Black Gold and Resource Wars: Global Oil Conflicts

GLOBAL OIL – THE GREAT GAME CONTINUES

HOW can you declare a climate change emergency and go on pumping North Sea and Atlantic oil? While Nicola Sturgeon is pondering this conundrum, we should note the current state of the global hydrocarbons market. Funny things are happening.

The background, of course, is the slowing of the world economy thanks to the US-China tariff war. Chinese exports to America in August were down a hefty 16 per cent, while imports from the US dropped by 22 per cent. True, Beijing and Washington have agreed to restart trade negotiations in October. But we’ve been here before only to see talks break down. Meanwhile the World Bank has revised down its forecast for global GDP growth to 2.6 per cent this year, which doesn’t keep up with population growth.

All this is impacting negatively on the oil market. For instance, Chinese car sales fell by circa 13 per cent in the first half of this year, which cuts petrol demand. This month, BP’s Brian Gilvary forecast that global oil demand would rise by less than 1 million b/d this year as consumption slows everywhere.

In response to weak oil demand, the OPEC producer’s cartel (led by Saudi Arabia) has been scaling back production. But non-OPEC production is going up and some cartel members (e.g. Iraq) are busy cheating and pumping more.

With output up and demand sliding, the price of oil globally has started dropping. North Sea Brent has just dipped below the $60 p/b mark. That’s well below the circa $80 needed to get oil companies to develop replacement supplies for the future.

This is not good news for Saudi Arabia, which is desperate to privatise Aramco, its state-owned oil company. Aramco is the most profitable company on the planet – its 2018 profits were $111bn, almost twice Apple’s $59.5bn. But Saudi strongman Mohammad bin Salman needs yet more cash to fight his proxy war against the Iranians in Yemen.

GOODBYE MR BOLTON, YOU WILL NOT BE MISSED

One reason that oil prices haven’t dipped even further is that President Trump – not satisfied with confronting China – has been ratchetting up oil sanctions on Iran, squeezing Tehran’s petroleum exports to the rest of the world. But this week, The Donald fired his National Security Advisor and chief White House hawk, the moustachioed John Bolton. This had the predictable effect of actually sending oil prices downwards. Why?

Because Bolton was the chief voice in Washington (apart from the Israeli government of Benjamin Netanyahu) advocating war against Iran. But Trump seems to have been deliberately using Bolton to scare Iran into negotiations. Trump’s style is to create leverage through ratchetting up tension. Bolton’s exit convinced the oil markets that Trump was serious about a deal with Tehran. That would mean a reduction of sanctions and more Iranian oil on world markets. More oil means a drop in petroleum prices.

Trump has already let it be known he is willing to meet Iran’s President Rouhani. Tehran has played coy on this, saying Rouhani will not meet with The Donald till sanctions are lifted. But with John Bolton axed as a sacrifice, things might change.

SYRIAN OIL: ENTER THE RUSSIANS

Control over oil and gas supplies remain at the heart of the entire Middle east conflict – another, supplementary reason why the world needs to de-carbonise urgently. Take Syria, for instance. Or did you think the Syrian war was about democracy or fighting terrorism?

Currently, the war-torn and bankrupt Assad regime has to import oil from Iran. In July, British Royal Marines stormed and seized the Grace 1, a tanker running Iranian oil to Syria. Actually, Syria gets most of its oil via Russia. Moscow is helping Iran skirt US sanctions by transporting Iranian crude through ports in Crimea. Boris is not going to send Royal Marine commandos to board a Russian tanker and Trump is a friend of Putin. Oil politics is always corrupt and disingenuous.

However, post-war Syrian will have its own oil and gas aplenty. In January, in payment for Moscow’s aid in saving his regime, Assad gave Russia the exclusive right to produce oil and gas in Syria – onshore and off. Currently, Syria’s onshore reserves are under the control of Kurdish nationalists. Putin will have to make a deal with these Syrian Kurds or join Turkey in crushing them. But there’s a bigger prize: offshore oil and gas. Syria shares the huge Levant hydrocarbon basin with Israel and tiny Lebanon.

Israel has already made two major discoveries in the area, the Tamar and Leviathan gas fields. This offers Israel energy security plus has dramatically upped Netanyahu’s leverage in the Middle East. Recently Israel signed a $20bn gas export deal with Egypt. It is also planning a pipeline via Cyprus to Greece and western Europe. This may not suit Moscow, which wants to maintain or expand its share of the EU gas market.

Israel will soon find itself contesting the Levant basin with the Russians. Also, Lebanon claims a share of the Levant gas field which brings the local, pro-Iranian Hezbollah group into the equation. We have not seen the last of Middle East oil wars. Green energy, anyone?

Comments (8)

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  1. Iain MacEchern says:

    The change from fossil fuels to green/renewable energy sources can not be done at the flick of a switch. It will be necessary to build up our renewables, whether it is Hydro, Wind, Tidal, Solar or whatever. As these energy sources are developed there will be a gradual reduction in the production and use of fossil fuels. This will allow the country and it’s citizens and businesses to adapt, in hopefully a smooth transition from one energy source to another.

    1. Sounds great Iain. What’s your understading of the time scale we are working with for this process?

  2. alasdairB says:

    The answer as far as we are concerned must be be an Independent Scotland & control over oil and gas production. A mixture of our green wind & tidal energy plus carbon resources would , most probably , make us self sufficient and able to kick start a manufacturing economy which was cruelly destroyed by Thatcher & her successors. That is , providing Independence is achieved sometime in the not too distant future.

  3. Indyman says:

    There is a website called energy and our future dot org (can’t seem to post the actual link) which I strongly recommend to anyone trying to think about our future relative to oil. In particular there is an Education section to the site which contains video lectures which are part of a course at Minnesota University. This is a take on the whole business which I have not come across before and which you will never see on the MSM, or indeed much of the alternative media.

  4. Julian Smith says:

    We need to re-frame “oil”. Instead of referring to it as a “fossil fuel”, we need to think of it as a raw material, essential for the future unless world population crashes. Look around. Whatever your eyes land on, there is a very good chance it will include something made from oil. Renewable energy has no future without materials made from oil. Electric cars won’t be made without materials made from oil. Oil (and coal too) are treasure houses of complex organic chemicals manufactured over millions of years by animals and plants using Solar energy. It is true that we need to stop burning it, but we have to recognise that we are absolutely dependent on it for all manner of things that we take for granted. It’s simplistic and unrealistic to say that we must leave it in the ground.

    1. Brian says:

      It’s only simplistic to say leave it in the ground if you accept as a given that our collective lifestyle will continue as it has currently.

      We have to accept that we cannot have both a continuing growing economy, based on oil (I agree with you there), and a planet that continues to be habitable.

      I 100% agree that our current society/economy/lifestyle is totally dependent oil. I don’t believe that renewables can in any way replace fossil fuels if we all wish to continue living as we currently do.

      However the idea that we cannot move away from oil is only true if we cannot imagine our lives in a different way than we do now.

      I think we will rapidly have to decide between those things we truly, really need and those things we have become accustomed to, in the affluent West, that makes our lives comfortable and convenient.

  5. david says:

    About five years ago, after more than forty in the Oil and Gas sector, I found myself on stage at the closing plenary session of a conference in Aberdeen. The storm clouds were gathering as the fall from $100 bbl was inevitable. I was asked a question about the future. I answered that with all of the human resources in Aberdeen, indeed a large proportion of the available resources in the world that understood offshore engineering we had everything we needed to transition quickly to offshore wind wave and tide.

    The sense at the end of my career is one of betrayal. Betrayal by a government of f****** arts graduates. Best part of fifty years in the energy business, and no government energy policy. It is not the oil industry we need to close, it is Eton and Oxford.

    1. james sinclair says:

      David agree with your observations. Living in Aberdeen and having spent over 45 years in the oil industry it is deeply depressing that this ongoing oil theft from Scottish waters continues unabated. Looking at Aberdeen now and what it was like over 40 years ago is the difference between black and white. The enrichment of certain individuals in this area has been spectacular but to look at the city once called the “Oil Capital of Europe” the majority of the population here and in the rest of Scotland see no outward signs of benefit from this precious asset. The oil companies go quietly about their business with much reduced manpower and increasingly higher levels of extraction technology aided and abetted by successive Labour and Tory administrations who through generous tax concessions have guaranteed rich pickings for oil company shareholders. Under London rule Scotland is being ripped off by these companies. If independence is achieved this asset should be the top priority for a Scottish government to control for the benefit of its people.

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