Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

The Quest for Oil in the New World Order

Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

The Quest for Oil in the New World Order

Article excerpt

Are we running out of oil? My research topic, "The Quest for Oil in the New World Order" has provided a better insight on the subject of the availability of oil. The research was a qualitative study. Five subject matter experts in the oil industry were interviewed as part of the study. I would like to thank and acknowledge those individuals who participated in my research. They were Joe Barnes, Research Fellow, Rice University, Lynn Cook Houston Chronicle Energy Editor James Baker III, and Institute for Public Policy, Eddie Habibi President and CEO, PAS, Jim Hackett, CEO Anadarko, and Matthew Simmons, Chairman Simmons & Company.

The topics evolved from the study were (1) the disruption of the world's oil supply and its effect on the economies of the world, (2) the role of OPEC, and the role of Saudi Arabia (3) the impact of oil and the

quality of life and (4) the question, "Are we running out of oil?"

The study asked six basic questions, which will be found in the body of this report.

Question 1. In 1973 Arab oil embargo was the oil supply disruption to cause major price increases and have global repercussions. U. S. domestic production fell by 6% between 1973 and 1975. Unemployment doubled to 9% and at the time there was no established mechanism to enable the Organization for Economic Cooperation Development countries to effectively respond and limit the economic impact of the supply disruption. Do you fear another "embargo" whether driven by OPEC or other world events?

While a true embargo will not happen because of the price of a barrel of oil today is over $70. Oil producing countries both OPEC and Non-OPEC would not encourage an embargo or other incidents causing a disruption of oil. With increase players being involved in the production of oil an embargo would not have the same impact as what occurred in 1973. Some OPEC and Non-OPEC countries are struggling internally and cannot afford a disruption of revenues. A principle player in a disruption of oil would be Saudi Arabia. A change in the ruling government in Saudi Arabia could have an effect on the world's oil supply. I will address the role of Saudi Arabia later in this paper. Iran could also become a major player as far as a disruption in the world's supply of oil. At this point we do not know what will happen once the seeds of democracy are planted and a self-governing party becomes a reality in Iraq. The point being is that experts feel that an embargo as we experienced in the 1970's will not occur. However, a possible disruption of the world's supply of oil could become a reality based on the action of one government or even natural disasters.

   Joe Barnes comments on an oil embargo.

   My opinion the price is really, really high right now. I don't see
   why they would even want to consider it. I mean an embargo is, that
   they would simply withhold, I presume they would withhold oil. Now,
   I don't know how you would do an embargo in a world of spot markets
   because you would do an embargo in a specific country. I guess you
   would have to embargo the whole world market. So don't see how an
   embargo would work in today's market. (Barnes, 2006)

It appears the most serious risk is that demand surges ahead of supply shortages. This time around there is nothing artificial about the shortages. The problem is trying to get more oil out of very old fields and in the case of foreign oil there seems to be a lack of technology to help in the recovery.

Question 2. Should international institutions be called upon to coordinate strategies in response to a variety of future global energy problems?

The approach would be to have a body of responsible and knowledgeable individuals to come together and address the issue of energy. The roll of economics would play a major part in how a world organization would address the issue of energy. To cite Eddie Habibi, "Today the economics of the world survive on the business of energy. …

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