View of the bulk fuel plant in Dhahran, Saudi Arabia. Because the kingdom needs oil prices to remain high to balance its budget, it pushed OPEC and its allies to decide on a production cut as of Nov. 1. CREDIT: Aramco

By Humberto Márquez
CARACAS, Nov 1 2022 (IPS)

The decision to cut oil production by the Organization of Petroleum Exporting Countries (OPEC) and its allies as of Nov. 1 comes in response to the need to face a shrinking market, although it also forms part of the current clash between Russia and the West.

The OPEC+ alliance (the 13 members of the organization and 10 allied exporters) decided to remove two million barrels per day from the market, in a world that consumes 100 million barrels per day. The decision was driven by the two largest producers, Saudi Arabia – OPEC’s de facto leader – and Russia.

The cutback “is due to economic reasons, because Saudi Arabia depends on relatively high oil prices to keep its budget balanced, so it is important for Riyadh that the price of the barrel does not fall below 80 dollars,” Daniela Stevens, director of energy at the Inter-American Dialogue think tank, told IPS.

The benchmark prices at the end of October were 94.14 dollars per barrel for Brent North Sea crude in the London market and 88.38 dollars for West Texas Intermediate in New York."Notwithstanding Mohammed bin Salman's sympathy for Putin, the cut was due to his concern about the balance of the world oil market, and not to support Russia." -- Elie Habalián

“At the time of the cutback decision (Oct. 5) oil prices had fallen 40 percent since March, and the OPEC+ countries feared that the projected slowdown in the global economy – and with it demand for oil – would drastically reduce their revenues,” Stevens said.

With the cut, “OPEC+ hopes to keep Brent prices above 90 dollars per barrel,” which remains to be seen “since due to the lack of investment the real cuts will be between 0.6 and 1.1 million barrels per day and not the more striking two million,” added Stevens from her institution’s headquarters in Washington.

A month ago, the alliance set a joint production ceiling of 43.85 million barrels per day, not including Venezuela, Iran and Libya (OPEC partners exempted due to their respective crises), which would allow them to deliver 48.23 million barrels per day to the market.

But market operators estimate that they are currently producing between 3.5 and five million barrels per day below the maximum level considered.

The alliance is made up of the 13 OPEC partners: Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela, plus Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan.

The giants of the alliance are Saudi Arabia and Russia, which produce 11 million barrels per day each, followed at a distance by Iraq (4.65 million), United Arab Emirates (3.18), Kuwait (2.80) and Iran (2.56 million).

In July, U.S. President Joe Biden met with Saudi Crown Prince Mohammed bin Salman, with whom he discussed human rights and abundant oil supplies for the global market. A few months later Riyadh led the decision for an oil cut that has been seen as a betrayal by Washington. CREDIT: Bandar Algaloud/SRP

United States takes the hit

U.S. President Joe Biden was “disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine,” a White House statement said.

The price of gasoline in the United States has soared from 2.40 dollars a gallon in early 2021 to the current average of 3.83 dollars – after peaking at five dollars in June – a heavy burden for Biden and his Democratic Party in the face of the Nov. 8 mid-term elections for Congress.

Biden visited Saudi Arabia in July, while the press reminded the public that during his 2020 election campaign he talked about making the Arab country “a pariah” because of its leaders’ responsibility for the October 2018 murder in Istanbul of prominent opposition journalist in exile Jamal Khashoggi.

The U.S. president said he made clear to the powerful Saudi Crown Prince Mohammed bin Salman his conviction that he was responsible for the crime. But the thrust of his visit was to urge the kingdom to keep the taps wide open to contain crude oil and gasoline prices.

Hence the U.S. disappointment with the production cut promoted by Riyadh – double the million barrels per day predicted by market analysts – which, by propping up prices, favors Russia’s revenues, which has had to place in Asia, at a discount, the oil that Europe is no longer buying from it.

Biden then announced the release of 15 million barrels of oil from the U.S. strategic reserve – which totaled more than 600 million barrels in 2021 and just 405 million this October – completing the release of 180 million barrels authorized by Biden in March, following the Russian invasion of Ukraine, that was initially supposed to occur over six months.

Saudi Crown Prince Mohammed bin Salman and President Vladimir Putin chat cordially during a visit by the Russian leader to Riyadh in October 2019. The two major oil exporters lead the 23-state alliance that upholds production cuts to prop up prices. CREDIT: SPA

Shift in Washington-Riyadh relations

Karen Young, a senior research scholar at the Center on Global Energy Policy at Columbia University in New York, wrote that “oil politics are entering a new phase as the U.S.-Saudi relationship descends.”

“Both countries are now directly involved in each other’s domestic politics, which has not been the case in most of the 80-year bilateral relationship,” she wrote.

“….(M)arkets had anticipated a cut of about half that much. Whether the decision to announce a larger cut was hasty or politically motivated by Saudi political leadership (rather than technical advice) is not clear,” she added.

Saudi leaders could apparently see Biden as pandering to Iran, its archenemy in the Gulf area, with positions adverse to Riyadh’s in the conflict in neighboring Yemen, and would resent the accusation against the crown prince for the murder of Khashoggi.

Young argued that “the accusation that Saudi Arabia has weaponized oil to aid Russian President Vladimir Putin is extreme,” and said “The Saudi leadership may assume that keeping Putin in the OPEC+ tent is more valuable than trying to influence oil markets without him.”

Gasoline prices in the United States, while down from their June level of five dollars per gallon, are still at a high level for many consumers ahead of the upcoming midterm elections. CREDIT: Humberto Márquez/IPS

More market, less war

OPEC’s secretary general since August, Haitham Al Ghais of Kuwait, said on Oct. 7 that “Russia’s membership in OPEC+ is vital for the success of the agreement…Russia is a big, main and highly influential player in the world energy map.”

Writing for the specialized financial magazine Barron’s, Young stated that “What is certainly true is that energy markets are now highly politicized.”

“The United States is now an advocate of market manipulation, asking for favors from the world’s essential swing producer, advocating price caps on Russian crude exports and embargoes in Europe,” Young wrote.

For its part, the Saudi Foreign Ministry rejected as “not based on facts” the criticism of the OPEC+ decision, and said that Washington’s request to delay the cut by one month (until after the November elections, as the Biden administration supposedly requested) “would have had negative economic consequences.”

In its most recent monthly market analysis, OPEC noted that “The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues.”

It also mentioned geopolitical risks and the resurgence of China’s COVID-19 containment measures.

The two million barrel cut was decided “In light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market,” said the OPEC+ alliance’s statement following its Oct. 5 meeting.

Oil analyst Elie Habalian, who was Venezuela’s governor to OPEC, also opined that “notwithstanding Mohammed bin Salman’s sympathy for Putin, the cut was due to his concern about the balance of the world oil market, and not to support Russia.”

Latin America, pros and cons

Stevens said the oil outlook that opens up this November will mean, for importers in the region, that their fuels will be more expensive but probably not by a significant amount, and net importers in Central America and the Caribbean will be the hardest hit.

Exporters will benefit from higher prices. Brazil and Mexico have already increased their exports of fuel oil, and Argentina and Colombia have hiked their exports of crude oil. And higher prices would particularly benefit Brazil and Guyana, which are boosting their production capacity.

Argentina could have benefited if it had begun to invest in production years ago, but its financial instability left it with little capacity to take advantage of this moment. And Venezuela not only faces sanctions, but upgrading its worn-out oil infrastructure would require investments and time that it does not have.

View of the Ras Tanura terminal in Saudi Arabia, the oil exporter receiving the highest revenues in the context of the crisis generated by the Russian invasion of Ukraine. CREDIT: Aramco

By Humberto Márquez
CARACAS, Apr 13 2022 (IPS)

The oil and gas supply crisis unleashed by the Russian invasion of Ukraine represents new business opportunities for the oil-producing countries of the developing South, both traditional and emerging, and also for accelerating the global transition to green forms of energy.

“The countries with the most positive economic effects are the net exporters that depend on hydrocarbon revenues for a large portion of their budget, economic activity and foreign exchange,” Nate Graham, head of energy at the Washington-based think tank Inter-American Dialogue, told IPS.

In Latin America this is the case, Graham said, for “countries such as Colombia, Ecuador and Venezuela, while on the other hand, countries in the Caribbean, Central America and Chile, which import oil and gas, will suffer the opposite effect.”

The opportunities arose after the Feb. 24 invasion of Ukraine, due to the abrupt withdrawal, in markets with fragile balances, of some three million (159-liter) barrels per day of crude oil from Russia, and the decision of a large part of Europe to cancel gas imports from Russia and look for other suppliers.

Oil and gas producers in the South “are enjoying extraordinary revenues,” Venezuelan oil geopolitics expert Kenneth Ramirez told IPS, “but those who are not producers have higher energy bills and are suffering from higher prices for food, of which Russia and Ukraine are major suppliers.”

Graham said: “Even in oil-producing countries, rising consumer fuel prices put pressure on governments to provide subsidies, which can then be politically difficult to reverse when prices fall again.”

But it seems that it is not yet time to heed all the warnings, given the new “(black) gold rush” unleashed in a world dependent on fossil fuel energy and aware that it will continue to be so for several more decades.

The oil production vessel Liza Destiny is used by Exxon to develop oil fields under Atlantic waters that Guyana has not yet definitively demarcated with neighboring Venezuela. CREDIT: SBM Offshore

Room for everyone

In South America one of the first to benefit has been Guyana, which extracted from the Atlantic Ocean – in waters pending delimitation with Caracas, noted Ramirez, who chairs the private Venezuelan Council of International Relations – some 110,000 barrels per day (b/d) in 2021 and expects to add another 220,000 within a year.

To achieve this, U.S. oil giant Exxon, with a century and a half of experience in the industry, accelerated its decision to invest another 10 billion dollars in Guyana.

Neighboring Suriname is also hoping for new investments, and traditional exporters Colombia and Ecuador must be rubbing their hands together in anticipation. But the most striking note was a new contact between the United States and Venezuela.

Formal ties between the two political opponents are broken, Washington has imposed sanctions that prevent Caracas from freely trading its oil and the South American country has made a show of being Russia’s ally in the region.

Venezuela, a major oil exporter throughout the 20th century, with production exceeding three million b/d between 1997 and 2001, now produces less than 700,000 b/d, following a decline in its oil industry under the administration of President Nicolás Maduro, in office since 2013.

But the country has gigantic reserves, close to 300 billion barrels, mostly of heavy crude, and the market read the new contact from Washington as a sign that the United States has decided that the adiós to Russian supplies will last for a long time.

The US company Chevron, which maintains a minimum level of production in Venezuela with Washington’s permission, could invest to produce another 200,000 b/d in a year, and the state-owned oil company Petróleos de Venezuela (PDVSA) is studying the leasing of new oil tankers, according to industry sources.

A technician works at the Tema refinery in Ghana, an emerging oil producer in West Africa. CREDIT: TOR

In Africa, in addition to the best-known producers, such as Nigeria, Angola, Libya, Algeria and Egypt, there are the hopes of the smaller and newer producers, such as Equatorial Guinea, South Sudan and above all Ghana, which, from producing a few thousand barrels a day five years ago, now produces almost 170,000 barrels per day.

Iran is another long-time oil producer which is again flexing with the crisis: it maintains energy alliances with Russia while the tug-of-war with the United States – which has sanctioned it for more than 40 years – continues over its nuclear program, whose redefinition may free it from some sanctions.

Tehran, which produces 2.5 million b/d, is preparing to increase its crude oil exports from 1.2 to 1.4 million b/d, and has a long-term plan to return to a production level of four million b/d.

Among the major beneficiaries of the crisis are the Gulf Arab exporters and in general the partners of the Organization of Petroleum Exporting Countries (OPEC), which act in alliance with 10 other producers in the OPEC+ group.

Saudi Arabia’s Aramco alone already recorded pre-war profits of 110 billion dollars in 2021 (compared to 49 billion dollars in 2020). Both the kingdom and the neighboring United Arab Emirates have been asked by Washington to increase oil production in order to avoid a price spike.

The main benchmark crudes, U.S. West Texas Intermediate (WTI) and North Sea Brent, were trading at around 70 dollars per barrel in 2021, but with the Ukraine crisis their prices soared: Brent has been holding steady this April at above 100 dollars and WTI at close to 95 dollars.

Global demand for crude oil is approximately 100 million b/d, of which OPEC contributes 32 million b/d, plus another 14 million b/d from the 10 OPEC+ allies, including Russia, Kazakhstan and Mexico.

OPEC+ rejected the request of large consumers, considering that the price increase is not due to market fundamentals but to the conflict in Ukraine, and agreed to add only 432,000 b/d to the group’s supply, starting in May.

“Nobody listened when we said more investments were needed in oil and gas,” said Emirati Oil Minister Suhail al-Mazroui. “Raising production will only be in a measured way and through a consensus among members.”

U.S. President Joe Biden then ordered the release of one million b/d for six months from his country’s strategic reserves of more than 650 million barrels, to increase the crude oil available to refineries and thus try to curb the rise in fuel prices.

Meanwhile, Algeria allowed itself the luxury of maintaining steady prices for the gas it exports to all its customers but not to Spain, in retaliation for a change in Madrid’s position on the dispute over the self-determination of the Saharawi people.

A crude desalter unit on its way to the Orinoco Oil Belt in southeastern Venezuela, considered the largest deposit of heavy crude on the planet and whose diminished production could receive a new boost as a result of the current energy crisis. CREDIT: PDVSA

The weight of Russia

And Moscow has stated that it will receive payment in rubles for its oil and gas exports to Europe, a region 40 percent dependent on Russian gas and 27 percent on its oil, with which it has not been able to completely do without after six weeks of war.

The late U.S. politician John McCain (1936-2018) said in 2014 that Russia “is a gas station masquerading as a country” to underline the nation’s heavyweight status in the field of fossil fuel energy.

Of the 1.7 trillion barrels of crude oil reserves on the planet, Russia has 107 billion, surpassed only by Venezuela, Saudi Arabia, Canada, Iran and Iraq. The Eurasian country produces 10.8 million b/d (more than 10 percent of the world total), behind only the United States and almost as much as Saudi Arabia.

In gas its weight is even greater, since it has 20 percent of the world’s reserves (38 of 188 trillion cubic meters), making it the leader by far, and with its annual production of 638 billion cubic meters it covers more than 18 percent of global demand.

The richest will earn more

Among the winners, oil companies will earn the most, and this year the 25 largest could make profits between 100 and 120 billion dollars higher than in 2021, when, according to the U.S. organization Accountable.US, they made record profits of 237 billion dollars.

Consumers, meanwhile, will pay the price. In almost all of Latin America a liter of gasoline costs well over a dollar (1.75 dollars in Uruguay, 1.40 in Chile, and 1.32 in Guatemala, for example) and even in up-and-coming Guyana – which has crude oil but no refinery, Graham pointed out – it sells for almost 1.10 dollars.

In the United States, where one out of every five barrels of oil the world produces is consumed, a liter cost 75 cents a year ago and this April averaged 1.10 dollars, with higher prices on the Pacific coast.

Gasoline prices this year exceeded four dollars per gallon (more than a dollar per liter) in the United States, and in an attempt to curb prices the government is releasing part of its strategic crude reserves so that the refineries have sufficient supplies. CREDIT: Fidel Márquez/IPS

Path to greener energy

In Europe, “the majority are now betting on a pragmatic and possibilist vision, which continues to focus on renewable energies and energy efficiency, but a debate is opening up about the use of nuclear energy and even coal, which would make a better balance between energy security and climate change,” said Ramírez.

Graham believes that “the present crisis underscores the geopolitical risks of dependence on foreign oil and gas and the importance of reducing it for security reasons, which can be an accelerating factor for the transition to renewable technologies and green hydrogen (obtained from clean energy sources).”

But “on the other hand, some may interpret the present crisis as a reason to increase domestic and regional hydrocarbon production in the short term, which may extend dependence on fossil fuels, while companies recover the costs of new investments,” he said.

In addition, there is pressure on governments to provide fuel subsidies to lessen the impact of the crisis on consumers, which may be politically difficult to reverse and might thus generate the opposite effect to what is needed to drive the energy transition, Graham said.

The International Energy Agency (IEA), made up of major industrialized consumers, recognized at its Mar. 24 meeting held to assess measures to address the crisis “the importance to energy security and clean energy transitions of ensuring clean, affordable, reliable, resilient, and secure energy infrastructure.”

Energy security and the transition to clean energies are “inextricably linked” in the view of the IEA, and its executive director, Fatih Birol, stated that “the response to this energy crisis will be an acceleration of the transition to clean energy,” not necessarily for climate reasons, but for energy security.

Exxon was responsible for the Exxon Valdez oil spill in 1989. Here, part of the spill in the Chenega Bay, Evans lsland (Prince William Sound). Credit: ARLIS Reference.

By Diego Arguedas Ortiz
SAN JOSE, Jul 17 2015 (IPS)

For decades, executives and decision makers at major U.S. and European fossil fuel companies were aware that carbon dioxide (CO2) emissions caused global warming, but still provided millions in funding to boost disinformation campaigns and sponsor scientists who denied climate change.

As early as 1981, more than a decade before the first meeting of the United Nations Framework Convention on Climate Change (UNFCCC), leaders at oil giant Exxon acknowledged the connection between fossil fuels and climate change.“Their aim was to sell doubt. They don't have to disprove climate change, [they] just have to make people believe there was not consensus." -- Nancy Cole

The revelations emerged as part of a report released by the Washington, D.C.-based Union of Concerned Scientists (UCS), called the Climate Deception Dossiers, which explores the tactics promoted by companies such as ExxonMobil, Shell, Peabody Energy, Chevron and Conoco-Phillips to undermine climate science.

“They were already factoring the risks of climate change in their business as early as 1981, and 34 years later they continue to lie to the people and undermining climate science”, Nancy Cole, Director of Campaigns for the UCS Climate and Energy Program and contributor to the report, told IPS.

The Dossiers show how Exxon and other major companies funded a vast disinformation campaign that included climate deniers, contrarian think tanks and public relations firms, with evidence pointing in their direction as recently as 2015.

“Their aim was to sell doubt. They don’t have to disprove climate change, [they] just have to make people believe there was not consensus,” said Cole.

One of the climate rebukers is Wei-Hock “Willie” Soon, an engineer affiliated with the Harvard-Smithsonian Center for Astrophysics who received more than 1.2 million dollars in big-oil funding between 2001 and 2012 and whose salary relied exclusively on their grants, according to UCS.

For years, Soon’s academic papers have largely overstated the solar influence in global warming and have been methodically discredited by fellow researchers, scientific journals and the Intergovernmental Panel on Climate Change (IPCC), but have been used by conservative politicians and big oil companies to cast doubt on the climate consensus.

A 2014 e-mail by climate scientist Lenny Bernstein, an Exxon employee during the 1980s, revealed that the company was aware as early as 1981 of CO2 emissions. The oil giant decided against exploring the Natuna gas field, off the coast of Indonesia, after being alerted about the massive amount of CO2 trapped in it and the potential for future carbon-cutting regulations.

If exploited, its release would have been the single largest source of global warming pollution at the time, accounting to roughly one per cent of the world’s emissions in 1981.

“In the 1980s, Exxon needed to understand the potential for concerns about climate change to lead to regulation that would affect Natuna and other potential projects,” wrote Bernstein, a veteran of almost 30 years in the industry.

The full UCS report includes over 330 pages of document from around 85 internal company and trade association documents spanning 27 years.

For instance, during the 2009 discussion of the American Clean Energy and Security Act, which proposed a federal carbon emission reduction plan, the American Coalition for Clean Coal Electricity (ACCCE) hired a PR firm which forged letters from diverse organisations to lobby congressmen and women against the bill.

Another major player in the report is the American Petroleum Institute (API), self-proclaimed “only national trade association that represents all aspects of America’s oil and natural gas industry”.

A 1998 internal API strategy document outlines the roadmap devised to confront the ever-growing climate change science and explicitly aimed to confuse and misinform the public, by sponsoring contrarian scientists and targeting teachers, schools and students across the United States.

The document states that victory would be achieved when “average citizens ‘understand’ (recognize) uncertainties in climate science.” IPS reached out to API by e-mail but got no answer.

Their modus operandi mimics that of tobacco companies, according to former U.S. Department of Justice lawyer Sharon Eubanks who led the Department’s successful lawsuit against the tobacco companies.

“It’s like what we discovered with tobacco – the more you push back the date of knowledge of the harm, the more you delay any remediation, the more people are affected,” Eubanks told DeSmog website.

This was echoed by Katherine Sawyer, the International Climate Organiser at the watchdog group Corporate Accountability International, who told IPS that “we wouldn’t let the tobacco industry create tobacco control policy, so why are we letting the fossil fuel industry create climate change policy?” – referring to their participation in U.N. processes.

Some fossil fuel companies appear, at least publicly, to be willing to contribute to a solution. Six major European companies (Shell, BP, Total, Statoil, BG Group, and Eni) sent an open letter to the UNFCCC and the French Government stating they can take faster climate action if governments provide a global interlinked system of carbon pricing.

“If governments act to price carbon, this discourages high carbon options and encourages the most efficient ways of reducing emissions widely,” states their letter.

But the decades-long opposition of fossil fuel companies has eroded their credibility among climate scientists, activists and much of the public.

“For 20 years, the world’s largest polluters have stymied progress in the UNFCCC by exerting undue influence over the treaty process—from direct lobbying to sponsoring the talks themselves,” said Sawyer, recalling that this year’s COP21 climate talks in Paris will be sponsored by corporations like EDF and ENGIE whose coal operations contribute to the equivalent of nearly 50 percent of France’s emissions

“In order for the UNFCCC process to create the meaningful policy our planet desperately needs, negotiators need to kick big polluters out,” she said.

Throughout the world, fossil fuel companies have been hit both in their image and their financial appeal after years of campaigning by divestment groups, organisations that promote getting rid of stocks, bonds, or investment funds linked to high-carbon industries such as coal, oil, and carbon.

“I definitely feel like the fossil fuel divestment movement is David against Goliath,” Perri Haser, lead organiser of the divestment campaign at Dartmouth College in New Hampshire, told IPS. “But here’s the thing about David and Goliath: we know how that story ends.”

A 2013 report highlighted how 90 companies, 50 of them publicly traded, were responsible for almost two-thirds of the world’s industrial carbon emissions over the past two and a half centuries.

That several major oil companies acknowledged risks from CO2 emissions as early as the 1980s doubles its significance since more than half of all industrial carbon emissions from 1750 onwards have been released since 1988.

Edited by Kitty Stapp