Calls for energy independence and talk of electric-drive cars is sending a chill through OPEC.
Open Access Article Originally Published: May 03, 2007
The dilemma, whether OPEC members acknowledge it or not, is that OPEC must increase capacity and lower prices or face the permanent loss of a substantial portion of oil's market share in the energy market. In the intermediate term the also risk losing market share within the petroleum segment of the energy market. In the last issue in this series we began the first of several articles addressing "Peak Oil." Today's article qualifies as a peak oil article but its focus is politics and economics rather than the geologic and technical factors that will eventually lead to a peak in production. One might call it a discussion of peak oil consumption.
OPEC's Monthly Bulletin starts with an article titled "Dependence is a two-way street." This is the most prominence OPEC has given to its security concerns. Those living In consuming nations, including your author, have expressed concern about import dependence and the concomitant threats to security. It is not surprising that OPEC views it differently. As Dad used to say, "Don't judge a man until you have walked a few miles in his moccasins."
We will let the OPEC speak for themselves. The following are from OPEC's latest Monthly Report.
"As the DoE states candidly on its website, “oil is the lifeblood of America’s economy”.
"In the US and some other key consuming countries, the fear that supplies of oil might be interrupted is the main reason why governments have decided to support the development of alternatives, such as solar and wind power, nuclear energy and biofuels.
"What the leaders and opinion makers of consuming countries seem to have overlooked in their frenzied search for energy security is that producing countries need security of demand since they too are dependent on oil. Maybe even more than they are. Producers need the revenue that oil exports bring in: in OPEC Member Countries, for example, oil accounted for 73 per cent of total exports in 2005. In some of these countries, the percentage was much higher: 95 per cent in Kuwait, 98 per cent in Nigeria and 99 per cent in Libya. In most of these countries, oil revenues are used to fund educational and health programmes, as well as to build crucial civil and communications infrastructure. Given this dependence, it would hinder, not bolster, their interests to withhold oil from world markets and to drive prices up so high as to hurt the global economy.
"OPEC is committed to supporting oil market stability, a commitment that is built “upon the fundamental recognition that extreme price levels, whether too high or too low, are damaging for both producers and consumers”. As it has done since it was established in 1960, the Organization will continue to work towards ensuring uninterrupted supplies to consumers at reasonable prices. But in the light of recent developments regarding the stated move away from traditional fossil fuels — and oil in particular — OPEC Member Countries feel that they ought to review their future expansion plans. It would, in fact, make no sense for them to spend money unnecessarily on building or improving facilities when their customers are telling them they intend to minimize dependence on OPEC supplies."
OPEC has a valid point. They are more dependent on oil exports than most of the major importing countries are on petroleum imports. However, the not so veiled threat of reducing investment in additional capacity is not a solution to their problem.
In the late 1970s Saudi Oil Minister Yamani warned OPEC that high prices would result in the loss of market for OPEC. They did and the loss came from two directions: lower demand for the high priced oil and greater production from non-OPEC producers.
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6 comments so far...
07-Jun-2007
56555
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This consideration of being in the shoes of the oil producer is not very natural but let’s make it as stated.
The first element to consider like for everybody is the desire to secure a prosperous future. On this aspect, having less or no oil revenue indeed appears as a catastrophy, but lets take a more in dept picture.
The fossil oil combustion is creating global warming. As we speak summer temperatures in Riad are already close to 50°C and there is no physical law that would prevent a further increase up to 100°C when the water ebullition start to act as a stabilization step. Although Riad is not near the sea, the distance is small enough so that the boiling of the surrounding seawater would also stabilize the temperature to 100°C. But already long before that level is reached, life becomes impossible at temperatures of only 62°C to 65°C. So that means we are only 12 to 15°C away from it. The predictions are that, in a scenario of business as usual, the global average temperatures will increase, by the end of the century, by about 4°C and that the deviation to that average increase can reach 100 %. Thus, this means that Riad could see a temperature increase of up to 8°C. That would make an astonishing summer temperature of 58°C in the shade! We are only 4°C away from the fatal 62°C, and those 4°C can come easily during the next century. By 2199, Riad could be a non-livable place, a kind of forbidden zone like described in so many catastrophy sci-fi novels. The rich buildings constructed today would stand empty in a deadly desert.
Well, we are now far away from the initial goal of securing a prosperous future. It is a real nightmare where people had to flee abroad or dig themselves in underground bunkers cooled by huge industrial airco systems just in order to survive. Palm trees, horses, camels, goats, even desert bushes and flowers are all gone. People live in misery at the brink of extinction.
Let’s get back to the present day and try to see what can be done. At first, as bizarre as it may seem, Saudi Arabia should not only joint the Kyoto protocol but use its money to help their present oil customers push the fight against global warming even further by giving them the means to get rid of their oil addiction. Saw the branch on which they are sitting to have a chance to fall on the ground alive instead of finding themselves at 62°C on the intact branch but not really alive anymore. Like the famous Al Gore frog, from the movie “an inconvenient thought”, they need to be rescued before it is too late. Saudi Arabia needs to reinvent itself away from oil. How can they possibly do that, well like Dubai has been doing for a while. Developing tourism, technology, trade, perhaps even investing in space access, or go up to building a base on the moon. Something that makes people flock to them instead of being distrustful of them. Showing open the country’s riches and create more tourism. Become a world bank for fossil fuel replacement projects like hybrids, solar panels, and wind power. Open up their society to democracy and share the values of the international community. Work for a better worldwide environment and stop religious extremism. Collaborate in research to find solutions away from fossil fuels that threat their future. Not only away from oil, but also away from fossil gas, tar sands and coal. Investing in renewable to literally save their lives and securing an, if not as prosperous, at least a decent life with newfound enriching contacts with the world community at large. A Saudi Arabia respected for its insight and wisdom instead of one disliked for extremism and exaggerated luxuries.
Posted by: Patrick Leonard
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05-May-2007
56080
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JW Ogden has it backwards. Oil income has created the network of Islamist indoctrination centers and jihadist groups now threatening us. It has also created a huge idle class with nothing else to do to justify their existence to themselves. Take that oil income away and force those classes to work for a living, and most of the problem will disappear.
Posted by: Engineer-Poet (TheOilDrum.com)
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05-May-2007
56086
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OPEC is not in danger of losing market share. Even if some people in NA and Europe shift to alternative fuels or electric cars there will always be demand from Asia and Africa. You are comparing apples to oranges when you compare 1979 and 2007. The big losers from even a modest drop in oil prices will be the tar sand operators in Alberta and the deep oil rigs. A drop to $40 a barrel would stop oil sand expansion in its tracks. It will also shut down small marginal wells in the US. OPEC cost of production is low compared to most other sources.
Posted by: Bob M
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17-May-2007
56237
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May 17th,2007 10:00 am NYC time
Gentlemen
There will come a time that oil producing nations may run out of oil
and seek new alternatives for their well being and take advantage now
to develop and produce for their people as the rest of the world does.
Meanwhile we need new solutions.As shown in my web pages, see index
( http://trillions.topcities.com ), electric vehicles will play a major
role in future global transportation.
Not until all countries agree on standardizing the battery size and
voltage for quick (one minute) 'refueling' at battery recharging
stations probably owned by GE or Exide, Hybrid Technologies and many
others will the public make the big switch to electric vehicles
and even then as time moves on they too will then again require
modifications to adapt to an even more advanced 'dual mode maglev'
riding elevated high speed pipeline guideways. In my website above
add -- /electriCar.html -- for typical swap stations
(I can design them) and also add my dual mode Maglev system
-- /dualmodemaglev.html -- a concept I conceived way back and
presented to US DOT in the 1960s of which many are now trying to claim
the ideas as theirs. I hope I can be of help... good wishes to all.
Sincerely Jack Marchand
Posted by: Jack Marchand
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17-May-2007
56237
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May 17th,2007 10:00 am NYC time
Gentlemen
There will come a time that oil producing nations may run out of oil
and seek new alternatives for their well being and take advantage now
to develop and produce for their people as the rest of the world does.
Meanwhile we need new solutions.As shown in my web pages, see index
( http://trillions.topcities.com ), electric vehicles will play a major
role in future global transportation.
Not until all countries agree on standardizing the battery size and
voltage for quick (one minute) 'refueling' at battery recharging
stations probably owned by GE or Exide, Hybrid Technologies and many
others will the public make the big switch to electric vehicles
and even then as time moves on they too will then again require
modifications to adapt to an even more advanced 'dual mode maglev'
riding elevated high speed pipeline guideways. In my website above
add -- /electriCar.html -- for typical swap stations
(I can design them) and also add my dual mode Maglev system
-- /dualmodemaglev.html -- a concept I conceived way back and
presented to US DOT in the 1960s of which many are now trying to claim
the ideas as theirs. I hope I can be of help... good wishes to all.
Sincerely Jack Marchand
Posted by: Jack Marchand
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04-May-2007
56070
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Good article
From the article:
‘Those living in consuming nations, including your author, have expressed concern about import dependence and the concomitant threats to security.’
The security threat to the consuming nations is way over estimated. The producing nations other than US, Canada and Norway need the petroleum income than the consuming nations need the petroleum. The consuming nations have multiple suppliers which provides a margin of safety.
There is little evidence that a drop in petroleum income will reduce terrorism or make things better in the middle east. A drop in petroleum income might just play into the hands of the radicals.
Posted by: jw ogden
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