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Current oil (dis)order: players, scenarios, and mechanisms

Published online by Cambridge University Press:  02 March 2011

ENRIQUE PALAZUELOS
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Abstract

This article has been constructed under the premise that International Political Economy provides the appropriate analytical tools for understanding the characteristics and performance of oil in economic and political relations. The article argues the need to articulate three levels of analysis (major players, scenarios, and exchange mechanisms) in order to understand the economic and political relations that underpin oil exchange during last decades. The central conclusion is that the current oil system is characterised by a set of asymmetric, unstable, and ungovernable relations, whose consequences are unpredictable but not necessarily traumatic.

Type
Research Article
Information
Review of International Studies , Volume 38 , Issue 2 , April 2012 , pp. 301 - 319
Copyright
Copyright © British International Studies Association 2011

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References

1 Fuel trade reached $1.8 trillion in 2007, almost 14 per cent of world trade in goods (Source: World Trade Organization). Most fuel trade was for crude oil and refined products, the exclusive topic of this article. Gas trade shows some characteristics similar to oil, but others are very different, putting it outside the scope of this work.

2 It is sufficient to recall colonial conditions under which the Anglo-Persian Company (now BP) was founded, or the political weapons used by the British government (and later by the Roosevelt administration) to obtain for their companies the right to drill oil in the Persian Gulf, or the complacency of those governments in regard to the tight oligopoly created after the Achnacarry agreement in 1928.

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5 In fact, this issue used to be among the most frequently analysed through this approach, when oil shocks in the 1970s were seen as a major factor of change in economic and political relations. On the diversity of approaches and typologies, see Cohen, International Political Economy. Also Palan, Ronen (ed.), Global Political Economy. Contemporary Theories (London: Routledge, 2000)Google Scholar ; Paquin, Stéphane, ‘La Nouvelle conomie Politique Internationale. Théories et enjeux’ (Paris: Armand Colin, 2008)Google Scholar ; Phillips, Nicola (ed.), Globalizing International Political Economy (Hampshire: Palgrave Macmillan, 2005)CrossRefGoogle Scholar .

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22 Kalicki and Goldwyn, Energy & Security.

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25 Amy Myers Jaffe and Ronald Solingo, ‘The International Oil Companies’, The James Baker Institute for Public Policy, Rice University, available at: {http://bakerinstitute.org, November, 2007}; Falola and Genova, The Politics of the Global Oil Industry.

26 ExxonMobil comes from the merger between New Jersey Standard Oil and Mobil. Chevron is the result of merging Standard Oil of California, Gulf, Texaco and Unocal. ConocoPhillips joined Conoco and Phillips, and then purchased Burlington Resources.

27 Among the twenty biggest oil drilling companies only four are private, and the best placed, ExxonMobil, is ranked number seven, while Chevron stands at 11th place, ConocoPhillips at 16th, and British Petroleum at 19th. Their positions are even weaker on stocks, because the vast majority of oil reserves are in the hands of large NOCs. The best-positioned in stocks is again ExxonMobil, though it places at a distant 20th.

28 Although Conoco-Phillips already owns 20 per cent of Lukoil, the other private company (TNK-BP) has a more independent (and conflicting) relationship with the Russian government. Fernández, ‘Some scenarios of Russian oil’.

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30 OPEC could be considered a ‘booster’ to the governments’ negotiating power with all member countries. It can be said that OPEC worked as a supply cartel between 1974 and 1982. However, after the decline of its policy of production quotas and the lack of internal discipline among its members, OPEC does not currently play an important role in international oil relations.

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32 Oil accounts for almost half of energy consumption in Japan and Korea, and over 40 per cent in the US, and ranges from 33 per cent in France to 46 per cent in Italy among the six major European consumers. It accounts only for 20 per cent in India and China but is growing rapidly. Source: International Energy Agency, IEA, Oil Information (Paris: IEA, 2008)Google Scholar . International agency estimates (from IEA, EIA, OPEC, APERC) agree that oil will continue to provide about 35 per cent of world energy consumption over the next two decades.

33 Imports account for about 60 per cent of consumption in China, over 65 per cent in India and the US, and even higher percentages in European countries, while Japan and Korea depend entirely on imports. Estimates are for these shares to continue to grow in the coming decades.

34 Kalicki and Goldwyn, Energy & Security; Enrique Palazuelos, El petróleo, cap. I and XVI.

35 All together, the nine countries mentioned have increased their consumption from 1.7 million b/d in 1970 to 13.3 million in 2000, and to 18 million in 2008. Sources: International Energy Agency, IEA, Oil Information; British Petroleum, Statistical Review of World Energy (2008), available at: {www.bp.com} accessed on 23 April 2009.

36 We consider a four-year (2005–2008) average to be more representative than 2008 data, since the year was very peculiar (with rising prices in the first half and sharp decline in the second).

37 These three European countries quickly began production, reaching 2 million b/d in 1980 and growing through the end of the century (to 6.2 million in 2000), when output began to decline. Mexico raised its production from 0.5 to 1.4 million b/d in 1980, staying around that figure until the present decade, when output began to decline. Sources: IEA, Oil Information; British Petroleum, Statistical Review of World Energy (2008).

38 The fall in Russian output was dramatic between 1990 and 1998, from 10.4 to 6.5 million b/d. The subsequent recovery has returned production to 10 million b/d, while in Kazakhstan and Azerbaijan, output has risen from 1 to 2.5 million b/d. Sources: IEA and British Petroleum, Statistical Review of World Energy, 2008.

39 US oil production decreased from 11.3 to 10.1 million b/d during the 1970s, then continued to fall, to below 7 million beginning in 2000. Palazuelos, Enrique, ‘The Role of transnational Companies as Oil Suppliers to the US’, Energy Policy, 38:8 (2010), pp. 4064–4075CrossRefGoogle Scholar .

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49 Such as the impact of natural gas (conventional and tight gas), the impact of political turmoil in the Middle East region, and the US sanctions on Iran (uncertainty for Irans oil development but also for Caspian oil/gas, and pipelines).

50 Michael Greenberger, ‘Energy Speculation: Is Greater Regulation Necessary to Stop Price Manipulation?’, Testimony before Subcommittee on Oversight and Investigations of the US House Committee on Energy and Commerce, available at: {http://digitalcommons.law.umaryland.edu/cgi/} accessed on 17 December 2007; Hagstromer and Wlazlowski, ‘Causality in crude oil prices’; Randall Wray, ‘The Commodities Market Bubble. Money Manager Capitalism and the Financialization of Commodities’, Public Policy Brief, 96 (Levy Economics Institute, 2008).

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52 Russia is a possible exception to these restrictions. Russian companies control a significant proportion of world reserves and are closely associated with the state apparatus, whose autonomy of decision is ample. However, weak technological capabilities and, especially, financial constraints force these companies to develop different forms of agreements with foreign companies to exploit domestic resources. Russia is also the exporting region with less diversified exports, as 90 per cent of sales go to Europe. Moreover, although it is not an oil rentier economy, oil (and gas) export revenues are increasingly important. Mommer, , ‘The Governance of International Oil: The Changing Rules of the Games, Oxford Institute for Energy Studies, WPM, 26 (2000)Google Scholar .

53 NOCs from producing countries have 78 per cent of reserves and Russian companies 6 per cent, so that multinational corporations directly control 6 per cent and have access together with NOCs to another 10 per cent. Jaffe and Solingo, ‘The International Oil Companies’.

54 Baghat ‘Energy Partnership’; Bronson, Thicker than oil; Waterbury and Richards, A Political Economy.

55 Palazuelos, ‘The Role of transnational Companies’.

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57 Strange, The retreat of the State.

58 Kérébel and Keppler, La Gouvernance Mondiale; Palazuelos, El petróleo, cap. IV and V.