By George H. Wittman on 11.15.07 @ 12:07AM
As OPEC gets set to meet again, an update on all the barrels it has in its court.
Two years ago a single British pound was equal to $1.75 US.
Today the rate is about $2.05 US to the pound sterling. The
difference is about 16%. This depreciation has been charged with
being a major culprit in the rise in the price of oil. Basic
arithmetic quickly shows that there is little relativity between
the 16% fall of the dollar and the nearly 100% rise in the cost of
a barrel of oil, which has risen in the same time period from
around $50 a barrel to close to $100 before falling back to $90.
There are many more factors involved in the price rise; the story
gets quite complicated.
The OPEC nations other than Saudi Arabia are hesitant or
straight out unwilling to increase oil production. The non-OPEC
countries have limited ability to do so due to dwindling reserves,
restricted exploitation and /or high investment requirements.
Russia is one of the countries that fall into that group. This is
the thumbnail sketch of the estimates of the International Energy
Association, the Western monitoring agency that tracks these
matters.
The IEA has been quoted as calculating that $22,000 billion ($22
trillion) will have to be invested in all aspects of the global
energy infrastructure in the next 23 years simply " to replace
capacity going out of service and meeting growing demand." That
figure goes up another 10% when alternative actions to curb
greenhouse gas emissions are included. These numbers create a
perspective on the expected massive investment required in the next
couple of decades in the overall energy sector.
These daunting figures and calculations, however, are only part
of the complications of the energy supply story, where Chinese and
Indian oil consumption stands out as the prime source of pressure
on the market. These two countries alone make up about 70% of the
current increased demand, a fact that the Saudi oil minister, Ali
Naimi, has downplayed as a problem. He has indicated Saudi Arabia
will have a 500,000 barrel per day increased productive capacity
coming on line by the end of this year or the beginning of the next
at the latest. Minister Naimi appears to imply this countervailing
downward pressure on the crude oil market will be all that's
needed. The market will be the judge.
Ali Naimi indicated that any increased shortfall could be made
up by the fact that the Kingdom's current potential production
capacity is 11.3 million barrels a day while it is now actually
producing only 9 million barrels a day. Furthermore, the Saudi oil
czar added that the excessive oil prices are basically the result
of speculators and hedge funds driving prices far above what the
true market should be.
Meanwhile the Saudis, OPEC, and all the other oil producers are
experiencing massive profits cut into only by that 16% drop in
dollar value on which petroleum pricing is calculated.
And now for some more interesting figures: Non-OPEC producers
are expected to peak and plateau in oil production by around 2015
at about 52 million barrels a day. This places OPEC in the driver's
seat for what has been modestly estimated as 100 million barrels a
day global demand in the next 25 years, and more rigorously figured
at 116 million and 118 million barrels a day by the IEA and the
U.S. Government projections, respectively.
As OPEC now supplies only 43% of worldwide oil production, a
simple calculation shows that cartel in a couple of decades will be
supplying close to 56% of the world's requirements. No wonder Mr.
Ahmadinejad and Mr. Chavez have such optimistic views of their
nations' future leverage.
The OPEC countries have created sovereign wealth funds. These
now exercise their proprietary muscle throughout the Western
financial world as well as use their increased purchasing power to
manipulate their own and developing nations' internal economies and
security.
The financial facts leap out: Whatever the underlying factors,
the U.S. Energy Information Administration projects OPEC revenues
created by output increases and strong prices will reach $762
billion per annum by 2008. The agency has figured that already this
year there has been a revenue increase five times what it was ten
years ago, and the out-years portend continued growth. The leaders
of Iran and Venezuela are well aware of these projections, as are
their radical Islamic counterparts seeking to overthrow the oil
producing monarchies of the Gulf. The dangers are obvious.
topics:
Islam, Iran, Russia, Energy, Oil
