Greasing the Global Economy

For how much longer can the world afford its economic dependence on oil?

December 13, 2001

For how much longer can the world afford its economic dependence on oil?

Few resources are as sought after by consumers and producers as oil. The world’s dependence on black gold turned Arab societies upside down — literally making billionaires out of former nomads. Yet, other than creating amazing riches for its producers, oil is also a highly politicized commodity. While oil-exporting countries try to control supply, demand is ever increasing — especially in the world’s largest economy, the United States. Our new Globalist Factsheet takes a look at oil producers and consumers — and why the world continues to bicker about oil.

Where are most of the oil reserves concentrated?

The Middle East has about two-thirds of the world’s proven oil reserves.

(Wall Street Journal)

Why is political stability in the Middle East so important?

After the Iraqi occupation of Kuwait in 1990, oil prices increased to $45-50 per barrel — and helped to tip the U.S. economy into a full scale recession.

(Zurich Financial Services)

How democratic are the world’s largest oil producers?

As of 2001, Freedom House rated seven of the 15 top oil exporters as “not free”.

(Transatlantic Futures)

How dependent is the United States on the Gulf region?

Back in 1974, the United States imported 1 million barrels of oil per day from the Persian Gulf, compared to 2.5 million a day in 2001.

(New Republic)

How much money does the world’s leading exporter earn from oil?

In 2000, Saudi Arabia officially earned $80 billion in oil revenues. Another $16 billion of additional oil sales were not reported — and instead used to finance the royal family.

(New York Times)

How close is the relationship between the United States and Saudi Arabia?

As of 2001, Saudi Arabia supplies one-sixth of the United States’ oil — and purchases $6 to $10 billion of U.S. goods every year.

(Wall Street Journal)

How much oil does the United States produce by itself?

As of 2001, the United States produces about 40% of its need for oil and imports the rest — 1.2 million barrels a day from Saudi Arabia alone.

(Wall Street Journal)

How has the U.S. oil sector fared over the last 30 years?

Since 1972, U.S. energy consumption has risen about 27%, while domestic oil reserves have fallen by about 30%.

(Oxford University)

What needs to be done to turn things around?

Increasing the average fuel economy in the U.S. by a single mpg would save 300,000 barrels of oil each day — or 1.5%. If fuel efficiency was improved by 5 mpg, oil efficiency would improve by 7.5% — or 1.5 million barrels daily.

(Newsweek)

How important is OPEC to the global oil market?

As of 2000, the 11 members of OPEC produced 40% of the world’s oil.

(Worldwatch Institute)

What about Russia’s role in the oil game?

Unlike OPEC governments — which can command their state-owned oil monopolies to stop pumping oil — the Russian state has a tougher time controlling production, since it is dependent on the decisions of the country’s dozen privately held oil companies.

(Wall Street Journal)

How much does Russia export?

As of 2001, Russia exports almost three million barrels of oil a day — and has promised to double that.

(Wall Street Journal)

How easily could Russia’s exports be increased?

While Russia has the capacity to be the world’s largest oil producer, its current pipelines are not able to export even one-fourth of that capacity.

(Washington Post)

And finally, has the cost of oil developed as planned over the decades?

After the 1970s oil shocks, America’s Department of Energy predicted that oil would cost $150 a barrel (at 2000 prices) — and Exxon predicted a price of $100.

(Economist)

December 13, 2001