Y376 IPE: Oil Politics

1. Ipe13 Y376 IPE: Oil Politics February 22, 2011

2. World Energy Consumption, 1965-2005, in Terawatts (TW) World Energy Consumption, 1965-2005, in Terawatts (TW)

3. Projected Future Energy Use

4. Top Consuming Countries, 1960-2005, in Million Barrels per Day Top Consuming Countries, 1960-2005, in Million Barrels per Day

5. Addiction to Oil

6. Figure 9-5. World Consumption of Petroleum, 1960-2005, in Millions of Barrels per Day Source: U.S. Department of Energy, Energy Information Agency, International Energy Annual (various years). Figure 9-5. World Consumption of Petroleum, 1960-2005, in Millions of Barrels per Day Source: U.S. Department of Energy, Energy Information Agency, International Energy Annual (various years).

7. OPEC Headquarters, Vienna Sheik Ahmed Zaki Yamani OPEC Headquarters, Vienna Sheik Ahmed Zaki Yamani

8. Table 9-1. Members of OPEC Country Membership Algeria 1969 Angola 2007 Ecuador 1973-92, Rejoined 2008 Indonesia 1962, quit 2009 Iran 1960 Iraq 1960 Kuwait 1960 Libya 1962 Nigeria 1971 Qatar 1961 Saudi Arabia 1960 United Arab Emirates 1967 Venezuela 1960 Table 9-1. Members of OPEC Country Membership Algeria 1969 Angola 2007 Ecuador 1973-92, Rejoined 2008 Indonesia 1962, quit 2009 Iran 1960 Iraq 1960 Kuwait 1960 Libya 1962 Nigeria 1971 Qatar 1961 Saudi Arabia 1960 United Arab Emirates 1967 Venezuela 1960

9. OPEC <ul><li>Organization of Oil Exporting Countries </li></ul> OPEC <ul><li>Organization of Oil Exporting Countries </li></ul>

10. . Major Crude Oil Reserves, 2006 Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University

11. . Figure 9-4. Production of Crude Petroleum by OPEC Countries, 1970-2007, in Millions of Barrels per Day Source: U.S. Department of Energy, Energy Information Agency, International Energy Annual (various years).

12. . Figure 9-7. OPEC and Non-OPEC Oil Production, 1970-2007, in Millions of Barrels per Day Source: Department of Energy, Energy Information Agency, International Energy Annual (various years).

13. . Non-OPEC Oil Production, 1900-2003

14. . Major Oil Routes & Chokepoints, 2000 Middle East North America Latin America Africa Western Europe Former Soviet Union Pacific Asia 15 10 3 1 Million barrels per day Hormuz Malacca Bab el-Mandab Suez Bosphorus Panama Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University

15. . Price of Oil, Nominal and Real 1861-2006, $ per Barrel Source: Wikipedia.

16. . Oil Prices, 1987-2011

17. . Figure 9-14. U.S. Gasoline Prices in Current and Constant 2007 Prices, 1919-2007, in Cents per Gallon Source: Department of Energy, Energy Information Agency, Short Term Energy Outlook , August 2008.

18. . Gasoline Prices in Pennies per Gallon, 1973-2010

19. . Non-OPEC Supply and Oil Prices

20. . Real Price of Oil and Major Disruptions in World Oil Supply

21. . Figure 9-8. U.S. Production, Consumption, and Imports of Crude Petroleum, 1949-2007, in Millions of Barrels per Day Source: Department of Energy, Energy Information Agency, International Energy Annual (various years).

22. . Challenges to the Seven Sisters and the rise of the cartel (OPEC) <ul><li>“ Oligopsony = An oligopsony is a market form in which the number of buyers are small while the number of sellers in theory could be large.” </li></ul><ul><ul><li>The Seven Sisters were also an oligopsony! </li></ul></ul><ul><li>“ A cartel is a group of formally independent producers whose goal it is to fix prices , to limit supply and to limit competition .” </li></ul><ul><li>OPEC was formed in 1960, but its effects were most dramatic in 1974. </li></ul><ul><li>OPEC sought to counterbalance the Seven Sisters. </li></ul><ul><li>Definitions from Wikipedia </li></ul>

23. . Seven Sisters: Old and New Chevron acquired Gulf in 1985 and Texaco in 2001 Exxon acquired Mobil in 1999 The old Seven Sisters became the four “Supermajors” Old New British Petroleum China National Petroleum (China) Gulf Gazprom (Russia) Royal Dutch Shell National Iranian Oil Company Standard Oil of California (Socal/Chevron) Petrobras (Brazil) Standard Oil of New Jersey (Esso/Exxon) PDVSA (Venezuela) Standard Oil of New York (Mobil) Petronas (Malaysia) Texaco Saudi Aramco (Saudi Arabia)

24. . Conservation Measures Taken after the Oil Price Shocks of the 1970s <ul><li>Higher taxes on gasoline and fuel oil in Western Europe </li></ul><ul><li>Fuel efficiency standards for motor vehicles in the US </li></ul><ul><li>Accelerated adoption of energy-efficient heating for homes, offices, and factories </li></ul><ul><li>General substitution of energy-conserving technologies for energy-intensive technologies </li></ul>

25. . Oil Prices have less impact on US Economy This doesn’t mean the US is consuming less oil, just that it is more efficient at utilizing oil to produce

26. . What Role Did Energy Politics Play in September 11? In… <ul><li>Afghanistan </li></ul><ul><li>Central Asia </li></ul><ul><li>The Middle East </li></ul><ul><li>The Rest of the World </li></ul>

27. . Afghanistan <ul><li>Afghanistan itself has few exportable energy resources. </li></ul><ul><li>Its main value from an energy standpoint stems from the fact that it offers a route for Caspian energy to the sea via Pakistan. </li></ul>

28. . <ul><li>There are large deposits of oil and natural gas in the Caspian Sea region. </li></ul><ul><li>The main problem is getting these resources to markets. </li></ul><ul><li>Pipelines are required to service the large markets in North America, Europe, and E. Asia. </li></ul>

29. . Two Pipelines in Greater Detail Main participants in these two pipelines: Tengiz to Novorossiysk Russian Federation 24% Repub. Of Kazakhstan 19% Sultanate of Oman 7% Chevron 15% LUKARCO 12.5% Rosneft/Shell 7.5% Mobil 7.5% Agip 2% Turkmenistan to Pakistan: Unocal, Gazprom, Hyundai, Itochu, Delta Oil (Saudi Arabia)

30. . What is the Role of Saudi Arabia within OPEC? <ul><li>It is the largest single supplier of oil. </li></ul><ul><li>The small Saudi population permits them the luxury of varying the amount of oil that they sell (thereby controlling prices): </li></ul><ul><ul><li>When they want the price to increase they sell less </li></ul></ul><ul><ul><li>When they want the price to decrease they sell more </li></ul></ul>

31. . Figure 9-10. Saudi Export Revenues and Foreign Currency Reserves, 1960-2005, in Billions of Current Dollars Source: World Development Indicators 2007 ; and Saudi Arabian Monetary Agency, Annual Report , Monetary and Banking Statistics .

32. . What Role Did Energy Politics Play in September 11? In… <ul><li>Afghanistan </li></ul><ul><li>Central Asia </li></ul><ul><li>The Middle East </li></ul><ul><li>The Rest of the World </li></ul>

33. . Afghanistan <ul><li>Afghanistan itself has few exportable energy resources. </li></ul><ul><li>Its main value from an energy standpoint stems from the fact that it offers a route for Caspian energy to the sea via Pakistan. </li></ul>

34. . <ul><li>There are large deposits of oil and natural gas in the Caspian Sea region. </li></ul><ul><li>The main problem is getting these resources to markets. </li></ul><ul><li>Pipelines are required to service the large markets in North America, Europe, and E. Asia. </li></ul>

35. . Two Pipelines in Greater Detail Main participants in these two pipelines: Tengiz to Novorossiysk Russian Federation 24% Repub. Of Kazakhstan 19% Sultanate of Oman 7% Chevron 15% LUKARCO 12.5% Rosneft/Shell 7.5% Mobil 7.5% Agip 2% Turkmenistan to Pakistan: Unocal, Gazprom, Hyundai, Itochu, Delta Oil (Saudi Arabia)

36. . What is the Role of Saudi Arabia within OPEC? <ul><li>It is the largest single supplier of oil. </li></ul><ul><li>The small Saudi population permits them the luxury of varying the amount of oil that they sell (thereby controlling prices): </li></ul><ul><ul><li>When they want the price to increase they sell less </li></ul></ul><ul><ul><li>When they want the price to decrease they sell more </li></ul></ul>

37. . Figure 9-10. Saudi Export Revenues and Foreign Currency Reserves, 1960-2005, in Billions of Current Dollars Source: World Development Indicators 2007 ; and Saudi Arabian Monetary Agency, Annual Report , Monetary and Banking Statistics .

38. . This Puts the United States in a Strange Position <ul><li>The U.S. wants the price of oil to be low, and it views the Saudis as a moderates within OPEC. </li></ul><ul><li>Saudi Arabian donors funded the Mujaheddin in Afghanistan and many of the Islamic schools that were the recruiting grounds for both Taliban and Al Qaeda fighters. </li></ul>

39. . The Three Periods Period Dates Type of Governance Bretton Woods 1945-1971 Hegemonic Interdependence 1971-1989 Collective Globalization 1989-present Global

40. . Evolution of Subsystems Subsystems Bretton Woods Interdependence Globalization North-North Creation of US-dominated regimes Floating replaces fixed exchange-rates; Major challenges to US hegemony EU expansion and the creation of Euro; the US reemerges as hegemonic North-South Bipolar competition NIEO, OPEC, increasing gaps w/in the South Rise of Asian NICs and the Washington Consensus

41. . What Happens to Specific Regimes? Regimes Bretton Woods Interdependence Globalization Monetary Fixed but adjustable rates Dirty Float Dirty Float; greater concerns about crises Trade GATT GATT challenged (even by US) WTO; rise of the anti-globalization movement Investment Few rules other than retaliation Period of nationalizations TRIMs within the WTO; but MAI fails; rise of BITs