The Climate Post: OPEC Discord May Be “the Beginning of the End” of the Oil Cartel


10 Jun 2011

With oil prices high, the International Energy Agency (IEA) last month made a rare plea for the world to produce more oil. So the latest meeting of the Organization of Petroleum Exporting Countries (OPEC), where they set their production quotas, was closely watched. After a rancorous meeting, most member countries refused to raise quotas.

Before the OPEC meeting, the chief economist of the IEA, Fatih Birol, told the New York Times: “Oil prices are hurting the economy.” He added, “I hope to see more oil in the markets soon.”

Saudi Arabian Oil Minister Ali al-Naimi declared it “one of the worst meetings we ever had,” with opposing views from the “haves” and “have-nots”—in terms of spare production capacity.

Saudi Arabia had been pushing to boost production by more than 1.5 million barrels per day, above current levels. Already OPEC members have gone beyond their quotas, producing an estimated 28.8 million barrels per day, compared to the current overall quota of 24.8 million barrels per day. “Everybody in OPEC is cheating and everyone knows that,” an oil analyst told the New York Times.

The Saudi oil minister suggested his country would decide on its own production levels, telling Platts, “let the buyers come and we will supply them with what they want, whatever they need.” The Wall Street Journal quoted one Gulf-state delegate as saying it’s “the end of the quota system,” and the Guardian reports some analysts say the split could mark the beginning of the end for the cartel.

Some analysts argued OPEC doesn’t matter, and Russia is the big winner, since they have added more to exports in the past few years than Saudi Arabia, and have the ability to boost their production further.

Is Increasing the Gas Tax the Answer?

The head of General Motors’ North American unit predicted gasoline prices will continue to climb in coming years. While, General Motors’ CEO, Dan Akerson, called for higher gas taxes to push people to buy more efficient cars. “We ought to just slap a 50-cent or a dollar tax on a gallon of gas,” Akerson said.

Meanwhile, the Liveable Communities Taskforce in the U.S. House of Representatives issued a report titled “Freedom From Oil.” “Providing a range of transportation choices can help break auto dependence,” the report said, and it encouraged a range of measures from more efficient cars, to better city planning, to “pay-as-you-drive” auto insurance.

Clean Energy Trade Wars

Subsidies for clean energy and emissions trading schemes were also a source of discord, within countries and internationally. China agreed to end subsidies that favored wind power firms using domestic parts, after the U.S. complained it was protectionism that broke World Trade Organization rules.

Starting next year, the European Union plans to include flights in and out of Europe in its greenhouse gas emissions trading system. But China may threaten a trade war over this issue, following on U.S. carriers, who have already started a legal battle to fight European Union levies on flights.

In several countries, feed-in tariffs that subsidize renewable energy are on the chopping block. The United Kingdom is considering slashing its subsidy by 40 to 70 percent for installations producing more than 50 kilowatts, but the solar industry pleaded for a re-think, saying the move would “decapitate” the industry. The chief policy director of the Confederation of British Industry said “business confidence has clearly been bruised by sudden and unexpected policy shifts,” including the reversal of these tariffs.

Climate Talks Stumble, Coal Rises

A few countries are starting to oppose an extension of the Kyoto Protocol. The climate treaty expires in 2012, and countries have been trying to negotiate a successor, but with limited success. At the latest round of talks in Bonn, Germany, one of Canada’s delegates said their country would not take on any emissions targets under an extension of the treaty. Russia and Japan also took a similar stance. The European Union’s lead negotiator said it may take until 2014 or 2015 to create a full successor treaty.

To help cut emissions and cope with a decline of nuclear power, the world could create a “golden age of gas,” according to a new IEA report. However, renewable energy such as wind and solar is often competing with natural gas—so the rise of natural gas could “muscle out” renewables, delaying their deployment.

Only six months ago, the IEA was warning about a gas glut, but that is already beginning to dissipate as gas demand has surged. In part this is due to increased imports by Japan of liquefied natural gas, after shutting another of its nuclear power plants.

The world may be moving increasingly toward coal, according to numbers published in the latest BP Statistical Review. Coal consumption  rose to 29.6 percent of the world’s energy—its highest share of the energy mix since 1970—with China’s use growing 10 percent in 2010, but richer countries also consuming 5 percent more in 2010. To reflect the rise of renewables, BP added them to their report for the first time, reporting that in 2010, solar grew 73 percent and wind close to 25 percent.

A New Kind of Crude

Instead of relying one kind of black goop—crude oil—to power cars, researchers at MIT developed another liquid they call “Cambridge crude.” The conductive liquid can store electrical charge, so that the battery could be slowly charged by plugging it in, or could be quickly “refueled” by draining the liquid and pumping in a new, pre-charged batch—giving electric cars the flexibility of fuel cars.

The Climate Post offers a rundown of the week in climate and energy news. Written by Mason Inman, it is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

bookshelf

books I've read on failure & grace

The World Without Us
The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man
Zeitoun
A Paradise Built in Hell: The Extraordinary Communities That Arise in Disaster
Hell and High Water: Global Warming--the Solution and the Politics--and What We Should Do
The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl
The Tipping Point
Three Cups of Tea: One Man's Mission to Promote Peace... One School at a Time
The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization
Out of Poverty: What Works When Traditional Approaches Fail
The Little Ice Age: How Climate Made History, 1300-1850
Confessions of an Eco-Sinner: Tracking Down the Sources of My Stuff
Deep Economy: The Wealth of Communities and the Durable Future
The Geography of Bliss: One Grump's Search for the Happiest Places in the World


Mason's favorite books »

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