The Iranian Crisis and the Second Oil Price Explosion

Abstract

In normal circumstances, given the strength of demand in the last quarter of 1978, crude oil production from Iran might have been expected to maintain its September near-capacity level of 6 million b/d through the fourth quarter. Instead, under the impact of oil workers’ strike action against the Shah’s regime, it declined to 5.5 million b/d in October, 3.5 million b/d in November and 2.3 million b/d in December. Towards the end of December oil exports were suspended, with only some 700,000 b/d being produced for local consumption. After the deposition of the Shah and the triumph of Ayatollah Khomeini, Iranian crude exports were resumed at the beginning of March 1979; production built up to a rhythm of around 4 million b/d, falling towards 3 million b/d in the last quarter of the year to make an overall 1979 average of 3.1 million b/d.