Abstract As we approach the end of the 20th century, the global oil picture starts to look more like the early 1970s, which set the scene for the first oil crisis in 1973. The “security margin” — the gap between demand and production capacity, has been shrinking since the early 1990s. In 1985 OPEC was producing at only 55% of capacity. By 1997 capacity utilization had risen to 95% and, barring the full re-entry of Iraq into the oil market, capacity utilization in 1998 is projected to rise to 96% with a growth of more than 1.6 million barrels a day (mbd) in global demand. No wonder, then, that the “capacity question” has been termed “oil's perennial problem”. The dilemma confronting producers is either they face the danger of over investing if demand grows slowly or not at all, or they run the risk of investing too little, too late. Yet, without outright investment, the capacity constraint may start to bite at some point in the near future. This paper will endeavour to analyse the origins of the shrinking “security margin” and its impact on the global oil supplies, the price of oil and the global economy. It will argue that under such conditions, one has to seriously consider the possiblity of a third oil crisis capable of again disrupting the global economy, triggered again by political upheaval in the Middle East.