Oil supply and oil politics: Déjà Vu all over again (original) (raw)

The outlook for US oil dependence

Energy Policy, 1998

Oil dependence is defined as a dynamic problem of short-and long-run market power. The potential monopoly power of an oil cartel depends on its market share and the elasticities of oil supply and demand, while the economic vulnerability of oil-consuming states depends most directly on the quantity of oil imported and the oil cost share of gross domestic product (GDP). Of these factors, only the market share of the Organization of Petroleum Exporting Countries (OPEC) cartel and the rate of growth of world oil demand are clearly different than they were 25 years ago. OPEC still holds the majority of world oil and, in the future, will regain market share. A hypothetical 2-year supply reduction in 2005-2006, similar in size to those of 1973-1974 or 1979-1980, illustrates the potential benefits to OPEC and harm to the US economy of a future oil price shock. OPEC's revenues are estimated to increase by roughly 0.7trillion,whiletheUSeconomylosesabout0.7 trillion, while the US economy loses about 0.7trillion,whiletheUSeconomylosesabout0.5 trillion. Strategic petroleum reserves seem ineffective against a determined, multi-year supply curtailment. Increasing the market's price responsiveness by improving the technologies of oil supply and oil demand can greatly reduce the costs of oil dependence. Each element of this interpretation of the oil dependence problem is well supported by previous studies. This paper's contribution is to unite these elements into a coherent explanation and to point out the enormously important implications for energy policy.

U.S. oil dependence 2014: Is energy independence in sight?

Energy Policy

The importance of reducing U.S. oil dependence may have changed in light of developments in the world oil market over the past two decades. Since 2005, increased domestic production and decreased oil use have cut U.S. import dependence in half. The direct costs of oil dependence to the U.S. economy are estimated under four U.S. Energy Information Administration Scenarios to 2040. The key premises of the analysis are that the primary oil market failure is the use of market power by OPEC and that U.S. economic vulnerability is a result of the quantity of oil consumed, the lack of readily available, economical substitutes and the quantity of oil imported. Monte Carlo simulations of future oil market conditions indicate that the costs of U.S. oil dependence are likely to increase in constant dollars but decrease relative to U.S. gross domestic product unless oil resources are larger than estimated by the U.S. Energy Information Administration. Reducing oil dependence therefore remains a...

Government Price Policies and the Availability of Crude Oil

1978

This study examines the effects of price incentives on the availability of petroleum. Expected sustained higher crude oil prices to domestic producers constitute an incentive to increase both exploratory drilling and secondary and tertiary recovery of oil as well as production out of reserves. Reserve-production ratios tend to fall under high prices. Equalization of the domestic price to the real world price would make the U.S. self sufficient within a six year period. Constant prices result in no new additions to reserves after a five year period and very low production levels. Imports reach sixty-five percent of domestic consumption.

CRUDE ECONOMICS: THE POWER OF THE OIL ECONOMY

A new era began when Edwin Drake successfully produced commercially usable quantities of crude oil from a 69-foot well in Pennsylvania, USA in 1859(Hamilton).Ever since, oil has lubricated our industries and provided the fire that drives economic growth worldwide. Economic growth equals power. Therefore, transitivity dictates that oil equals power. This research paper seeks to establish the relationship between power and the oil economy in the global geo-political scenario.

Future Petroleum Geopolitics: Consequences of Climate Policy and Unconventional Oil and Gas

Advances in unconventional oil and gas production and the adoption of a more effective international climate policy impact on supply–demand balances in the petroleum sector, causing shifts in financial flows and capital accumulation. Such changes may in turn lead to shifts in the power balance between oil and gas exporting and importing countries. Because the relationship between exporting and importing countries in the petroleum sector is asymmetric, with a few exporting countries benefiting from the combined flows of revenue from many importing countries, exporting countries stand to lose more from a change in the status quo. The following interstate relationships may be particularly sensitive: the United States and the Gulf countries, Russia and the EU member states. Unconventional oil and gas may also play a role in the emerging superpower competition between China and the United States. The geopolitical changes one expects from unconventional oil and gas and climate policy depends on how one understands the current geopolitical situation in various parts of the world, and how strong the current geopolitical competition is seen to be.

Is the Strategic Petroleum Reserve our Ace in the Hole?

The Energy Journal, 2006

The Strategic Petroleum Reserve (SPR) is often touted as a vital asset in mitigating the adverse effects of oil supply disruptions on the economy. The importance of SPR, however, largely depends upon the effect of stock sales on market prices. To address this question, this study develops a monthly econometric model of the world crude oil market. Inventories, consumption, production, and prices for crude oil are determined within a dominant producer pricing framework in which Saudi Arabia adjusts output based upon market demand and competitive fringe supply. The estimation results provide additional support for the dominant producer pricing model for world oil markets and reasonable estimates of short-run supply and demand elasticities. Several model simulations are conducted to assess the impacts of SPR policies. For example, the gradual build-up of the SPR by the Bush Administration resulted in a very small, almost imperceptible increase in world prices. Similarly, the Clinton sale from SPR had minor impacts on market prices. Another simulation indicates that while SPR sales can lower world prices during a supply shock, the required drawdown would be so substantial the reserve would be significantly depleted after just a few months. These findings suggest that once played, the SPR card has modest impacts on world prices and could be easily trumped by actions of other players, including output adjustments by world oil producers.