Between 1986 and 2005 the global spare oil production

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Unformatted text preview: ventional wisdom has not yet caught up. Most analysts expect that once the world economy starts recovering, global oil demand will rebound to its former growth rate of i.5-1.8 percent per year--a rate that would require the production of at least 1.8-2.o million barrels of new oil a day. This forecast is based on the anticipated increase in demand for motor transportation and motor fuels, itself the expected result of population growth and higher per capita income. But a return to prior growth rates is unlikely. For one thing, the market is responding to last year's high prices. Tracking the trend, the International Energy Agency has lowered its estimates for oil demand in 2030: it forecast 1o6 million barrels a day in its 20o8 report, down from 116 million barrels a day in its 2007 report. Projections of future demand will inevitably be cut even further: one extraordinary lesson of the last 6o years is that after every spike in oil prices, demand growth flattens considerably. 276 Oil DDW 2012 1 No Spare Capacity 277 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Spare capacity has declined for decades and lack of refineries prevent meeting demand Umbach, Centre for European Security Strategies (CESS), Munich-Berlin, Germany, 09 Frank Umbach, Centre for European Security Strategies (CESS), Munich-Berlin, Germany, 3-6-09, [“Global energy security and the implications for the EU,” Energy Policy Volume 38, Issue 3, March 2010, Pages 1229–1240,] E. Liu In times of crisis and conflict, additional capacity to pump oil and deliver natural gas is more limited than ever. A particular challenge for the stability of global energy security is multiple crises as we have witnessed in 2002–2003 when Venezuela’s oil production declined from almost 3mb/d to some 400,000b/d in early 2003 due to country-wide strikes to bring down Hugo Chavez’s presidency. It pushed oil prices above US$30 per barrel. In the following years, the November 3, 2002 earthquake in Alaska, the unrest in oilprovinces in Nigeria, export disruptions in Colombia as the result of guerrilla attacks on oil facilities and pipelines, terrorist attacks on a French oil tanker, a failed Al-Qaeda plot to sabotage oil facilities in Saudi Arabia as well as continued instability in the Middle East (Iraq-war) and Indonesia all contributed to a growing sense of insecurity of sufficient oil supplies and the inherent risks of relying too heavily specifically on Middle Eastern oil supplies (IISS, 2003). In 2007, Nigerian oil production declined to about 750,000b/d, while Russia cut oil deliveries to Belarus and civil as well as ethnic unrest in Iraq continued to disrupt a higher oil production (IEA, 2007a,b). Between 1986 and 2005, the global spare oil production capacity (‘‘the energy equivalent of nuclear weapons’’ – Morse and Richard, 2002) decreased from about 15% to just 2–3% of the global demand (Maugeri, 2006). In 2003, the previously available spare oil production capacity up to 7.3mb/d had already...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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