January 14, 2016

There Will Be Chaos: Big Oil's Collapse And The Birth Of A New World Order

Barrel prices have completely cratered. With alternative energies on the rise, geopolitics may never be the same

by Michael Klare

As 2015 drew to a close, many in the global energy industry were praying that the price of oil would bounce back from the abyss, restoring the petroleum-centric world of the past half-century. All evidence, however, points to a continuing depression in oil prices in 2016 -- one that may, in fact, stretch into the 2020s and beyond. Given the centrality of oil (and oil revenues) in the global power equation, this is bound to translate into a profound shakeup in the political order, with petroleum-producing states from Saudi Arabia to Russia losing both prominence and geopolitical clout.

To put things in perspective, it was not so long ago -- in June 2014, to be exact -- that Brent crude, the global benchmark for oil, was selling at $115 per barrel. Energy analysts then generally assumed that the price of oil would remain well over $100 deep into the future, and might gradually rise to even more stratospheric levels. Such predictions inspired the giant energy companies to invest hundreds of billions of dollars in what were then termed “unconventional” reserves: Arctic oil, Canadian tar sands, deep offshore reserves, and dense shale formations. It seemed obvious then that whatever the problems with, and the cost of extracting, such energy reserves, sooner or later handsome profits would be made. It mattered little that the cost of exploiting such reserves might reach $50 or more a barrel.

As of this moment, however, Brent crude is selling at $33 per barrel, one-third of its price 18 months ago and way below the break-even price for most unconventional "tough oil" endeavors. Worse yet, in one scenario recently offered by the International Energy Agency (IEA), prices might not again reach the $50 to $60 range until the 2020s, or make it back to $85 until 2040. Think of this as the energy equivalent of a monster earthquake -- a pricequake -- that will doom not just many "tough oil" projects now underway but some of the over-extended companies (and governments) that own them. . . .


Lutz Kleveman, "The New Great Game," The Guardian, October 20, 2003

Daniel Howden and Philip Thornton, "The Pipeline That Will Change the World," The Independent, May 25, 2005

Michael T. Klare, "Is Energo-fascism in Your Future?,", January 16, 2007

John Gray, "Control Oil and Water, Control the World," The Observer, March 30, 2008

M K Bhadrakumar, "Russia, China, Iran Redraw Energy Map," Asia Times, January 8, 2010

[things are going to get worse worldwide so everyone will suffer and is to 'blame'. The original source is the US Federal Reserve and its ludicrous, artificial interest rates caused by massive money printing which the world has copied. Throw in staggering debt increases by the US government . . . and there will soon be hell to pay.--Pepe Escobar, "Planet of Fear," Asia Times, January 21, 2016]

Ambrose Evans-Pritchard and Mehreen Khan, "Opec pleads for Russian alliance to smash oil speculators," Asia Times, January 27, 2016

[Today, the notion that oil is becoming scarce has all but vanished, and so have the benefits of a new era of petroleum plenty being touted, until recently, by energy analysts and oil company executives.--Michael T. Klare, "Energy Wars of Attrition: The Irony of Oil Abundance,", March 11, 2016]

Robert Fisk, "Saudi efforts to 'modernise' its economy away from oil are just PR tactics,", April 29, 2016

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