Excess Supply
The Organization of Petroleum Exporting Countries is the main grouping of 12 countries who have excess supplies and primarily export their oil to other countries. It is tasked with the coordination of oil policies of its member-countries and help to ensure some sort of stability in world markets. Its pricing policies are designed to ensure steady income to the producer-countries, provide a fair return to investors and assure regular and efficient supply to end consumers. OPEC has come under fire lately due to its refusal to ramp up oil production despite a surge in global oil demand from such countries as China and India. This shortfall in production has caused sharp spikes in the price of oil and is disruptive to global economic growth and world political stability.
Oil production
Its influence has waned because other countries with significant oil production have not joined as members. Consequently, its role as the world’s main determinant of oil price has been in decline. However, according to the latest estimates, a little over three-quarters of the total proven reserves of the world are in OPEC member countries. The 5 countries with the highest reserves are Saudi Arabia, Iraq, Iran, Kuwait, and the United Arab Emirates. To somehow deflect criticisms that it is causing hardship on other countries by increasing the price of oil, it has propounded the idea that gasoline is expensive to end users because of high levels of taxation in some countries. In the U.K., France and Italy, the government tax is more than half the price of gasoline being sold. The site below is OPEC’s official website where anyone can get updates on its plans:
The latest news is that Indonesia will withdraw from OPEC membership because it had become a net oil importer. Its huge energy needs and steadily declining yields from existing oil fields made it import oil rather than export it. It intends to rejoin OPEC once it becomes a net oil exporter again after new fields come on line and begin production. Indonesia feels it is not appropriate for it to remain in OPEC when it is not exporting any oil at all. Canada is a significant oil producer but has refused to join OPEC despite being invited. The reason given was that it prefers to operate in free markets rather than become a member of an oil cartel that imposes production quotas on its members and determines its price “artificially”. At present, Canada is the biggest supplier of oil to the U.S. because of its proximity. Its oil comes from tar pits and oil sands found in the province of Alberta.
Oil experts predicts that proven oil reserves will last only for the next 40 to 50 years at the most at current consumption rates. They say that production of oil will start to decline in the next 15 years. Energy consumption is virtually at unsustainable levels especially from China where car sales double almost every two years and India where 10% of car sales are gas-guzzling luxury vehicles. The sky-high prices of oil has one good effect though: it has made alternative energy sources like the sun and wind more realistically attractive and imperative. Reliance on the fossil trio of oil, gas and coal is no longer viable in the long term. Nuclear energy is plentiful but technology is expensive. The same is true of hydrogen, which is abundant and also burns cleanly. But getting hydrogen from water is expensive as it requires a lot of energy to separate hydrogen from oxygen.
The above site of the British Broadcasting Corporation gives an excellent discussion on the six issues facing mankind with regards to the environment: food, water, pollution, climate change, energy, and biodiversity. It presented a well-researched six-part series on the most pressing concerns with its “Planet under Pressure” documentary. As the author aptly says, there is no way to prioritize this short list; every issue raised in the documentary is a top priority and trying to decide which issue should be tackled first is meaningless. All of the six issues should be addressed simultaneously with a sense of extreme urgency.