Crude Power: Politics and the Oil Market 9781845110239, 9780755620197, 9780857711793

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CRUDE POWER

I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I

CRUDE POWER Politics and the Oil Market

0YSTEIN NORENG

LB.Tauris PubliJherJ LONDON. NEW YORK

Reprinted in 2007 by I. B. Tauris & Co Ltd

ISBN 978 1 84511 023 9

Printed and bound by Thomson Press India Limited

CONTENTS

List offigures Preface Introduction: The oil market, the United States and the Iraq War 1

2 3 4 5

The necessity of oil Foreign powers and Iviiddle Eastern oil Oil supplies, OPEC, oligopoly and politics The political economy of oil prices The persistent political risks

Notes Appendix:l:'zgure data in tabular form Bibliograpf?y Index

Vi Vll iX

1

52 103 152

187 219 233 241

249

FIGURES

1 2 3a 3b 4 5 6 7 8a 8b 8c 8d 9a 9b 10 11 12a 12b 12c 13a 13b 14 15

Oil prices 1970-2000 OPEC Middle East population 1970-2000 OPEC J'v1iddle East oil extraction per capita 1970-2000 OPEC Middle East oil output value per capita 1970-2000 OPEC Middle East oil exports 1970-2000 World oil product category consumption 1972-2000 World energy consumption 1973-2000 Annual changes in oil and total energy demand 1974-2000 Oil demand by products and regions 1973-2000: USA Oil demand by products and reglOns 1973-2000: Western Europe Oil demand by products and regions 1973-2000: Japan Oil demand by products and regions 1973-2000: rest of the world US economic repercussions 1972-2000 North Sea oil price increase (real) 1972-2000 US oil imports and Saudi oil production 1973-2000 OPEC Middle East military expenditures 1970-1999 OPEC population 1980-2000 OPEC oil reserves 1980-2000 OPEC oil production 1980-2000 OPEC oil export revenues 1980-2000 OPEC oil export revenues per capita 1980-2000 World, OPEC and Gulf oil supplies 1960-2000 Non-OPEC oil supplies 1960-2000

14 18 19 19 20 32 33 34 35 35 36 36 41 41 95 121 139 140 140 142 142 146 151

PREFACE

The present book is the paperback edition of the final report to the Petropol Programme of the Norwegian Research Council from the project Oil Prices, Market Power and Politics, originally published in hard cover in 2002. The intention was to prepare a comprehensive book on the interaction of economic and political forces in the world oil market. Generous funding and patience from the Petropol Programme during the years 19972000 provided the author with extensive resources and time to carry out the project. The introduction written for the paperback edition addresses the evolution of the international oil market and related politics since 2001. Even if dramatic events, such as the Iraq \Var and the oil price risc, were not foreseen in the book, they confirm the thrust of the argument that the international oil market is essentially shaped by politics and bargaining strengths rather than conventional market forces. From this perspective, it is the author's hope that the book will still be of some interest. The author is grateful for advice and critical comments from many colleagues and friends and would like to thank in particular Bjorn Brochrnann, formerly with Norsk Hydro, Tor Kartevold of Statoil, Daniel Heradstveit of the Norwegian Institute for International Affairs, Svein Andersen and Arne-J on Isachsen of BI Norwegian School of Management, Helge Hveem of the University of Oslo, Hilde Henriksen Waage, Are Hovdenak and Stein Tonneson of the International Peace Research Institute, Oslo, Paul Horsnell of Chase J.P. Morgan, formerly with the Oxford Institute for Energy Studies, Angel de la Vega of the Colegio de Mexico, Valery Kryukov of the University of Novosibirsk, Nadine Bret-Rouzaut and JeanPierre Favennec of the Institut Fran