulf posted price rose from $1.80/bbl in 1970 to $11.65 by December 1973 (Yergin); World Bank average crude rose from $12.9 (1978) to $36.9 (1980).

2. 1986-1999

   Saudi Arabia abandoned its role as swing producer in late 1985 and flooded the market; non-OPEC supply was rising and demand had fallen. A long, low-price era followed, ending with the 1998 Asian crisis glut.

   Average crude fell from $27.2/bbl (1985) to $14.4 (1986) and hit $13.1 in 1998 (World Bank).

3. 2003-2008

   China's industrialisation and car boom met tight spare capacity and years of underinvestment. Financial flows into commodity indices amplified the run-up; the global financial crisis ended it.

   Brent averaged $28.8 in 2003 (annual average of monthly prices) and $97.6 in 2008, peaking at a $133.9 monthly average in July 2008 before falling to $41.6 in December 2008 (World Bank).

4. 2011-2016

   Prices sat above $100 for three years, which funded the US shale boom. In November 2014 OPEC chose not to cut output, and a glut drove prices down by more than half.

   Brent averaged $112.0 in 2012 and $44.0 in 2016 (World Bank).

5. 2020-2022

   COVID lockdowns cut demand by about a tenth and WTI futures briefly went negative in April 2020. OPEC+ cuts and recovery followed, then Russia's invasion of Ukraine in 2022 caused a spike and a rerouting of Russian crude to India and China.

   Brent's ten-year monthly low was $23.3 (April 2020); it averaged $120.1 in June 2022 (World Bank).

6. 2026

   US and Israeli strikes on Iran from 28 February 2026 effectively closed Hormuz. The IEA called it the largest supply disruption in history, with output from affected countries down more than 14 mb/d by May. A June truce briefly reopened traffic before fighting resumed in July.

   Brent averaged $71.1 in February and $120.4 in April 2026, touched $126.41 intraday on 30 April, fell to $85.4 in June and was back at $116.8 in September (World Bank; ABC7).

What drives the cycle

• Emerging-market demand. China drove most demand growth from 2000 to 2020; India is now the largest source of growth, adding transport and LPG demand as incomes rise.
• OPEC+ spare capacity and policy. Saudi Arabia and the UAE hold most spare capacity; their choice to defend price or market share has ended booms (2014) and stopped busts (2020). The UAE left OPEC on 1 May 2026.
• Shale investment cycle. US shale responds within months but declines fast, so its growth depends on prices and on investor appetite for capital spending.
• Geopolitics and chokepoints. Hormuz, Bab el-Mandeb and sanctions on Russia, Iran and Venezuela decide how much oil can actually reach buyers.
• Energy transition. EVs, efficiency and ethanol blending erode road-fuel demand, which can make investors wary of new supply and raise the risk of under-investment.

Metrics to track