OPEC Move Over : A Search for New Energy Sheiks

Written by M. Glantz. Posted in All Fragilecologies

Published on October 20, 2009 with No Comments

Fragilecologies Archives
11 July 2008

pen6OPEC is the Organization of Petroleum Exporting Countries; members include Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The OPEC cartel has considerable control over the price of oil. As a result, when consumers become dissatisfied with the price they have to pay for energy (oil or natural gas), they tend to reduce consumption. The OPEC cartel then lowers its prices to lure consumers back into their old energy use patterns. This also has the effect of reducing interest and investment in alternative energy sources such as wind and solar power. This is the way the cycle has gone… until recently.

oil_drums Dwindling supply of oil…

There is a lot of talk about “peak oil,” which suggests that oil production has reached its peak, in that few new resources of oil are expected to be found, and that known reserves are all we have lerft to consume. In the meantime, demand for oil continues to rise unabated. This results from economic development pressures and a sharp increase in affluence in populous countries like China and India. Energy users are caught between the blades of the proverbial pair of scissors: dwindling supply and sharp increases in cost.

OPEC is not the only oil-producing cartel. There is a shadow cartel of non-OPEC oil producers, some of which are net exporters and others that are net importers. These countries include Kazakhstan, Russia, Canada, the UK, Norway, Mexico, and China. Though individually they are not major producers of oil like the OPEC countries, collectively they are:

Non-OPEC countries produced 60 precent of the world’s oil (total liquids) in 2004, down from 62 percent in 2003. Since 1970, non-OPEC production as a share of the world’s total oil production reached a high of 71 percent in 1985 and a low of 48 percent in 1973, with a 60 percent average. (Source: EIA Country Fact Sheet)

Those countries are sharing in the windfall profits that arise from escalating oil prices, which are more or less controlled by the OPEC cartel.

With energy costs already high and no apparent price ceiling in sight, other entrepreneurs have gotten into the energy business in a big way. Given the concept of peak oil and given the sharp increase in the price of oil, other forms of oil are back in the spotlight. During the 1970s oil crisis, a lot of attention was focused on Alberta, Canada’s tar sands that are considered to contain humongous oil reserves. At the time, a book appeared about the potential oil entrepreneurs in which the author referred to them as the “blue-eyed sheiks” (P. Foster, 1979: The Blue Eyed Sheiks: The Canadian Oil Establishment). This was to distinguish them from the oil sheiks of the Middle East.

Once again, tremendous interest exists in the commercialization of oil extraction from these oil-laden sands. In the United States, the state of Colorado also has potential oil reserves tucked away in oil shale. These “new” sources of oil are extremely attractive, given what has happened to oil prices in the marketplace, and given that all countries need oil for transport, manufacturing, and for agriculture.

green_eyes_small_2 The green-eyed sheik

Today, in mid-2008, we are now witnessing the emergence of what, for lack of a better term, might be called the “green-eyed sheiks.” These are the entrepreneurs entering the oil business through the conversion of biological matter into biofuels. Interest and investment in biofuel production has spread around the globe like wildfire. Many governments, as well as companies, see the potential for relieving some domestic pressure on energy needs by growing their own biofuel. Other governments are getting into the biofuel business in order to make money to enhance their economic development prospects.

Lots of controversy now surrounds bioenergy. Is it causing farmers to shift from food to fuel production? Are entrepreneurs taking over previously unused, often protected, areas like rainforests to produce biofuels? To what extent has the rapid development and expansion of biofuel production abetted the sharp increase in food prices around the globe and the widespread appearance of food riots and less violent forms of protest?

You will notice that to this point no mention has been made about global warming and the emissions of greenhouse gases that result from industrial, agricultural, and land-use practices. Extraction of oil from the tar sands of Canada and the oil shale of Colorado will yield huge amounts of greenouse gas emissions to the atmosphere.

Biofuel production has called into question whether, from a climate impacts standpoint, there is value to reducing greenhouse gas emissions. Corn for ethanol production now seems to have moved from being a good crop to a bad crop, just on its global warming potential alone.

The image comes to mind, when it comes to energy issues, of people re-arranging the deck chairs on the Titanic: a ship that is destined to sink regardless of how well arranged the chairs become. It appears that there is great resistance to confronting the energy crisis head on, from a climate standpoint. Countries need energy to function. Alternative energies are still not taken seriously by most governments, even though an all-out war on dirty greenhouse-gas-producing energy sources in favor of truly cleaner solar and wind energy, for example (and even a serious all-out approach to conservation) is one war that could likely be won.

There seems to be an energy version of a good old-fashioned high-school-style food fight going on right now, and instead of the school cafeteria, the battleground is Planet Earth. Brown-eyed sheiks have to make room at the energy planning table for both blue-eyed and green-eyed sheiks.

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