11. POLITICS AND HIGH CRUDE PRICES
The recent run-up in crude prices really can't be blamed on resource depletion. Virtually all the reasons are political.
Consider Iraq. The country is capable of pumping 3 or 4mbd more than it is now, but it's not because of politics. Everybody keeps saying: OPEC is pumping flat out, they can't increase anymore, but in fact they can. They can increase, at the very least, by the 3 or 4mbd that Iraq is not pumping.
The Caspian? Potential oil production there is apparently 5 or 6mbd, so what's standing in the way? Pipeline politics, and nationalized oil interfering with investment.
Further development in Saudi Arabia? Poor investment returns due to nationalized oil.
Mexico? Still some good potential in the deepwater Gulf, but the Mexican policies on oil nationalisation make it a bad investment for the companies which have the technology to do it.
Politics is in play everywhere. After Yukos, Russia looks like a dicey spot to invest a lot of money. Iran? Can't invest there; it's illegal. Nigeria? Political unrest. Venezuela? Messy politics. Polar? Messy jurisdictional/political issues. ANWR or the protected US coast? Messy politics.
It's a wonder the oil companies can produce any oil at all.
One thing's for sure: Right now, we could be pumping a lot more oil than we actually are. So the recent high prices (driven as they are by political impediments) are actually a sign of the peak being delayed, not coming on early. The politics is keeping the oil in the ground, and ensuring we have a long plateau.
posted by JD @ 3:52 AM
2 comments
2 Comments:
It's funny you don't get berrated by people in posts like this...
JD's absolutely right, there are other very important bottlenecks than geology in the oil supply system. Personnel, drilling rigs, transportation to name a few. But politics is probably the most important.
Much of the peak oil theory (at least Dr. Hubbert's) assumes that the whole world produces oil like the US, with the sole purpose of maximising profit. However, according to Douglas Reynolds, professor at the university of Alaska Fairbanks it can be shown that if some countries produce oil slower than the market dictates, peak production will be less in terms of barrels per day (well, DUH). Thus, peak will come before half of the oil is produced. The result will also be a softer peak that otherwise, much to our benefit, more resembling the plateau JD talked about.
At a recent conference in Washington, a representative from OPEC said that Saudi Arabia plans to have oil in the ground for their grand children to sell 50 years from now. They have only two reasons to increase production, now that they have seen the world is willing to pay 60 $/barrel: 1) Avoid serious development of alternatives to oil, and 2) avoid invasion from some country that desperately wants to secure access to oil...
/Thomas
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