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Oil in a day`s work

  • 29/06/1997

IN THE wake of the devastating energy crisis, energy- related issues were catapul- ted onto the geopolitical agenda as one of the main issues affecting the global economy. But as the spot price of oil stabilised in the volatile Rotterdam market, energy policy was again rele- gated to the background, and foreign policy and security- related issues came to occupy centrestage on the geopoliti- cal agenda. In this changed context, environmental objec- tives greatly influence energy demand policies, and governments have started succumbing to pressures in the market for the allocation of investment and trade.

There has been a phenomenal increase in the production of oil outside West Asia and the close-knit Organization of Petroleum Exporting Countries ( OPEC ),. The book projects that this trend is likely to continue till AD 2010, when the share of oil produced in West Asia and by OPEC, in the world oil market, will become stag- nant. Investment cycles and short-term market disrup- tions will have a correlation with oil price, but the authors say that this is unlikely to show a long-term trend before AD 20 10. In . West Asia, rivalry between ) principal petroleum exporters might reinforce commercial competition to increase production capaci- ties and export revenues. In some countries, revenue expansion is under leash in the long and medium term. If the revenue does not keep pace with rising demands, it will put a strain on the polit- ical stability of the region.

According to the authors, it would be unjudicious to depend on Iran and Iraq for a steady supply of oil, as they do not enjoy a harmonious relationship with the rest of the world. In contrast, Russia is more dependable, with Gazprom, a Russian hydro- carbon producing company, becoming the largest hydro-carbon producer in the world. In the European gas market, Russian gas is poised to grow in importance. The political relations between Russia and its southern neighbours would be critical for the development of hydrocarbon resources of the Caspian Sea for export. Rapid economic changes in east Asia and the corre- sponding increase in energy demand in the region is bringing about a change in the balance of world energy markets. The region con- sumes more energy than Europe- as much as USA.

According to John V Mitchell, the principal writer of this monograph, the major options for expanding and diversifying energy supplies hinge on international cooperation. It is necessary to resolve boundary disputes affecting unexplored oil provinces and provide a framework for investment in cross-border projects for fresh supplies of gas either from new liquefied natural gas (LNG) sources or from eastern Russia, and to enhance capacity building for nuclear power in some countries. Nuclear power elsewhere has generated environmental fears rather than hope for a new source for energy. The authors point out that managing these fears call for deft handling of trade in plutonium, spent fuel and technology.

The book surmises that the distribution of future energy demand would be linked to the politics of climate change mitigation. The neo-politics of energy, in which the us will continue to play an important role, is creative rather than defen- sive, as it is aligned to mar- ket-oriented development rather than state .management. Successful international cooperation can promote cross-border investment and technology, alleviate tempo- rary disruptions in energy supply, establish stable con- ditions for Russian gas and oil exports to Europe and for the development and export of Caspian oil and gas, and develop widely-accepted options for nuclear power.

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