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Three years ago, in an essay for Foreign Affairs, we predicted a new era of oil price volatility. The market laughed at us: the next three years were the smoothest in decades. In the past month, however, volatility is back, and our 2011 essay explains why.
Saudi Arabia and other OPEC members have long maintained large oil reserves to limit volatility in oil prices. But with key states now refusing to maintain such expensive buffers, the world must learn how to cope with big price swings in the years ahead.