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.

Employees work on the solar panels of the El Romero plant, with a capacity of 196 megawatts, in the desert region of Atacama in northern Chile, a country that has set out to develop its solar power potential. CREDIT: Acciona

By Humberto Márquez
CARACAS, Apr 29 2020 (IPS)

The oil slump, global recession and uncertainty about the magnitude of the COVID-19 pandemic will fuel the appetite for cheaper fossil fuel energy and delay investments in renewables, affecting the targets of the Paris Agreement on climate change and the Sustainable Development Goals (SDGs).

The countries of the developing South, and in particular oil exporters, will be affected as suppliers to shrinking economies and as seekers of investment in clean energy, in a world that will compete fiercely for low-cost recovery, warned experts consulted by IPS.

The crises, “in view of the abundance and low prices of oil, far from accelerating a change of era that would leave behind fossil fuels and embrace renewable energies, will postpone for a long time that aim, outlined in the SDGs,” said Venezuelan oil expert Elie Habalián.

One of the targets of SDG 7, which calls for affordable clean energy, is to “increase substantially the share of renewable energy in the global energy mix” by 2030.

This is in line with the Paris Agreement on climate change, signed in 2015, which enters into force at the end of this year. The accord includes energy transition measures: national contributions to replace fossil fuels with clean energy, reduce greenhouse gas emissions and curb the increase in temperature to 1.5 degrees Celsius.

These commitments are undermined by the impact of the COVID-19 pandemic, which will cause a severe recession, with the global economy projected to shrink three percent this year and six percent in large countries in the North like the United States and in the South like Brazil.

With that forecast, “it seems that the efforts of governments will tend to sustain and deepen the extractivist model, including hydrocarbons,” said researcher María Marta di Paola, of Argentina’s Environment and Natural Resources Foundation.

In 2018, according to British oil giant BP, global consumption of primary energy (the energy embodied in natural resources before undergoing any human-made conversions or transformations) was 13,865 million tons of oil equivalent (Mtoe), with a predominance of fossil fuels: oil 33.6 percent, coal 27.2 percent and gas 23.8 percent.

Hydroelectricity represented 6.8 percent and sources strictly considered renewable (solar, wind, geothermal, marine, biomass) contributed just 561 Mtoe, or 4.04 percent.

The Paris Agreement, aimed at adapting to and mitigating the climate emergency, establishes that developing countries will take longer to comply with the agreement and that the reductions to which they commit will be made on the basis of equity and in the context of their fight against poverty and for sustainable development.

But in the face of the crises caused by the pandemic, many of the 196 signatory countries, “seeking to take advantage of their installed capacity and regulate impacts on employment and consumption, will relax environmental standards and miss the opportunity to begin a clean, fair and inclusive energy transition,” said Di Paola.

Lisa Viscidi of the Washington-based think tank Inter-American Dialogue said that “although rates of return are currently higher for renewables than for fossil fuels, there are indications that it will be difficult to attract investment in solar or wind energy before demand recovers.”

View of a gas plant in Abu Dhabi, United Arab Emirates, a major oil exporter. The outlook of abundant oil and lower prices in the midst of the crisis points to intense demand for and use of fossil fuels in the short and even medium term. CREDIT: ADNOC

She cited “the plunge in demand for electricity due to the self-isolation (to curb the spread of COVID-19), which strongly impacts the auctions of renewables, leading to their cancellation” – a reference to the mechanism for buying and selling electricity between suppliers and distributors.

With the collapse of oil prices, governments like those of Latin America “will not be inclined towards renewable energy for now, calculating that it could have higher costs,” said Viscidi, head of the energy area in her organisation.

But also when the current world health crisis ends, “the post-pandemic economy will pose insurmountable obstacles for many countries in the global South to achieve a transformation of their energy mix,” said Alejandro López-González, an expert in sustainability from the Polytechnic University of Catalonia in Spain.

This, he argued, is because “the transformation of the energy mix in countries of the South depends on trade in commodities with industrialised countries,” that is, on securing good markets and prices for their products, which provide revenue with which to adopt cleaner energy sources.

Throughout the developing South, the global recession will result in fewer exports, business closures, job losses, lower tax revenues and reduced investment, according to projections by multilateral bodies, leaving capital- and technology-intensive initiatives, such as solar or wind farms, without resources.

Currently, in the developing South, only India, with solar and wind energy plants, and Brazil (wind and biomass) are attempting to keep up with the giants that possess large non-conventional clean energy installations: China, the United States, Germany and Japan.

In 2018, renewable energies represented only 9.3 percent, or 2,480 of the 26,615 terawatts (1 Tw = 1 billion kilowatts) of electricity generation in the world, versus 10,100 Tw contributed by coal, 6,189 by gas and 4,193 by water sources.

Peter Fox-Penner, head of Boston University’s Institute for Sustainable Energy, said in an article distributed by The Conversation that “Economy-driven demand reductions, which are likely worldwide, will hurt new renewable installations.

“Utilities will tighten their budgets and defer building new plants. Companies that make solar cells, wind turbines, and other green energy technologies will shelve their growth plans and adopt austerity measures,” in the context of the global recession, he wrote.

But “Countervailing factors will partly offset this decline, at least in wealthy countries,” Fox-Penner said. “Many renewable plants are being installed for reasons other than demand growth, such as clean power targets in state laws and regulations,” and public pressure that forces utilities to close down coal-fired power plants, he added.

The outlook for oil

Along these lines, Venezuelan economist José Manuel Puente predicted that “the energy transition will happen, there are more and more regulations, electric and hybrid cars, and the problem for Venezuela, Nigeria or Mexico is that we will remain poor countries with deposits of black sludge underground.”

López-González is also in favour of countries like Venezuela – with an enormous potential for wind energy due to the strong, constant trade winds that blow in the northwest – fully exploiting their hydrocarbon resources in order to finance changes in their energy mix.

But these strategies were suspended for members of the Organisation of Petroleum Exporting Countries (OPEC), and for other crude oil producers, when oil prices collapsed to the point that on Apr. 20 they reached negative values, for the first time in history.

U.S. benchmark West Texas Intermediate was quoted that day on the New York futures market at -37 dollars per barrel, 50 dollars below its opening price that day of 13 dollars.

The prices plunged because, as stockpiles overwhelmed storage facilities, buyers did not want to be forced to receive agreed shipments for delivery on that “Black Monday”, and preferred to assume the cost of getting out of the commitment.

That day illustrated the decline in demand that had already started before the arrival of coronavirus in Europe and the Americas, and which gave rise in March to a supply reduction agreement between the 11 OPEC partners and 10 other exporters.

The recession triggered by COVID-19 will mean that the world will consume 30 percent less this year: 70 million barrels a day of oil, down from 100 million in 2019.

This oil crisis “brings very bad news for producers in the Gulf, Russia, Mexico, Venezuela and others: it is the end of absolute income, and the extreme minimisation of the differential income of oil,” said Habalián, a former Venezuelan ambassador to OPEC.

For years, oil exporting nations benefited from setting reference prices for oil before it reached the markets. And in addition, due to the wide gap between costs and prices, they piled up profits that are being pulverised by the current crisis.

Also affected are dozens of companies facing bankruptcy since the growing demand and strong oil prices had allowed them to extract, mainly in the United States, shale oil and gas by means of fracking (hydraulic fracturing), an environmentally questionable technique.

Finally, the energy landscape will be impacted by the behaviors that consumers adopt in the wake of the pandemic – such as their use of energy or demand for travel – or by changes in labour relations after the extensive experiment in off-site work as a result of the COVID-19 self-isolation.

The Paraguaná oil refinery complex in northwestern Venezuela, one of the world’s largest, can process a million barrels a day, and is working at just a third of its installed capacity. Credit: Pdvsa

By Humberto Márquez
CARACAS, Dec 19 2017 (IPS)

Corruption in the Venezuelan state oil industry, denounced by the government itself, and with former ministers and senior managers behind bars, is the latest evidence that, in the country with the largest oil reserves on the planet, the industry on which the economy depends is falling apart.

There was a drop “in the production of crude oil, of a million barrels per day,” economist Luis Oliveros, who teaches at the Metropolitan University, told IPS. In December 2013 output stood at 2,894,000 barrels per day compared to 1,837,000 in November 2017, according to the Organisation of the Petroleum Exporting Countries (OPEC).

By 2018 production could drop another 250,000 barrels per day at the current rate, and Venezuela, co-founder of OPEC in 1960 when it was the world’s largest crude oil exporter, is becoming an almost irrelevant player in the global market, Oliveros said.

This despite the fact that it has the largest known deposit of liquid fossil fuels, the 55,000- sq-km southeastern Orinoco oil belt, with an estimated 1.4 trillion barrels of crude, mainly extra-heavy, including proven reserves of 270 billion barrels, according to Venezuelan estimates.

Oil is virtually Venezuela’s only export product, the source of 95 percent of foreign exchange earnings, and by the middle of this decade it represented more than 20 percent of GDP. Most of the business is in the hands of the state-owned Petroleos de Venezuela (PDVSA), which has a few partnerships with transnational corporations.

President Nicolás Maduro started a purge on Nov. 28 within PDVSA, in the midst of the hail of corruption allegations and investigations, and asked the new management, led by a general new to the industry, Manuel Quevedo, to make an effort to raise production by one million barrels per day.

The immediate target was to meet the quota assigned by OPEC for 2017-2018, of 1,970,000 barrels per day, said presidential adviser Alí Rodríguez.

“Merely to sustain the current production of 1.85 million barrels per day – let alone increase it – we need to inject between four to five billion dollars into the industry, and the evidence is that this money is not there,” said Alberto Cisneros, CEO of the oil consulting firm Global Business Consultants.

With the economy in shambles, a four-digit inflation rate, different simultaneous exchange-rate systems for a currency that depreciates daily, shortages of food, medicines and essential supplies, and a foreign debt of more than 100 billion dollars, Venezuela does not have the resources that the industry needs, he told IPS.

Against this backdrop, the oil business “also suffers from management problems since PDVSA in 2003, after a strike against the government, dismissed 18,000 employees, half of its workforce,” former deputy energy minister Víctor Poleo (1999-2002) told IPS.

And corruption was dramatically exposed this December, when the Attorney General’s Office sent 67 PDVSA executives and managers to prison for crimes ranging from falsification of production figures to embezzlement and undermining the country’s sovereignty,.

Among these were two former oil ministers of President Nicolás Maduro, in power since 2013, Eulogio del Pino and Nelson Martínez, who were also presidents of PDVSA and its U.S. subsidiary, Citgo, which they allegedly damaged when re-negotiating debts.

Moreover, the Public Prosecutor´s Office is investigating Rafael Ramírez, a former oil minister and president of PDVSA between 2002 and 2014, and until last November Venezuelan ambassador to the United Nations, for his possible involvement in money laundering operations through the Banca Privada d’Andorra bank.

Petromonagas, a joint venture between state oil company PDVSA and Russia’s Rosneft, extracts crude oil from the Orinoco Oil Belt, in southeastern Venezuela, considered the largest oil deposit on the planet. Credit: Pdvsa

According to the Spanish newspaper El País, which claims access to reports on which Andorran Judge Canòlic Mingorance is working, people close to Ramírez received at least two billion euros (2.36 billion dollars) in illegal commissions between 1999 and 2013.

PDVSA, a company born from the nationalisation of the industry in 1975, and which for years boasted of being one of the top five oil companies in the world, is thus languishing under a cloud of accusations of corruption, incompetence and fraudulent management.

Production “is declining due to a lack of investment and maintenance, starting with the obsolete installations of Lake Maracaibo in the northwest, which produces no more than 450,000 barrels per day,” said Cisneros. Since 1914, more than 13,000 oil wells have been drilled there, and up to the 21st century, the lake basin produced more than one million barrels a day.

The relatively new fields of the east provide the rest of the output, but the figure of 1.3 million barrels per day extracted in the Orinoco Belt, announced by del Pino in the middle of the year, has been questioned by the criminal investigation.

Venezuelan expert Francisco Monaldi, at Rice University in the U.S. state of Texas, pointed out that exports are already below 1.4 million barrels per day (they stood at over 2.5 million at the beginning of the century), and less than 500,000 barrels per day were exported to the United States in November

For a century, the United States was the biggest importer of Venezuelan oil, purchasing 1.5 million barrels per day. And it is still the main source of revenue, as exports to China, which exceed 600,000 barrels per day, are used to pay off debts.

In oil refining, “it is perhaps even worse” according to Cisneros, since the Venezuelan refineries, installed to process 1.3 million barrels per day, “worked a few years ago at 90 or 95 percent of their capacity and now are only working at a third, 30 or 35 percent. We do not even supply our fuel needs,” which in part have to be imported, he pointed out.
To the decrease in the production of gasoline, lubricants and other derivatives are added distribution problems in the 1,650 service stations in this country of almost one million square kilometers, 31 million people and four million vehicles.

One of the problems is the absurdly low price of fuel in the country, the cheapest in the world. One litre costs just one bolívar, which at the official exchange rate is equivalent to about 10 cents, but at the black market rate is equivalent to one-thousandth of a cent: with one dollar you could buy 100,000 litres.

The cost of selling half a million barrels of fuel each day at this low price is a loss of between 12 and 15 billion dollars a year for PDVSA.

In addition, there is a problem of smuggling to Colombia, Brazil and the Caribbean, which Venezuela partially curbs with controls and rationing that cause shortages and huge queues of vehicles at gas stations along the border.

PDVSA has paid back interest in arrears this year for its debt bonds, while a US subsidiary of Chinese company Sinopec -a partner that has contributed more than 50 billion dollars in loans to Caracas – sued the Venezuelan state-owned company before a US court, for 21.5 million dollars over unpaid bills.

The United States imposed sanctions on Venezuela that make it difficult to renegotiate the country’s and PDVSA’s debts.

“Sanctions and default make it more difficult for partners to invest in joint ventures. The Venezuelan oil industry seems to have entered a spiral of death,” said Monaldi.

Cisneros believes that a recovery of the industry “is possible with a different organisational scheme, such as Argentina’s, which has a ‘front company’, Enarsa, and an operator, YPF (51 percent state-owned, 49 percent listed on the stock market).”

To achieve that “there are two possibilities; one is that the current regime reacts with respect to the economy and oil, and another is that there is a political change and the country starts to take advantage of its human, economic and oil resources,” he argued.

Ranking of recoverable shale oil and gas reserves, which have revolutionised the global map of fossil fuels. Credit: ProfesionalMovil

By Humberto Márquez
CARACAS, Nov 26 2014 (IPS)

Shale fever and the political chess among major oil producers and consumers have put OPEC in one of the most difficult junctures in its 54 years of history.

“OPEC was spoiled for several years by high prices of around 100 dollars a barrel,” Elie Habalián, a former Venezuelan OPEC (Organisation of the Petroleum Exporting Countries) governor, told IPS. “If it had had the foresight to keep prices down to around 70 dollars a barrel, shale oil would not have begun to pose such stiff competition.”

The 12-member group – made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela – may agree to cut output, which would entail sacrificing markets, during its Nov. 27 ministerial meeting in Vienna – the 166th held since the organisation was founded in September 1960.

Oil prices, which climbed after 2003 to over 140 dollars a barrel in 2008, plunged as a result of the global financial crisis that broke out that year, but recovered this decade and have remained at around 100 dollars a barrel.

In the meantime, the production of unconventional oil and gas began to expand in the United States. Shale, a common type of sedimentary rock made up largely of compacted silt and clay, is an unconventional source of natural gas and oil, which is trapped in shale formations and recovered by hydraulic fracturing or “fracking”.

“Fracking” involves pumping water, chemicals and sand at high pressure into the well, a technique that opens and extends fractures in the shale rock to release the natural gas and oil on a massive scale.

With the technology and capital available in the 20th century, these unconventional resources were not recoverable.

Habalián pointed out that after the 1973 Arab oil embargo, “the West and Japan adopted a strategy to achieve a stable market under their control rather than under that of the exporting countries.”

That strategy has run into surprises. For example, 40 years ago no one foresaw that China, along with India and other emerging powers, would become a fast-growing economy with a voracious appetite for fossil fuels, which gave a boost to producers of oil and gas.

“But with the high prices, while the exporters financed geopolitical campaigns, like the conflicts in the Middle East or the influence of Venezuela in Latin America under the presidency of Hugo Chávez (1999-2013), the big corporations were investing in technology and new areas of business,” said Habalián.

The shale boom “has merely accelerated the results of that permanent strategy by the West. Shale oil is here to stay, the price will drop as the technology advances, and that will bring down the prices of, and set a cap on, OPEC’s oil,” the expert said.

Map of proven global reserves of conventional oil, where new actors have also reduced OPEC’s grip. Credit: Fastcompany.com

Fracking is a costly procedure that requires high crude prices to make it profitable. It is also criticised for its environmental effects, as it involves consumption of enormous amounts of water and the creation of cracks in the rocks deep below the surface, with consequences that have yet to be determined.

Shale oil is already a major actor in the global energy market, with daily output of 3.5 million barrels, mainly in the United States, which recently overtook Saudi Arabia and Russia to become the world’s largest oil producer, with more than nine million barrels a day.

For decades Saudi Arabia was the biggest producer and the de facto leader of OPEC, because to its production of nearly 10 million barrels a day is added a spare production capacity of two million barrels which has enabled it to increase or reduce output in periods of market scarcity or abundance.

The market, of some 91 million barrels consumed daily, of which OPEC contributes one-third, is showing signs of being oversupplied because of the rising offer of shale oil, Europe’s fragile economic recovery, and the slowdown of emerging economies, from China to Brazil.

Crude oil is about 30 percent cheaper than one year ago. The European benchmark North Sea Brent stands at 80 dollars a barrel, compared to 110 dollars a barrel at the close of 2013. The U.S. benchmark West Texas Intermediate is trading at 75 dollars a barrel, and Venezuela’s dense cocktail at less than 70 dollars a barrel, down from a high of more than 100 dollars a barrel.

Saudi Arabia “appears determined to respond aggressively in defence of its market share, even if that means lower prices for a few years,” Kenneth Ramírez, a professor of geopolitics and oil at the Central University of Venezuela, told IPS.

The Saudis are thus apparently facing off with Iran, their rival in the Islamic world – and which, like Venezuela, Russia or Nigeria, needs the biggest possible influx of revenue in the short term – and would discourage, with flows of low-cost conventional oil, the development of its big future rival: shale oil.

In addition, according to analyses like those of Habalián and Ramírez, low prices and a market with a greater supply of crude would “punish” nations like Syria or its big supporter, Russia, which is clashing with the West over the conflict centred in Ukraine.

In the immediate future, OPEC could opt for the Saudi proposal of maintaining the status quo and letting oil prices slide to 70 dollars a barrel or lower, with the aim of slowing down the development of shale oil while waiting for a recovery of Europe or China and other emerging economies.

Venezuela has tried to push another option, with an intense tour by Foreign Minister Rafael Ramírez to the capitals of oil producing countries, from Mexico City to Moscow through Tehran, but conspicuously avoiding Riyadh. The idea is to cut production to shore up prices, betting that the capacity to extract shale oil will decline in a few years.

One component that contributes to a move in that direction, said Habalián, is the pressure from environmentalists, especially in the United States and Canada, who oppose the extraction of shale oil and gas because of its impact on water sources, the injection of chemicals and the fracturing of rock deep underground.

A third option, said Ramírez, would be to ratify OPEC’s production ceiling of 30 million barrels a day, which would remove a small portion of the partners’ current excess supply “and although it would have a small impact on prices, it would send a signal that the organisation is not on the ropes.”

But in the medium to long term, Habalián observed, a new energy architecture in line with the market stability sought by the West continues to be bolstered, in the face of an OPEC strained by political and budgetary urgencies.

Editedo by Estrella Gutiérrez/Translated by Stephanie Wildes

Wind energy is slowly taking off in Kenya. Credit: Miriam Mannak/IPS

By Thalif Deen
UNITED NATIONS, Jun 10 2014 (IPS)

When the United Nations inaugurated the first-ever global forum on renewable energy last week, it provided a laundry list of financial pledges aimed at achieving one of the world body’s most ambitious goals: sustainable energy for all (SE4ALL) by 2030.

The forum specifically focused on the developing world where one out of five people are without access to basic energy: electricity.

According to the United Nations, Norway is expected to spend about 330 million dollars for global renewable energy this year, while Bank of America’s Green Bond has pledged some 500 million dollars over three years as part of a 10-year 50-billion-dollar environmental business commitment.

The collective 50-billion-dollar pledge was made by big businesses at the Rio+20 conference in Brazil in June 2012.

"With the Sustainable Energy For All Initiative being dominated largely by big energy corporations, multilateral development banks and private capital who seek commercial returns, it is doubtful if the interests of the energy deprived will be met at all." -- Meena Raman of the Malaysia-based Third World Network
Additionally, the Organisation for Petroleum Exporting Countries (OPEC) has created a one-billion-dollar fund for energy access.

And the African Development Bank has approved sustainable energy projects totaling some two billion dollars and mobilised co-financing totaling about 4.5 billion dollars.

Brazil, meanwhile, has reached out to nearly 15 million people, once living in veritable darkness, with its ‘Light for All’ programme.

Still, the commitments and achievements fall far short of the overall target for SE4ALL.

World Bank President Jim Yong Kim said last year that financing was the key to resolving the energy crisis, with a staggering 600 to 800 billion dollars needed a year from now until 2030.

He said the three goals are: access to energy, energy efficiency and renewable energy.

“We are now starting in countries in which demand for action is most urgent,” he said, pointing out that “in some of these countries, only one in 10 people has access to electricity. It is time for that to change.”

But to make that change, the United Nations has been marshalling resources, mostly from the private sector, big business and international organisations.

At the just-concluded forum, some of the corporate participants included senior officials from Bank of America, Citigroup, Coca Cola, Deutsche Bank, Royal Dutch Shell, Philips Lighting, Statoil and Sumitomo Chemical.

The meeting was attended by nearly a thousand delegates, including government leaders, energy practitioners, representatives of international organisations and non-governmental organisations (NGOs).

But civil rights groups and activists in the energy sector are sceptical about the role of big business.

Dipti Bhatnagar, climate justice and energy coordinator at Friends of the Earth International (FoEI), told IPS the SE4ALL initiative “has been co-opted by dirty energy corporations” and the United Nations is therefore not in a position to realise its goal.

The funders are led by an unaccountable, handpicked group dominated by representatives of multinational corporations, including oil giants such as Shell, that are investing billions in fossil fuels exploitation around the world, she charged.

“We have warned [U.N. Secretary-General] Ban Ki-moon that the SE4ALL and other U.N. initiatives have been captured by dirty energy corporations which use them to greenwash their image,” said Bhatnagar.

These companies are obstructing “the rapid transformation needed to reduce our dependence on fossil fuels and achieve a just and sustainable energy system.”

Meena Raman of the Malaysia-based Third World Network was equally apprehensive about the involvement of big business in SE4ALL.

“With the Sustainable Energy For All Initiative being dominated largely by big energy corporations, multilateral development banks (MDBs) and private capital who seek commercial returns, it is doubtful if the interests of the energy deprived will be met at all,” she told IPS.

The emphasis on centralised modern energy systems, which are expensive and not affordable to those who need them the most, undermines the very objective it is set to serve in term of ensuring universal access to modern energy services, Raman pointed out.

The objective of “ensuring universal access to modern energy services” must ensure that universal access needs to be prioritised.

She said a large percentage of the world’s poor in the developing countries get their survival energy needs from either collected or low-cost local-market-based traditional energy sources (which are under increasing threats from mining, expansion of urbanisation, industrialisation etc.).

“This is not necessarily because there are no modern energy services available in that society or locality, but largely because these poor people cannot afford those modern (and higher cost) energy services.”

Forcing the poor to the commercial energy market without foolproof systems to guarantee energy access for the poor will create more deprivations, more inequities, more distress, she argued.

Addressing the forum, Ban said,”Sustainable development is not possible without sustainable energy.”

Ban also launched the U.N. Decade of Sustainable Energy for All (2014-2024) focusing on energy for women and children’s health during the initial two years.

Bhatnagar told IPS the world’s current energy system is unsustainable and unjust.

“It is harming communities, workers, the environment and the climate.”

“To provide sustainable energy to those who are now excluded, we urgently need to transform our current, corporate-controlled energy system into one that empowers people to build clean, democratically controlled, renewable energy systems,” she warned.

Raman told IPS the first priority should be to drastically reduce the threats to the poor’s free access to free or low-cost energy services (while improving their quality of use with modern technological/technical & social inputs – and this has multiple benefits, including the health of women and small children).

She said the objective of providing “modern energy services” to those without such services at present, can thus be achieved only when the state plays a policy-determined role, and the market economy is strongly regulated to take cognizance of the widely differing capacities to buy energy services.

She said it cannot be done by de-regulating and privatising such services to big capital and markets.

“Too much emphasis on the private sector and market-economy is bound to concentrate more modern energy access to those who can afford to buy.”

Thus, the role of enlightened and inclusive state policies and actions will be paramount and should increase, rather than decrease, said Raman.

(END)