This is a subject so complex that, most of the time, I’m only aware of it vaguely: can’t quite grasp it, a bit like trying to catch steam in a collander.
My stream of consciousness goes something like this. For the past year the global trading price of oil has been falling. This is said to be due to a glut, caused by over-production. The main producers are Russia, China, Canada, various Middle-East states, a couple of African countries (e.g. Nigeria, Algeria) and some South American countries like Venezuela. In all just over 100 countries produce oil and the top ten deliver about 65% of all the oil produced. The biggest producer is the United States, and the majority of their oil now comes from shale-oil. Oil production is still going up, the price is still going down, the US is now a major exporter of oil and, for the first time, the UK (a producer in its own right and 23rd in the list) is importing oil from them. The simplistic view of economics is that the supply vs demand ratio determines commodity price: the scarcer a commodity the more valuable it is. One has to wonder, then, why members of OPEC (a cartel – The Organisation of Oil Producing Countries) persist in producing when the effect is to lower the price of oil and, theoretically, the value of their proven reserves.
It seems to me one plausible reason is to “turn the screw” on Russia. Russia has been subject to international sanctions for over a year (at time of writing) ostensibly because of that country’s actions in Ukraine and their annexation of part of Crimea. The sanctions, amongst other things, have restricted movement of capital and shackled their economy putting pressure on the value of the Rouble. Russia supports Syria. The west wants to topple the Syrian regime. Iran, another major oil producer (7th on the list), has recently been “brought in from the cold” by the US following a protracted campaign to prevent them from developing nuclear power and weapons. Israel, which is not at all happy to have Iran back in the fold, is however happy to see the value of Iranian oil production restricted, as is Saudi Arabia. Saudi Arabia produces roughly the same amount of oil as Russia and is locked in a ‘cold war’ with Iran. Both countries are engaged perhaps indirectly, but certainly through proxy, in a hot war in Syria and Iraq.
While all this Machiavellian global power play plotting goes on, the world faces another, ultimately more dangerous, threat: global warming. We desperately need to abandon carbon-based economies and develop sustainable ‘green’ technologies, but while oil is gushing out of the ground at artificially low prices the economics of doing it don’t stack up. If proof were required of a direct effect of this on global warming it has recently been revealed that, in the UK anyway, the steadily falling price of motor fuel has resulted in a commensurate rise in use of motor vehicles: optional travel by road is evidently very price sensitive. It’s hard enough to wean people off the use of private transport without encouraging un-necessary travel by artificially lowering costs. We should be leaving the oil in the ground, but then the super-powers would have one less lever to pull in their struggle for world domination.