Where the future’s bright and full of oil

The past month has seen plenty of headlines of tussles between Greenpeace, Greenland and Scottish oil company Cairn Energy over the company drilling test deepwater wells off Greenland. The Arctic “could yet turn into a fully fledged oil rush”, with both the Greenland(ish/ian?) government keen and oil companies undeterred by BP’s Deepwater Horizon debacle.

But cast your net a bit wider and contemporary oil rushes are already well underway. A recent Foreign Policy piece has totted up a few of these instances where oil is being prospected and drilled for in new places all around the world, lengthening the list of oil-exporting countries.

“…much is going on in heretofore unmentioned places on the energy map. As a whole, the significance is that the presumed transition to a non-fossil fuel future is a long, long runway…what we have is a big new hydrocarbon business in which, by necessity, the extreme fringe is fast morphing into the center”

Just this week, Brazil’s aggressive offshore drilling efforts (since discoveries in 2007) recieved a boost from the world’s biggest new oil field discovery in two decades (potentially); in coming years, Uganda, Cameroon and Ghana are all due to become net oil exporters, joining ten other African countries, following major finds in recent years; Iraqi oil looks to come back online in a significant way over the next decade as infrastructure gets fixed; the FP piece reports that US officials are quietly offering assistance to countries like Suriname and East Timor with the potential to offer further diversity of supply, getting in before the Chinese do.

And the fight to get in could get pretty heated. This graph from the Council on Foreign Relations offers a suggestive look at the trajectory of increases in oil consumption as income increases – and China getting anywhere near Taiwan/South Korea levels of consumption, let alone US ones, is going to create an awful lot of demand, especially after the US$15,000 per capita level that seems to be the threshold for a jump in consumption.

That new oil fields are tapped as old ones are depleted comes as no surprise. And on these trends, increasing consumption is going to keep on driving demand. But does this expanding landscape of petropower offer a glimpse of what peak oil might come to look like? The expansion of the oil frontier to bring in new, hitherto-undrilled states, at a basic level, increases the number of players in the supply game (and opens the door to all the susceptibilities of the resource curse). But while the addition of new suppliers might normally mean that each has less leverage, a context of escalating demand changes that – for the high-consumption states, happiness might not be multiple pipelines, after all.

Instead, even more power and influence accrues to the producer states – with more of them than before. A draft German military study, obtained by Der Speigel, offers a pretty dark picture of this future: politics replaces the market in determining supply; the scope for assertive foreign policies by producers; a slowdown and strangulation of global trade sends shocks into economic patterns of production. Sounds awfully like the oil shocks of the 1970s – except that the world didn’t quite learn its lesson then.

The CFR optimistically concludes that “the world may be forced onto alternative energy sources much sooner than it realizes”. But along the bumpy road to get there will be immense temptation for any country sitting on oil reserves, especially those that might have made pledges to forgo them, to reap the economic and political bonanza when supply doesn’t quite meet demand.

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