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Do they have a 'responsibility' to supply us?
Posted by Jerome a Paris on May 10, 2007 - 5:40pm in The Oil Drum: Europe
Topic: Policy/Politics
Tags: colonialism, diplomacy [list all tags]
Politics of oil seen as threat to supplies
Increasing state ownership and rising resource nationalism are emerging as the main long-term threats to global oil supplies, says a report for the industry by an energy consultancy.
(...)
Resource nationalism, which is limiting access for international oil companies, and the national oil companies’ failure to reinvest profits in production, are limiting outlay required to replace existing resources, which are being substantially depleted.
Easy profits herald global oil crunch
Key national oil companies are not making the needed investment, either because resource nationalism is leading them to block out technologically advanced international oil companies or because they are making so much money from current fields that they do not see the need to reinvest.
(...)
“The real challenge is *whether the national oil companies will meet their responsibility to bring the oil to market* ,”he says.
It is unclear whether that responsibility is as important to those countries as meeting their needs at home.
Their responsibility? Their responsibility? As in a duty? As in a duty to supply us our fix? As in an imperative obligation to supply us before they supply their own needs?
In what kind of world is the seller under any obligation to sell? On what markets do sellers have a responsibility to provided their goods to buyers unless they want to (presumably because they find it a good opportunity for themselves to sell)? Oh yes, in a world where we are entitled to the resources of the whole planet without any restriction - and entitled to consume them, burn them, deplete them when we want and in the quantities we want. If that entails riding roughshod over reticent governments, isolating, demonizing or toppling them, or even waging war on them, so be it. They failed their responsibility to provide us their oil.
Gah. We get the warning signs from all over the place. Peak oil is, in the most optimistic estimates, less than a couple decades away (i.e. less than one generation of infrastructure away). Production capacity constraints, whatever the reason, seem most likely to come a long time before that - and can indeed be argued to have started already. We thus need to work on the assumption that we can no longer count on the supply side to balance the markets. Thus, instead of pestering ungrateful national oil companies for cashing in on their good luck (and for behaving perfectly sensibly in managing their resource base with a longer term perspective), we need to work on what we actually control: our demand. How hard is that to understand?
And it's not like it would be so hard. We waste so much energy that reducing our consumption should not have any noticeable impact on our quality of life - in fact, in all likelihood, it should increase it, as we do with less pollution, less traffic, less wasted time, less military spending, less involvement with seedy regimes, less resentment around the world at our greedy ways, etc... not to mention the samll matter of global warming. But no, it's sooo much easier to blame the nasty, stupid nationalists, communists, terrorists or assorted incompetents (I mean, Arabs, Iranians, Russians or Venezuelans, in no particular order).
Irresponsible bastards. What is OUR oil doing under YOUR deserts/toundra? Or, should it be - why are we whining or throwing tantrums instead of acting on what we can? Why should the spoiled kids dictate the terms?
I sent the FT the letter below. I don't know whether they will publish it though:
Of course they have no responsibility to sell us oil. The simple asking of the question, however, tells me that we are very close to admitting that we are not as civilized as we think we are.
Wars have been waged for resources in the past, and I see no reason why it should be any different now. Some folks need to get a grip on reality. If someone has something you need desperately enough, and they are unwilling to trade for it, then the only recourse left is to try to take it. That's not unique to this country or this century. It's the way we are, bleeding hearts notwithstanding.
Say howdy to your reptile brain.
HOWDY!!!
KTA&TTG!
YCHSOMG,RN,AIFIYF.
qwerty!!!!
The countries with oil have no responsibility to supply other countries with oil, just as the countries with advanced pharmaceuticals have no responsibility to supply other countries with medicines.
I don't see any added value in the association you are trying to make. Yes it is true that in a free market nobody has the responsibility to deliver (unless by a binding contract), including the pharmaceutical companies. This is the foundation of our market economy.
But it may argued that it is in the common good of both sides for the pharmaceutical companies to deliver. While it is not at all certain that it is in the long-term good of oil suppliers to squander their resources as fast as they can.
What we are witnessing is a clear case of one of the sides in market relationship trying to exert unfair and contradicting to the basic market principles power over the other side. If this was happening within US or within any developed country there would be a series of lawsuits costing billions for the offenders. But since this is happening in the international arena, where some are "more equal" than the others they are able to get away with it.
Jerome's article is spot on, and is drawing the attention to a problem which will become increasingly acute in the years to come. The most destructive way PO may lead us to would be confrontation between oil consumers and suppliers.
Hello LevinK,
I echo your ending quote:
"Jerome's article is spot on, and is drawing the attention to a problem which will become increasingly acute in the years to come. The most destructive way PO may lead us to would be confrontation between oil consumers and suppliers."
Sounds like the original Financial Times article is propaganda to induce us towards the '3 Days of the Condor' scenario. I hope we will have the attained sufficient Peakoil Outreach wisdom to practice ELP and some version of the ASPO Energy Depletion Protocols instead.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Personally I don't believe in any significant mitigation efforts before the crisis has arrived. Even then the response will not be ELP or coordinated conservation effort, but more like "everybody taking care of himself" :)
Oh, but let's not pretend we can't see the point just because we don't like the way it was stated (or because we delude ourselves about pharmaceuticals, most of which are used to pretend to treat old age, something we don't really have a reciprocal stake in.)
The bottom line is that most OPEC countries have nothing - zero, zilch, zip, nada - in the way of an economy except oil. That's why they've been twitchy about actually killing the golden goose in the past.
In the last few years they've gotten away with something and seem tempted to push until the world economy breaks. Very well, they may succeed. But let's not forget that it's a co-dependency, a two-way street. No oil out, nothing in trade back in, collapse, as they produce nothing themselves. Consuming countries are not the only ones in for a shock.
How does this preclude responsibility for the oil-exporting countries to manage their oil wealth the way we, the consumers want?
And I don't even want to enter in the argument that much of the reasons oil producing countries are ranking high in the misery rank-list are lying in the policy of the rich ones towards them. If they had any choices other than exporting oil, would they be wasting it for 10c a cup?
Oh, on that part of the point, you're right - as with most business transactions, the trade will go forward, or not, insofar as both parties see it as being in their interest, or not. The gross negligence by most OPEC countries of their own economic development simply disconnects 'responsibility' from the discussion by rendering it irrelevant.
Edit: on second thought, maybe the OPEC governments do have some responsibility to their own people. Most have done utterly poorly at that. And those responsibilities will involve trade, because (1) autarky doesn't work well anyway, and (2) their past negligence has foreclosed other alternatives for the short to medium term.
Aside from the apples and oranges point, there is no way the US is going to accept the deal implied here. The world can survive on generics -- but there is no generic substitute for oil.
Too late. This is what is already happening. And it is going to get a lot worse by all indications. That the empire will lose eventually is quite certain. How much devastation it will rain on the world is what's unknown. It's much too much to hope that it will collapse the way the "evil empire" did, with a minimum of violence.
We are entitled to infinite amounts of cheap energy: http://en.wikipedia.org/wiki/Image:JabbatheHuttROTJ.jpg
The international oil companies can do something: Use their substantial lobbying power to pressure the US president and Congress into enforcing the Carter doctrine. The US has already begun using its military power to secure access to oil. If you read between the lines, the article makes the point that the next logical step is military action.
So, perhaps these oil companies could convince the US government (mainly prez bush and vice prez Cheney) to get us involved in another conflict over oil. Who pays the tab?
US is currently in debt for over $8.5 TRILLION and a forth of that is held by foreign powers. So what country or PTB will buy trillions more treasury notes to allow for more "oil conquests"?
The US has already stepped into the quick sand with Iraq. Being involved in one more conflict over oil would send the dollar plunging and the economy would be hammered by inflation and extremely high interest rates as the debt piles up by an additional $100-200 billion per year.
And lastly, where would we find the military personnel to do the fighting? Want to see a replay of the Vietnam era protests and riots? Just reimpose the draft for another oil war. I can see blood flowing in US streets even before the first bodies arrive home.
I've just been reading up on what Thailand is doing in response to roughly doubling of it's energy import costs -have a look:
http://www.boi.go.th/english/why/Alternative_Energy.pdf
Rather than whinging on that exporting nations should 'give them more' they create home grown solutions. If this is the sort of forward thinking we can expect when the market signals 'tougher times ahead' via higher prices I say bring it on and ASAP.
I've just written an email to www.nanosolar.com -it would be great to see them set up a manufacturing plant in Thailand (as well as US and Germany) to supply the Asian Market and they would get bargain tax breaks to boot...
Nick.
This is a terrific link, and another reason why the world can transition past Peak Demand, if oil stays above $60 a barrel. Especially note the section on biogas.
In 10 years, worldwide, the majority of farms will be using waste for energy (if oil stays up). Animal dung is big. Jatropha farms will be huge (especially if selective breeding increases yields).
Add new biofuels to plug-in hybrids, and what you see the world past Peak Demand. OPEC leaders recently have been wondering who can they sell their oil to in 10 years. Wonder well they should.
No discussion of fossil crude is complete without recognizing the role of price on demand. It is not inelastic. The role of price on supply is delayed for a decade, but on demand maybe five years or less.
There are real, perhaps intractable problems in the world, usually involving human behavior. How does one end wars, or solve the urban crime problem? These are problems.
Technical problems almost always get solved, even one where there are constraints. But energy is a fun one, as the solutions are so diverse. Any new source of supply, or any form of conservation, is part of the solution.
Cars can not only be lighter, they can be hybrids or plug-ins. They can run of bio-diesel, or ethanol. Animal dung need no longer be released into the air as methane, if can be turned into energy.
The Indians will be driving Tatas by the hundreds of thousands - but what if they are plug-ins, and India builds nukes? And India moves to a 20 percent biomix diesel (as they plan to)? Then what happens to fossil crude demand?
Yeah then what happens? Can you makesome calculations, like what would the surface needed be to grow that? What's the energy input needed to get energy out of pig dung (inlcuding the produciton of the hardware installation)? Like what amounts of liquid fuels that will be produced?
Like how many, and how fast there will be cars (say hybrids) that influence the MPG at what time? How fast in your model does the MPG increase over time? How does recession/increased growth play out the next 10-20 years?
You are full of optimism, thats good, but will your solutions come fast enough, in large enough style?
Get us some proposals with figures and timelines and realism before you post next time, dude.
Go for it!! Cheers.
There are massive shortages of electricity in India. Outside of Bombay - now known as Mumbai - there is not a single city in India that gets electricity for 24 hours a day. In most cities (including the capital New Delhi), there is "load-shedding" of 2 to 6 hours a day. In villages that are connected to the grid, power may be available for only 6 to 8 hours a day. So there is no way the Indian grid can handle a significant number of electric vehicles.
Secondly, the Tatas make cheap cars. Plug-ins will be too expensive for most Indian car-owning households.
If India were to build all the nuclear power plants that they are planning to build, the percentage of electricity generated from nuclear energy will increase from 3% to 5%.
As far as Jatropha based bio-diesel is concerned, it remains a promise, not an accomplished fact.
Economists (much reviled on these pages) would tell you the mechanism that allows the market to sort everything out is the price signal. High prices will supposedly spur new investment and all will be well.
Of course many here would deride that opinion because you can't pump what isn't there, no matter how much you invest.
But that doesn't mean that high prices won't stimulate any positive developments. For one thing, high prices will stimulate the introduction of more fuel efficient cars. And if they are high enough for long enough the result will be a more fuel efficent fleet.
Of course some on these pages (if they notice my post at all) will complain that this can't possibly happen fast enough to make a difference, so it is irrelevent, and we should just start breeding horses now.
But come on. Maybe $60 oil won't result in the rapid introduction of lightweight plug-in serial hybrids. But how about $100 oil. Or $200 oil. Or $300? If you believe that we are post-peak and about to experience a rapid decline, then you must by definition believe that we will soon see shockingly high prices. In which case it logically follows that will be a shockingly fast move to improve fuel economy.
Alternatively, if you think prices will not go up dramatically any time soon, doesn't that imply that we do still have time to make significant improvements in efficiency?
The implication, to my way of thinking, is that the sooner prices go up, the better - it will spur the efficiency gains we so badly need to work on. And the less the national oil companies invest in infrastructure, the sooner high prices arrive.
So the biggest favour Russia and Venezuela can do for the world is to put all capacity and maintenance programs on the back burner and "go slow" with their production, in order to spur changes amongst their consumers. A little pain now is better than trauma later down the road.
If we are to believe in things we cannot see or touch, how do we tell the true belief from the false belief?
The bigger the threat, the bigger the response.
It's as easy to extrapolate an exponential decline far enough into the future to see 'The end of civilisation' as it is to extrapolate an exponential increase and get to 'Death Star sized space structures'. Doesn't mean either will happen.
Digression: Most people think the 2nd world war started in 1939 but the really big fighting didn't get going till mid 1941. Stalin packed up and moved a good chunk of Russias Manufacturing capacity in Response to Barborossa. Germany didn't even declare Total War till Feb. 1943. Just look back at what was achieved in terms of output during wartime and you realize that humans can move mountains if needed. This is something that the 'Nintendo Generation' mostly don't have a clue about but I can't see them sitting back and crying into their last can of diet coke as the lights gradually go out on planet earth...
Nick.
Regarding WWII - actually probably started earlier than that. Same as Vietnam. Most think it started in '63 or thereabouts. I was there in '59. Getting shot at, and shooting back. And not as a "civilian".
Determining the start and finish of any war is very difficult. Imo, they just move to different arena's with short little breaks in between that we call "peace".
Ah, the smell of fear, or at least the beginnings of it. Reality is appearing on the FT's horizon.
I've put it this way: You can have either the 100 largest financial institutions or the 100 largest oil fields, but not both.
What would the value of the 100 largest financial institutions be without the 100 largest oil fields? (Note that at least until recently, the two largest producing fields, now in decline, accounted for 10% of world crude oil production.)
What would the value of the 100 largest oil fields be without the 100 largest financial institutions?
Banking was here centuries before petroleum was a product and will be here centuries after we stop using it.
Certainly. But back then what percentage of the banking portfolio was devoted to automobiles getting less than 15MPG? Or detached single family dwellings in suburban tracts? Or the production of either of these two items? The slow motion banking collapse in front of us is going to be interesting to see.
Hi td
So you think banking is here to stay?
I have my doubts. Banking is ultimately dependant on reaping interest in real terms. By definition, real growth in the real economy must occur so that more money can be loaned to pay the interest on prior loans. ("Tomorrow's growth is collateral for today's debt" as Colin Campbell succinctly puts it).
Historical experience to date has been that economic growth has paralleled growth in energy production. Aggregate increasing economic activity requires inceasing energy input (not necessarily oil). This does not seem controversial or difficult to understand IMO.
In the 70's-80's, we did experence a brief run of growth with decreasing energy consumption. Efficiency obviously improved over this time. But can efficiency gains grow exponetially? Thermodynamically we know full well it can't.
I'd expect that once
*we begin riding down the back-side of Hubbert's peak in ernest,
*all the impoverished players are long out of the game,
*all the low-hanging efficiency fruit has been reaped
*the inertia of the current order is overcome
Then irreversible economic decline will get underway, and we should see the end of growth, interest and functioning capitalism, for starters.
Like all other business ventures banking has experienced boom and bust cycles. American banks haven't experienced a serious bust since 1930. The level of economic activity in the 1940s was unimaginable ten years earlier. The Hirsch Gap will be a time of prolonged bust but as the many forms of solar energy are implemented economic growth will resume. The amount of economic activity that solar energy could provide is 100s of times more than existing levels. Given enough energy and human ingenuity all other resource restraints can be overcome.
http://www.time.com/time/world/article/0,8599,1619213,00.html
Iraqi Lawmakers Draft Timetable Bill
Thursday, May. 10, 2007 By AP/QASSIM ABDUL-ZAHRA
Excerpt:
Super. I hope we do get all our guys out. Then we can nuke the joint and be done with it.
Been there. Done that. Here's what's really gonna happen.
I have proposed the formation of a "Neocon Brigade" consisting of pundits and armchair warriors who are still in favor of sending someone else's kids to Iraq.
The Neocon Brigade would be used to cover the withdrawal of US troops.
I like that. They should be armed accordingly: with armchairs, microphones, and laptops. I'd be interested in how many seconds their expected survival time on the battlefield would be.
Good idea! But I seriously belive that a lot of theose people are already fully engaged in orchestrating the PsyOps (regarding oil/Iraq) mediated by MSM.
Do they really need nuclear reactors?
So let's get this straight. You invade a weak and inoffensive nation already prostrate from prior military defeat, which you already controlled economically through sanctions, and whose citizens you had starved in their hundreds of thousands ... and you invade on an excuse even weaker than that used by the Germans to invade Poland (the Germans at least faked an actual attack on themselves - who is going to buy 'They might have attacked us one day!'?), and then you get completely thrashed by predictable resistance, and it's therefore time not just to go home, but to go home and 'nuke the joint'. You lose a war that you started without any reason at all, and it's time to nuke a bunch of people who were just minding their own business before you all succumbed to ridiculous fantasies about your own nation?
Face it. The US has the military glory and effectiveness of Mussolini's Italy. You bit off more than you could chew, i.e. an impoverished third world nation. It's entirely your own damn fault and no nuking of anyone is called for ... except, maybe, of the US of A.
"Saudi Arabia is also limiting capacity expansion because of a self imposed cap" FT quote.
What? Where did the FT get this idea? KSA has increased their rig count dramatically, started building more oil refineries and processing facilities, and are planning to exploit their huge natural gas reserves by building gas liquification plants so it can be exported.
Do these actions by KSA sound like a self imposed cap?
The only limiting the major oil exporters will be doing in the future is amount of dollars they will accept in trade. Many will require payment for oil in stable and higher valued currency like the euro and the ruble.
How many journalists do you think know that official OPEC reserve numbers are bullcrap, have been bullcrap ever since production quotas got tied to reserve numbers, and that the problem gets worse every year.
A public company cannot claim to have oil they don't have. To do so is securities fraud, and the consequences can be nasty. Government owned companies on the other hand can claim whatever they want to.
Its amazing. By this logic, if a woman refuses to sell us her body we are entitled to rape and kill her.
Many of my ancestors were Mennonites, Anabaptists from Switzerland who went to Lancaster County, Pennsylvania in the 1750's fleeing the draft for religeous wars. They believed that living a simple life would help them get closer to their God, and that worship of the state is a form of idolitry. There life and world view is looking better all the time.