Y669 IPE: Oil Politics

1. Y669 IPE: Y669 IPE: Oil Politics Oil Politics October 5, 2010 October 5, 2010

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

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

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

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

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

7. OPEC OPEC Organization of Oil Exporting Countries Organization of Oil Exporting Countries

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

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

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

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

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

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

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

15. Spot Prices, 1980-2010 Spot Prices, 1980-2010

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

17. Real Price of Oil and Major Real Price of Oil and Major Disruptions in World Oil Supply Disruptions in World Oil Supply 90 5 Annual Demand Increase in Mill brls/day Gulf War 4.5 80 4 70 $ per barrel (2005 US$) Iranian Revolution 3.5 Iran / Iraq War 60 3 OPEC Embargo 50 2.5 6 Days War 40 Suez War 2 30 1.5 20 1 10 0.5 0 0 1998 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 2001 2004

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

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

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

21. Oil Prices have less impact on US Economy Oil Prices have less impact on US Economy The Energy Intensity of Output has Declined Markedly 20,000 18,000 BTU's per $ of Real GDP 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 ©FactSet Research Systems This doesn’t mean the US is consuming less oil, just that it is more efficient at utilizing oil to produce

22. What Role Did Energy Politics Play What Role Did Energy Politics Play in September 11? In… in September 11? In… Afghanistan Afghanistan Central Asia Central Asia The Middle East The Middle East The Rest of the World The Rest of the World

23. Afghanistan Afghanistan • Afghanistan itself has few exportable energy resources. • Its main value from an energy standpoint stems from the fact that it offers a route for Caspian energy to the sea via Pakistan.

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

25. Two Pipelines in Greater Detail 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)

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

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