1GB3 Energy Flashcards
Saudi Arabia
Discovered in 1938, by Californian Arabian Standard oil company
2nd largest oil reserve -238 billion barrels
1/5 of the world’s total reserve
Highest actual production in 2015
Key factors affecting oil economics:
Demand
High demand causes prices to rise, and falling demand causes lower prices
Increase in demand due to world economic growth and globalisation - cars / consumerism / planes.
China’s rapid industrialisation in the early 21st century curt her increased the demand for energy which China’s own oilfields could not meet, so oil imports filled the gap.
During periods of recession , such as after 2008, economies slowed down and consumers brought fewer goods. There was less demand for oil and prices fell.
Long-term, rising demands for energy are likely to put pressure on oil supply and on prices.
Key factors affecting oil economics:
Diplomacy
Diplomatic relations and conflicts between countries can affect supply and demand.
For example, in 2013-14, rivalry between Iran and Saudi Arabia, two of the largest oil-producing companies, meant they failed to agree production targets. Saudi Arabia increased the supply of oil, leading to a fall in prices on world markets.
Conflict over supply chains in unstable area creates problems e.g. Middle East
Russia gas control over e.d. Ukraine and Eastern Europe.
Conflict between Russia and Ukraine erupted in 2008 when Ukraine refused to pay increases in Russian gas prices. Russia threatened to cut supplies that went through Ukraine to European customers.
Key factors affecting oil economics:
Social
Security problems and protestors in countries can slow down oil production e.g Nigeria in 2008 (20% drop in production)
In Mexico oil companies cut production as a protest against political interference.
Key factors affecting oil economics:
Supply
Supply affects the price - too much oil and the price falls, too little and it rises
Much controlled by OPEC, 1973 Price shock, 2008 Peak price, 2024 Price plunge
Short-spikes in the oil price can be caused by disruptions to supply, such as the 2010 oil spill caused by an explosion on a BP oil rig in the Gulf of Mexico. Political events in the Middle East can Oslo restrict oil supplies.
The discovery of new sources like shale gas in the USA increased supply, reducing oil and gas imports and leading to local and world prices.
Key factors affecting oil economics:
Technology
Shale gas and fracking in the USA:
Profitable return
Reducing oil and gas imports
Leading to lower prices
Key factors affecting oil economics:
Regulation
Renewable energy targets (e.g. Kyoto Protocol) means better technology, reducing consumption, NIMBYism means a broader energy mix.
OPEC
Organisation of Petroleum Exporting Countries
An inter-governmental organisation for oil producers and exporters.
When they work together, it’s members have immense power to influence the supply and pice of oil on global markets
12 members
OPEC control
American Dream demands a lot
Air conditioner/ individual transport
Urban sprawl/ poor public transport
Supply concerns
Saudi Arabia has reached ‘peak oil’
Future growth of demand
We assume America life is normal India and China continue to grow and demand resources for lifestyle change Jobs and income breeds consumerism Businesses are continuing to expand Transport is main use of oil exports
Supply changes
American technology leads to shale-gas revolution
US largest producer again by 2015/16
Saudi Arabia will catch up with technology
Brazil and China starting to exploit
Madagascar has multiple energy sources
Issues with oil consumption due to Global economic growth
Global economic growth will lead to rising demand for energy resources.
This could increase prices, e.g. The price of oil
Pressure to develop new sources of energy
Issues
Changing international relation
Countries may decide to retain their fossil fuels rather than export them
Conflict could result over supply chain is unstable areas, e.g. Middle East
Suppliers could use energy as s political lever
Global patterns of energy use
Over the last century, population growth and rising income per person have driven the increased demand for energy. By 2035, an additional 1.6 billion people will require energy, and demand will also grow as people and countries become better off. Per capita energy use varies considerably.
