Privatization in the International Petroleum Industry: The Interplay between Politics, Economics, and Reliance

By Rhea, John E. | Denver Journal of International Law and Policy, Fall 2005 | Go to article overview

Privatization in the International Petroleum Industry: The Interplay between Politics, Economics, and Reliance


Rhea, John E., Denver Journal of International Law and Policy


INTRODUCTION

Since the discovery of oil, world power brokers have fought over the price, production, and control of the once vast and still vital natural resource, (1) Some allege that the recent occupation of Iraq is motivated by the control over oil supplies in the Persian Gulf. (2) This view suggests that recent military operations in Afghanistan and Iraq are in truth, strategic precursors for the eminent wars to procure oil. (3) Yet, the critical discussion, in this writer's opinion, should contemplate how the world will function without oil and how civilization will come to terms with the fact that fossil fuels as an energy resource are no longer an inexhaustible resource. (4) In the very near future the world will experience an energy crisis and a shock to economic systems much like that experienced in the 1970s and mid-1980s. Only this time, the end of production will not be the result of any unilateral exercise of sovereign power. Instead, the crisis will result from an actual worldwide depletion of fossil fuel resources. Some predict that petroleum (5) resources will peak by the year 2020 (6) and that by the year 2080, petroleum resources will be completely exhausted. (7) The grim reality that crude oil is indeed a finite resource places a real threat to the way of life of developed countries and will drastically impair world economies. Currently, the world consumes over thirty billion barrels of oil per day (bpd). (8) The United States alone consumes approximately ten billion bpd (9) and by 2025, U.S. consumption is expected to balloon to nearly thirty-five billion bpd. (10) As world populations and demand grow at a faster rate than production, the global energy outlook becomes disastrous.

Dr. M. King Hubbert, discussed infra, alerted the world in 1950 that petroleum was a finite resource and that the production of conventional oil would reach its peak between 1970 and 1980. (11) At which point we would have used half of all the recoverable oil that ever existed on our planet. (12) This alarming information has likely been known to previous administrations. Surely the Bush Administration, through the eyes of Vice President, Dick Cheney, is well aware of the impending crisis. (13) For instance, Cheney, a former Halliburton executive, stated during a speech to the International Petroleum Institute in 1999 that: "by the year 2010 we [the world] will need on the order of an additional 50 million bpd." (14) It is further estimated that by 2020 the world will require 120 billion bpd for economic growth. (15) Rather frighteningly, for oil-dependent countries, a mere 10 to 15 percent shortfall between demand and supply can trigger an enormous economic crisis. (16) In short, in apocalyptic fashion, life as we know it will cease as world oil supplies come to an end.

Be clear that there is no feasible replacement for oil. An end to world reliance on fossil fuel based energy in the form of renewable energy or other alternative energy sources is at best a supplement but more realistically a theoretical fantasy. In most cases, oil is required to develop these alternatives to oil. (17) For example, oil is required in the mining and extraction of the hard rock minerals required to develop solar power. (18) Moreover, recovering "oil" from oil shale also requires the use of crude oil to convert the oil shale into a usable product. (19) Additionally, the promise offered by fuel cells is questionable due to limited global reserves of platinum. (20) Thus, despite efforts to develop alternative energy resources, petroleum remains the world's primary source of energy. (21)

In this writer's view, energy companies, heads of states, and the major power brokers of the primary consuming countries, should realize that reliance on oil suppliers with hidden political agendas and narcissistic international policies like those of Saudi Arabia and the Persian Gulf, can no longer be entrusted to bear the sole key to the future of the energy market place. …

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