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Lasting only nine months, the price spike was less extreme and of shorter duration than the previous oil crises of — and —but the spike still contributed to the recession of the early s. While Iraq officially claimed Kuwait was stealing oil prices australia dubai economy oil via slant drilling, its true motives were more complicated and less clear.
In addition, Iraq felt Kuwait was overproducing oil, lowering prices and hurting Oil prices australia dubai economy oil profits in a time of financial stress. In the buildup to the invasion, Iraq and Kuwait had been producing a combined 4. After only nine months, the spike had subsided, although the Kuwaiti oil fires set by retreating Iraqi forces were not completely extinguished until Novemberand it took years for the two countries' combined production to regain its former level.
By raising interest rates and lowering growth expectations, the Fed hoped to slow and eventually reduce inflationary pressures, creating greater price stability. The August 6 invasion was seen as a direct threat to the price stability the Fed sought. In fact, the Council of Economic Advisors published oil prices australia dubai economy consensus estimate that a one-year, 50 percent increase in the price of oil could temporarily raise the price level of the economy by 1 percent and potentially lower real output by the same amount.
Despite the potential for inflation, the U. Fed and central banks around the globe decided it would not be necessary to raise interest rates to counteract the rise in oil prices.
Federal Reserve decided to maintain interest rates as if the oil price spike were not occurring. This decision to refrain from oil prices australia dubai economy stemmed from confidence in the future success of Desert Storm to protect major oil-producing facilities in the Middle East and a will to maintain the long-term credibility of economy policy that had been built up during the s.
To avoid being accused of inaction in the face of potential economic turbulence, the U. Initially, the act prohibited the U. When oil prices rose, revision of this act allowed the U. From Wikipedia, the free encyclopedia. Archived from the original PDF on November 14, Retrieved January 20, Acronyms Oil shale gas Peak oil mitigation timing People Petrocurrency Petrodollar recycling Shale band Shale gas Swing producer Unconventional oil heavy crude oil sands oil shale.