Economics of Oil Today 90 Term Paper

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(Drawing the Line on Energy) the newly emerging economies are also trying to find more and more oil for their economies to advance rapidly.

There is a lot of difference among the countries in terms of the amount they produce and in terms of the quantities they export. In terms of production the order is Saudi Arabia, United States, Russia, Iran, Mexico, China, Norway, Canada, United Arab Emirates, Venezuela, United Kingdom, Kuwait and Nigeria. In terms of exports, the order is Saudi Arabia, Russia, Norway, Iran, United Arab Emirates, Venezuela, Kuwait, Nigeria, Mexico, Algeria and Libya. It is clear that USA does not export as it consumes all the quantities that it produces. The need is for USA is to ensure that it gets all the oil it needs and that was probably the reason to attack Iraq. One of the persons contributing to that view was the Vice President Richard Cheney. In August 2002, he had declared that "armed with an arsenal of these weapons of terror, and seated atop 10 per cent of the world's oil reserves, Saddam Hussein could then be expected to seek domination of the entire Middle East, take control of a great portion of the world's energy supplies, directly threaten America's friends through the region and subject the United States or any other nation to nuclear blackmail." (America's disastrous energy plan)

Of course U.S. oil production is long past its prime, having occurred in 1970s and today the country imports about 11 million barrels a day. This is expected to increase by 2025 to around 20 barrels a day. The rest of the world also requires more oil as China is becoming a major importer of oil. There are lots of areas where oil is being found, but it is expected that two thirds of the world's oil will come from the Middle East and the Caspian Sea area even in 2025. This has led U.S. To try and secure its supplies from the Middle East through military methods. This has a large cost, and there are no advantages in getting petroleum at that price. The cost in terms of policing Middle East is around $70 billion and that is about $10 per barrel. The other cost is in terms of the unpopularity it has created starting with the stationing of troops in Saudi Arabia. That has helped the start of al Qaeda. That is also probably the main reason why U.S. does not want the policing in Iraq to be done by United Nations and wants to do it itself. The net result is that every time USA plays up to any regime in that area, the regime becomes unpopular. (America's disastrous energy plan) Thus planning for oil is an area where U.S. has not had great success.

The effort for Iraqi is also for the Russians and one of the individuals interested was the Russian oil person, Vagit Y Alekperov. He had bought a Getty gas station in Manhattan after the oil company that he owns - Lukoil. He was on a trip to USA with president of Russia and got the gas station renamed by the president and wanted Americans to understand that Americans also needed Russian oil and from Lukoil. This is due to an increasing bonding between U.S. which a large consumer and Russia which is a large producer. At the same time, the Russian oil baron may be hoping that the U.S. could help Lukoil with the large West Qurna field in Iraq. Lukoil had negotiated with the Saddam Government for that field and wanted U.S. To ensure that the agreements are retained by the new authorities. (Russia Sends Message to U.S. about Iraqi Oil Contracts)

Another small oil producer, Petrel Resources had sent an executive to Iraq for getting a deal on oil. He claims he is an anti-war individual, but feels that he will be happy even with crumbs in Iraq. According to him crumbs in Iraq would be worth hundreds of millions of dollars. There is a high risk, but there are good chances of getting it. (the Battle for Iraqi Oil) Thus one does not know whether the supply of petroleum will end or not, but most powerful nations are interested in getting more of it. The theory about depletion of oil is called the Hubbert peak theory. This assumes that if the reserves are not increased by some means, then the production of petroleum will reach a peak and then decline. Then slowly the reserves will get exhausted. This is a theoretical prediction and one cannot be certain that any time can be predicted by this method. Earlier the peak years had been considered to be 1989, 1995 and 1995-2000. All these have been proven to be incorrect. The latest prediction talks about 2007 as being the peak year for oil. (Petroleum) This theory clearly does not have any basis on the physical estimation of oil.


Petroleum. Retrieved at on 6 May, 2005

Brooke, James. Drawing the Line on Energy. New York Times. 29 March 2005. Retrieved at Accessed on 6 May, 2005

Romero, Simon. Spanish Seek Oil Off Cuba, as Americans Watch Silently. New York Times. 6 July 2004. Retrieved at Accessed on 6 May, 2005

Sachs, Jeffrey. America's disastrous energy plan. Financial Times. 22 December 2003. Retrieved at Accessed on 6 May, 2005

Roston, Aram. The Battle for Iraqi Oil. The Nation. 2 January 2004. Retrieved at Accessed on 6 May, 2005

Banerjee, Neela. Russia Sends Message to U.S. About Iraqi Oil Contracts. New York Times. 27 September 2003. Retrieved at Accessed on 6 May, 2005[continue]

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