CRUDE POWER,
T
CRUDE POWER
CRUDE POWER Politics and the OilMarket
BYSTEIN NORENG
Reprinted in 2007 by I. B. Tauris & Co Ltd
ISBN 978 1 84511 023 9
Printed and bound by Thomson Press India Limited
CONTENTS
LLJ t oj&z~res 1)refa~e ~ntrodmtion:The oil market, the Unzted Stdtex and the I r ~ qITGr 1 2 3 4 5
'l'hc ileccssity of oil Foreign powers and Middle Eastern oil Oil supplies, OPEC, oligopoly and politics The political economy o f oil prices The persistent political risks
iY0fe.1 4ppewd~x:Fg~tredata zn ~ a b u b r j m z B~bl~qqrupi~y Index
vi vii ix
FIGURES
Oil prices 1970-2000 OPEC hfiddle East population 1970-2000 OPEC Middle East oil extraction per capita 1970-2000 OPEC hfiddle East oil output value per capita 1970-2000 OPEC Middle East oil exports 1970-2000 World oil product category consumption 1972-2000 World energy consurnption 1973-2000 Annual changes in oil and total cncrgy deimand 1974-2000 Oil demand by products and regions 1973-2000: USA Oil demand by products and regions 1973-2000: LVestern Europe Oil demand by products and regions 1973-2000: Japan Oil demand by products and regions 1973-2000: rest of the world US economic repercussions 1972-2000 North Sea oil price increase (real) 1972-2000 US oil imports and Saudi oil production 1973-2000 OPEC Middle East military expenltures 1970-1999 OPEC population 1980-2000 OPEC oil reserves 1980-2000 OPEC oil production 1980-2000 OPEC oil export revenues 1980-2000 OPEC oil export revenues per capita 1980-2000 World, OPEC and Gulf oil supplies 1960-2000 Norl-(~)l'E(: oil supplies 1960-2000
PREFACE
The present book is the paperback e l t i o n of the final report to the Petropol Programme of the Norwegian Research Council from the project Oil Prices, Market Power and Politics, originally published in hard cover in 2002. The intention was to prepare a coinprehensive book on the interaction of economic and political forces in t l ~ eworld oil market. Generous funding and patience from the Petropol Programme during the years 19972000 proviclcd the author with extensive resources and tinle to carry out the project. 'I'he introduction written for the paperback e l t i o n addresses the cvolution of the international oil market and related politics since 2001. Even if dramatic evcn~s,such as the Iraq \Vat and the oil pricc risc, werc 1101 foreseen in the book, they confirm the thrust of tlie argurnent that the international oil market is essentially shaped by politics and bargaining strengths rather than conventional market forces. From this perspective, it is the author's hope that the book will still be of some interest. The author is grateful for advice and critical comments from many colleagues and friends and would like to thank in particular Ajorn Brochrnann, formerly with Norsk Hydro, 'l'or I<artcvold of Statoil, Daniel Heradstveit of the Norwegan Institute for International Affairs, Svein Anderscn and Arne-Jon Isachsen of BI Norwegian School of Management, Helge I-Iveem of the Ulliversity of Oslo, Hilde Hcnriksen Waage, Are Hovdenak and Stein Tonneson of the International Peace Researcll Institute, Oslo, Paul I-Iorsnell of Chase J.P. Morgan, formerly with the Oxford Institute for Energy Studes, Angel de la Vega of the Colegio de Mexico, Valeqr I G p k o v of the University of Novosibirsk, N a l n e Bret-Kouzaut and JeanPierre Favennec of the Institut Franqais de Pktrole, Giacomo Luciani of the European University Institute, Florence, Philip LVright of the University of Sheffield, and Picrre 'l'erzian of T'etrostratcgies, Paris. 111 addition. thc author is forever indebted to two old friends and mentors, Jean Carrii. and Jean-Marie Uourdaire, both formerly with CFP-Total. Without the competent and enthusiastic help of research assistants the book would not have materialized. The author would like to thank 'l'onje Irene Horn Omland, Leif Wollebak, Erik Rindvoll and Per Anker-Nilssen
v~li
CRUDE POWER
for ineticulous and patient efforts in collecting and processing data and finding sources, as well as in dealing with the author's moods. The author has the sole responsibhty for the present book, inclulng errors, mistakes and misjudgcmcnt.
I N T R O D U C T I O N TO 1'HE P A P E R B A C K E D I T I O N
T H E OIL MARKET, T H E U N I T E D S T A T E S .AND T H E I R A Q WAR
Crude Power in hindsight This introduction written for the papcrbacli edition addresses the recent evolution of the international oil market and related politics, emphasizing the Iraq War and prospects for Iraq and the Middle East, as well as relations between China and the United States. The hardcover edition of Crude I1owerwas published in the late autumn of 2002, as preparations for the Iraq War were at an advanced stage. Nevertheless, the book, in the last chapter, expressed doubts as to whether the United States really would attack Iraq, even if Saddam Hussein's gradually consolidating position appeared harmful to US interests in the Middle East,' because the risks were so great. It seems that tlic policy-makers in \Vashington either underestimated the rislis, or decidcd that their interests outweighed them. The Iraq War and the subsecluent occupation of Iraq corlfirm the salience of the Middle East to the rest of the world, and not only because of oil. The doubling of oil prices confirms that the international oil market is essentially shaped by politics and bargaining strengths rather than by conventional market forces sucli as supply costs and demand. Other developments have occurred since the publication of the first edition of Crude lPower. 'I'he oil pipeline from Baku in Azerbaijan througl~ Georgia to Ceyhan in 'l'urkcy has been completed, although it is not filled, so far. The US bases in Saudi Arabia have been evacuated and the forces moved to Bahrain, I
1974
'
'
3,
,ttLuOil,,y ' " "'""Totalprimary energy -1.35 %
0.63 %
CRUDE POWER
Table/Figure 8: Oil demand by products and regions 1973-2000 Source: BPAmoco Statistical Review ofWorld Enetgy 200 1
Middle distillates
* Others: Refinery gas, LPGs, solvents,petmleum coke, lubricants, bitumen, wax, r$nety **Fmm 1990, includng Eastern Eumpe.
fuel and loss.
APPENDIX
Table/Figure gab: US economic repercussions 1972-2000 Source: Energy Information Administration (EM) 2001 '*
> "**Y Per &nt Price increase (nominal)* Price increase (real)* Inflation rate Nominal bank prime rate Real bank prime rate GDP growth Unemployment rate I%
