Wars, oil and strategic balances

A map of the planet, starting from its energy sources, to understand the reasons for the conflicts in the world

By Alberto Ferrucci

Published in Città Nuova 24/01/2020

If energy is essential for economic development, energy from fossil fuels is proving downright deadly for the planet: this is demonstrated by the accelerated melting of the polar ice caps, the wildfires in California and Australia, so vast that they can no longer be contained with helicopters or Canadair aircrafts which make use of water bombing, and wind storms that destroy entire forests and raise waves that destroy the coasts.

However, it is not easy to do without fossil fuels: the large quantity of renewable energy being produced today does not replace that of mineral origin, because first it must compensate for the ever increasing energy demand, especially in Asian nations, growing both in terms of population and standard of living.

To this we must add the contradiction of China as well, where while a huge airport run entirely on green energy is being inaugurated and the country excels in transport with high-speed trains, as in the case with India, total coal consumption still continues to increase.

Oil is therefore still the main protagonist, and its production is actually slightly growing: 94.5 million barrels are extracted per day, with reserves for another 49 years. Crude oil continues to guide the logic of international politics, especially since fracking was discovered as a new method of extraction, which in the last twelve years has increased the production of the United States from 6.7 to 17.2 million barrels per day.

The introduction of fracking oil has lead to a production surplus, which in a free market should have induced a price reduction, like in the 1980s, when the price fell to 7 dollars a barrel: back then the collapse deprived many developing countries with the revenues they needed and hit the USSR, which based its economy on the huge currency revenues from its export of raw materials, especially hard; that collapse created the economic conditions for its fall.

When the price of oil fell from 60 to 25 dollars a barrel due to fracking a few years ago, fearing that history would repeat itself, President Putin proposed for the first time to a nation Russia hitherto wasn’t exactly friendly with, namely Saudi Arabia, the third largest producer in the world, to sign a production reduction agreement that would bring the price back to 65 dollars.

However, no reduction agreements of any kind are possible with US extraction companies, which in recent years have heavily indebted themselves in order to increase production in a downright paroxysmal way, 1.7 million barrels more per day only this past year; it was up to their friend and president, Trump, to find a market for their oil, preventing them from bursting into another huge financial bubble.

Trump tried, trying in vain to convince Merkel not to double the North Stream pipeline to Russia and instead buy fracking produced liquefied gas; he is still probably trying, making it difficult to eliminate sanctions on Iran, which would have reserves for 124 years and produces 22% less oil today than twelve years ago; he will probably not do much to make Libya resume crude oil production from its El Sharara field, which has been blocked by Haftar in recent days. Libya has reserves for 116 years, the disappearance of the 300 000 barrels per day normally produced by those wells helps to keep the international price high.

Countries that produce 87 % of the oil in the world (*) Production 2019            (MMbbl/g) Variation % compared to 2018 Reserves in years of production
USA 17.2 1.8 10
Saudi Arabia 12.0 -0.3 61
Russia 11.5 0.1 19
Canada 5.3 0.1 87
Iraq 4.8 0.2 84
United Arab Emirates 4.0 0.2 67
China 3.8 0.1 18
Iran 3.4 -1.0 124
Kuwait 3.0 0.1 94
Brazil 2.9 0.2 12
Nigeria 2.1 0.0 48
Kazakhstan 2.0 0.0 42
Qatar 1.8 0.1 38
Norway 1.7 -0.2 13
Algeria 1.6 0.0 21
Angola 1.5 -0.1 15
Libya 1.1 0.1 116
Venezuela 1.1 -0.5 775
Azerbaijan 0.8 0.0 25
Ecuador 0.5 0.0 43
Total 82.0 0.72 54
World Total 94.5 93.8 49

The table (Worldwide Report of Oil & Gas Journal, December 2019) shows other producing countries in difficulty: the abandonment of the technicians from the big oil companies thanks to Maduro has reduced the production of Venezuela by 67%, which would have reserves for 775 years. Nigeria, which is in dire need of revenue for its growing population, has lost 20% of its production over the past twelve years.

In conclusion, the powerful exploit geopolitics to impose their raw materials on the market, at the price level they decide, even when it could become positively scandalous: in the twelve years in which the world has increased its oil consumption by 13%, the United States has increased its production with a whopping 154%, without ever considering the problem that by doing so in ten years the entire reserves of the country will be burned and its territory severely polluted, causing earthquakes and large methane emissions, twenty times more harmful than carbon dioxide.

What is also outrageous is Trump's cancellation of Obama's laws to reduce methane emissions and even more his intent to cancel California's environmental laws on a federal level, which until now forced car manufacturers to make severe emission adjustments, subsequently applied across the entire nation.

In these days of great international events, what has been said above unfortunately does not give us much hope in terms of useful interventions being decided upon in order to solve the crises in Libya, Iran and Venezuela, by Russia, the United States, or Saudi Arabia for that matter: solving them would mean increasing the offer in the oil market, at the expense of their own production.



Language: ENGLISH

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