When Sheikh Ali Khalifa al-Sabah of Kuwait thinks about today's plunging oil prices, his mind drifts back to the mid-1980s, when he was forced to sell some of his country's crude for as little as $5 a barrel.
As Kuwait's oil minister at the time, Sheikh Ali had to sell a cargo or two at that price just to keep up cash flow to a country that depended upon oil revenues. "It wasn't because I wanted to; it was because it was the market price," he recalls.
"We really had no alternative."
For oil industry players active during the 1980s bust, the current drop in prices carries echoes of those desperate days. Interviews with some of those involved in that period reveal that while there is little consensus on how long prices will stay depressed, experience suggests the current market glut will not evaporate soon.
Representatives from all aspects of the energy industry will be mulling current low oil prices and the supply glut this week during the IHS CERAWeek gathering in Houston.
Kuwait's struggles in the 1980s are instructive for anyone wondering whether producing countries can tinker their way out of trouble now. In the face of weak prices in the early years of the decade the OPEC production group introduced output cuts in an attempt to mop up oversupply. Kuwait slashed production from nearly 2 million barrels per day to about 600,000 bpd. The top producer Saudi Arabia made even costlier cuts.
Three factors dashed the plan: fellow OPEC members cheated on their own cuts; global thirst for oil had dried up after price spikes in the 1970s pushed consumers to buy efficient cars; and new supplies, particularly from non-OPEC Mexico, Norway, and Alaska threatened to squash gains from any cuts.
By late 1986, Saudi Arabia and other OPEC members opened the taps again to regain market share, and prices did not recover for 20 years.
The memory leaves Sheikh Ali, now 71, feeling grim about a price recovery this time.
"Tomorrow if the price of oil goes down to $20 I would not be surprised,” he said. "You don't take excess oil away very quickly. It was true in the 1980s, now it's even worse."
Adrian Lajous was head of crude exports trading for Pemex, Mexico's state oil company in the mid-1980s. He says major oil producers are powerless to tackle the current oversupply by making production cuts, despite an agreement this month between Saudi Arabia and Russia to freeze supply.
Today's bust is driven by uncertainty about demand - mostly China's - and by the threat of a resilient non-OPEC supply, mostly from U.S. shale oil.
"Again you have both a demand shock and a supply shock at the same time," said Lajous, 72, who is now a fellow at Columbia University's Center on Global Energy Studies. "I don't see a real rebalancing of the market taking place this year," adding that should the global economy slow, recovery could be delayed into next year or later.
Ed Morse, 74, who headed energy diplomacy at the State Department during the 1979 Iranian revolution that led to an oil price shock, agrees that crude would likely not recover until late this year or early next. Even then, he believes it will likely stabilize in a range between $45 to $65 per barrel, above today's price of about $33 for international Brent oil, but well under the roughly $100 level it averaged from 2011 to 2014.
Saudi Arabia will likely continue to relinquish its traditional role as the swing producer in global oil markets when it led production cuts to raise prices, he said. Rather it is likely to plow ahead with its strategy of fighting for market share by pumping oil full steam ahead.
"They realize that at a price that's too high ... U.S. shale production comes roaring back," said Morse, the global head of commodities research at Citigroup.
John Miller felt the impact of the 1980s price drop personally. Miller was president and chief operating officer of Cleveland-based Standard Oil of Ohio in the mid-1980s, when BP (BP.L) upped its stake in Standard to majority status and in the midst of the industry crisis, fired him.
"When the price dropped, our results dropped precipitously, and BP used that as an excuse to move their management team in," says Miller, now 77.
Miller says coordination on the supply side is hard to pull off. "Back then, everybody would sit there and hope that your competitor would be statesmanlike and do the ‘right thing,’” he said with a laugh. "My own guess is ... prices won't recover any time soon. Demand probably matters more now than in 1986. What's happening in China matters more."
Sheikh Ali estimated it will take seven to 10 years to emerge from the current slump. "The idea that U.S. companies are going to collapse and therefore their production is going to zero is daydreaming," he said. "Even the wells that have closed can easily re-open."
Saudi Arabia may no longer be the swing producer of global markets, but the United States is now the world's "spring producer," Sheikh Ali said. Shale stands to put a long term damper on global markets, because when oil prices rise even a little, North Dakota and Texas output can pop back to market far easier than expensive deepwater or Alaskan production did decades ago, he said.
Technology innovations keep pushing the cost of shale production lower. And the return of Iran's oil exports after the lifting of sanctions also threatens to moderate prices.
But a long-term oil bust may not be all bad for producers, said Sheikh Ali. It could force reforms in governments including Saudi Arabia and Kuwait where oil has long dominated the economies.
"I don't think it is negative for countries in the Gulf," he said. "It will make us more rational, pay more attention to our economy, reduce corruption, have better management. It may be a blessing in disguise."
(Additional Reporting by Bruce Wallace; Editing by Bruce Wallace and Chris Reese)