Y376 IPE: Oil Politics October 13, 2009
Oil-- Synonymous with Advanced Industrialization and Globalization Essential to industry as: Transport fuel Industrial fuel Raw material input Modern militaries most important material: Portable, non-volatile, efficient, easily handled Churchill s decision The essence of modern geopolitics: Basis of much of modern society (suburbs, mass transit, heating, electricity, industrial base) Access is economic life or death
World Energy Consumption, 1965-2005, in Terawatts (TW)
World Crude Oil Production and Consumption, 2003 Barrels per day (2003) 11 million Production Consumption Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
Top Consuming Countries, 1960-2005, in Million Barrels per Day
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).
OPEC Organization of Oil Exporting Countries
Table 9-1. Members of OPEC Country Membership Algeria 1969 Angola 2007 Ecuador Rejoined 2008 Indonesia 1962 Iran 1960 Iraq 1960 Kuwait 1960 Libya 1962 Nigeria 1971 Qatar 1961 Saudi Arabia 1960 United Arab Emirates 1967 Venezuela 1960
Major Crude Oil Reserves, 2006 Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
OPEC Headquarters, Vienna Sheik Ahmed Zaki Yamani
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).
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).
Non-OPEC Oil Production, 1900-2003
Major Oil Routes & Chokepoints, 2000 Middle East North America Latin America Africa Western Europe Former Soviet Union Pacific Asia Panama Bosphorus Hormuz Suez Bab el-mandab Malacca Million barrels per day 15 10 3 1 Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
Price of Oil, Nominal and Real 1861-2006, $ per Barrel Source: Wikipedia.
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.
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).
$ per barrel (2005 US$) Annual Demand Increase in Mill brls/day Real Price of Oil and Major Disruptions in World Oil Supply 90 80 Gulf War 5 4.5 70 60 50 40 30 20 10 0 1950 1953 Suez War 6 Days War Iranian Revolution OPEC Embargo 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 Iran / Iraq War 1989 1992 1995 1998 2001 2004 4 3.5 3 2.5 2 1.5 1 0.5 0
Challenges to the Seven Sisters and the rise of the cartel (OPEC) 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. The Seven Sisters were also an oligopsony! A cartel is a group of formally independent producers whose goal it is to fix prices, to limit supply and to limit competition. OPEC was formed in 1960, but its effects were most dramatic in 1974. OPEC sought to counterbalance the Seven Sisters. Definitions from Wikipedia
Conservation Measures Taken after the Oil Price Shocks of the 1970s Higher taxes on gasoline and fuel oil in Western Europe Fuel efficiency standards for motor vehicles in the US Accelerated adoption of energy-efficient heating for homes, offices, and factories General substitution of energy-conserving technologies for energy-intensive technologies
BTU's per $ of Real GDP Oil Prices have less impact on US Economy 20,000 The Energy Intensity of Output has Declined Markedly 18,000 16,000 14,000 12,000 10,000 8,000 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 US Demand for All Fuels This doesn t mean the US is consuming less oil, just that it is more efficient at utilizing oil to produce FactSet Research Systems
A few items of note in the Politics of Oil Nasser & the Suez Crisis of 1956 Linkage of 1970s oil price shocks to Arab-Israeli conflict Invasion of Kuwait linked to Iran-Iraq war and resulting decline in Iraqi economy Al Qaeda origins in Saudi Arabia and US-Saudi sponsorship of mujaheddin in Afghanistan US invasion of Iraq ostensibly to resolve issues unresolved by the war in Kuwait