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One year after BP spill, geopolitics of oil intensifies
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Kai Ryssdal: We’re spending a little bit more time than usual this week talking about oil. Crude’s at about $108 a barrel at the moment — worth a conversation or two anytime. But the more lasting oil story dates back a year ago tomorrow, when the Deepwater Horizon exploded and started what’s come to be called the BP oil spill. Investigations since then have answered the basic question of why the rig exploded and how the leak happened. But maybe a better question is why BP was drilling in such an inhospitable place to begin with.
The answer is part geology because the easy-to-get-at, easy-to-refine oil is mostly gone. And part politics, too. Scott Tong reports from the Marketplace Sustainability Desk.
Scott Tong: Once upon a time, big oil companies could go around the world, write checks, and drill. On behalf of us, the consumer. That was a long time ago. Today, even though oil’s down there, political fences and stop signs limit our access. So we zoom around the world now, with the help of an atlas and an expert.
Steve Levine: Steve Levine. I’m a contributing editor at Foreign Policy. And I’m an adjunct professor of energy security at Georgetown’s School of Foreign Service.
First stop: The Middle East.
Levine: This is the epicenter of oil production in the world — now and going forward for, say, five decades. But the only place where a foreign oil company can drill for oil is Libya.
Ok, was Libya — until protests and war broke out. That means now, all Middle Eastern oil is controlled by governments. Many facing political unrest, including…
Saudi Arabia newsreel
Yes, the government of Saudi Arabia. State control of oil matters because Riyadh is expected eventually to tighten the spigot, pump less. Not for market reasons, but to save it for future generations of Saudis.
Steve Kopits: If you’re Saudi Arabia, you probably want to stay in the game for the long run.
Steve Kopits is with energy consultancy Douglas Westwood.
Kopits: So there’s an incentive to be measured about how they use those resources. At some point they’re going to say, that’s as much as we can do.
With the recent protests, the Saudi government has actually siphoned oil money away for handouts and subsidies to the people.
Amy Myers Jaffe studies oil markets at Rice University.
Amy Myers Jaffe: That’s money they won’t be spending expanding their oil fields. And that means less oil for other countries, like the United States and Europe down the road.
An even bigger producer than Saudi Arabia is Russia. So Steve Levine and I go there, or flip there.
Levine: When the Soviet Union collapsed 20 years ago, the oil consuming countries of the world looked at this place rubbing their hands together with glee.
Or so we thought. The problem…
Russian national anthem
Moscow. Levine’s case study is Chevron — it cut a deal with Russia to pipe more than a million barrels a day from the Caspian Sea. In 1993.
Levine: ‘Til this day, Russia has put a continuous stranglehold on those exports. It’s almost 20 years!
And here’s the thing: even if Chevron jumps through one more bureaucratic hoop, who knows if it’ll work in Russia.
Levine: You don’t know whether it’s the last hoop. And the number of the hoops and the character of the hoops change with the price of oil.
And the political angst goes from there. Hugo Chavez’s Venezuela? Dow Jones reporter Angel Gonzalez doesn’t even know how much Caracas has.
Angel Gonzalez: The government says one thing. OPEC says another thing. And the U.S. Energy Information Administration says a different thing. And nobody knows what to believe, either.
Africa, Steve Levine.
Levine: Can one say that Uganda is going to be a settled place? One can’t say that. Somalia?
Levine: It can’t get its politics right in the Niger Delta.
By one estimate, 75 percent of the world’s oil is politically uncertain. That includes the it country of the moment: Brazil, and its vast offshore fields controlled by state-owned Petrobras. The attitude in Brazil…
Levine: We have these big oil fields. We’re a serious player. When you say BRIC countries, incidentally we’re the B. And so Petrobras has made Brazil pretty much off limits.
Meaning, oil there may also not flow as quickly as we’d like. Meantime, global demand is hustling to catch up with supply. And when it does, here’s what John Hess, chairman and CEO of Hess Oil sees coming. He spoke at an industry conference.
John Hess: Prices will skyrocket. With the likely outcome of bringing the world’s economy to its knees. The $140 per barrel oil price of three years ago was not an aberration. It was a warning.
When will that come? Some predict next year. Others think 2020 or beyond, so there’s time to plan ahead. Either way, the geopolitics of oil — much more than the actual supply of oil — will hasten the day of reckoning.
In Washington, I’m Scott Tong for Marketplace.
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