Y376 IPE:
Oil Politics
February 20, 2012
World Energy Consumption,
1965-2005, in Terawatts (TW)
Projected Future Energy Use
Top Consuming Countries, 19602005, in Million Barrels per Day
Addiction to Oil
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 Headquarters, Vienna
Sheik Ahmed
Zaki Yamani
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
OPEC

Organization of Oil Exporting Countries
Major Crude Oil Reserves, 2006
Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
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, 19002003
Major Oil Routes & Chokepoints, 2000
Bosphorus
Million barrels
per day
Hormuz
Suez
Malacca
Middle East
North America
Latin America
Africa
Western Europe
Former Soviet Union
Pacific Asia
Panama
Bab el-Mandab
Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
15
10
3
1
Price of Oil, Nominal and Real
1861-2006, $ per Barrel
Source: Wikipedia.
Oil Prices, 1987-2011
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.
Gasoline Prices in Pennies per
Gallon, 1973-2010
Non-OPEC Supply and Oil
Prices
Real Price of Oil and Major
Disruptions in World Oil Supply
Gulf War
80
Iranian Revolution
Iran / Iraq War
60
OPEC Embargo
50
40
30
Suez War
6 Days
War
4.5
4
3.5
3
2.5
2
1.5
20
1
10
0.5
0
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
$ per barrel (2005 US$)
70
5
0
Annual Demand Increase in Mill brls/day
90
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).
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
Seven Sisters: Old and New
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)
Chevron acquired Gulf in 1985 and Texaco in 2001
Exxon acquired Mobil in 1999
The old Seven Sisters became the four “Supermajors”
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
Oil Prices have less impact on US Economy
20,000
The Energy Intensity of Output has Declined Markedly
BTU's per $ of Real GDP
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
©FactSet Research Systems
This doesn’t mean the US is consuming less oil,
just that it is more efficient at utilizing oil to produce
What Role Did Energy Politics Play
in September 11? In…




Afghanistan
Central Asia
The Middle East
The Rest of the World
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.
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.
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)
What is the Role of Saudi Arabia
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
they sell (thereby controlling prices):

 When
they want the price to increase they sell
less
 When they want the price to decrease they sell
more
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.
What Role Did Energy Politics Play
in September 11? In…




Afghanistan
Central Asia
The Middle East
The Rest of the World
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.
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.
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)
What is the Role of Saudi Arabia
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
they sell (thereby controlling prices):

 When
they want the price to increase they sell
less
 When they want the price to decrease they sell
more
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.
This Puts the United States in a
Strange Position


The U.S. wants the price of oil
to be low, and it views the
Saudis as a moderates within
OPEC.
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.
The Three Periods
Period
Dates
Type of
Governance
Bretton Woods
1945-1971
Hegemonic
Interdependence 1971-1989
Collective
Globalization
Global
1989-present
Evolution of Subsystems
Subsystems Bretton
Woods
Interdependence Globalization
NorthNorth
Creation of
US-dominated
regimes
Floating replaces
fixed exchangerates; Major
challenges to US
hegemony
EU expansion and
the creation of
Euro; the US
reemerges as
hegemonic
NorthSouth
Bipolar
competition
NIEO, OPEC,
Rise of Asian
increasing gaps w/in NICs and the
the South
Washington
Consensus
What Happens to Specific Regimes?
Regimes
Bretton
Woods
Interdependence Globalization
Monetary
Fixed but
Dirty Float
adjustable rates
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