Petroleum, Oil, Shale Gas, and Power.

• What is Petroleum?

 

Petroleum has been used by humans for thousands of years, primarily as a source of fuel for lamps and for medicinal purposes. However, the widespread use of petroleum as a fuel source began in the mid-19th century with the advent of the industrial revolution. The first modern oil well was drilled in Pennsylvania in 1859, and the use of petroleum as a fuel for transportation, industry, and electricity generation rapidly spread around the world.

 

Petroleum is a complex mixture of hydrocarbons, which are molecules made up of hydrogen and carbon atoms. The main groups of petroleum include crude oil, which is the raw material extracted from the ground; natural gas, which is mostly made up of methane and is often found alongside crude oil deposits; and petroleum products, such as gasoline, diesel, and jet fuel, which are refined from crude oil.

 

The global power movement around petroleum began in the early 20th century, when countries began to recognize the strategic importance of controlling access to oil reserves. During World War I, the British government took control of oil reserves in Iraq, and other countries soon followed suit. The rise of oil-rich countries such as Saudi Arabia and Iran in the mid-20th century further heightened tensions over control of petroleum resources.

 

The origin of the petrodollar can be traced back to the early 1970s, when the United States was facing high inflation and a weak economy. In response, President Nixon removed the US dollar from the gold standard and made a deal with Saudi Arabia to price oil in dollars. This meant that other countries had to buy dollars in order to purchase oil, creating a huge demand for dollars and solidifying the US dollar's position as the world's reserve currency. This system has had significant implications for global economic and political power dynamics.

 

• Major Producer Countires of Petroleum.

 

The major producer countries of petroleum are those with significant reserves of crude oil and natural gas. The top five petroleum-producing countries in the world, as of 2021, are:

 

United States: The United States is the largest producer of petroleum in the world, with an estimated production of over 19 million barrels per day.

 

Saudi Arabia: Saudi Arabia is the second-largest producer of petroleum in the world, with an estimated production of over 11 million barrels per day.

 

Russia: Russia is the third-largest producer of petroleum in the world, with an estimated production of over 10 million barrels per day.

 

Canada: Canada is the fourth-largest producer of petroleum in the world, with an estimated production of over 5 million barrels per day.

 

China: China is the fifth-largest producer of petroleum in the world, with an estimated production of over 4 million barrels per day.

 

The major national organization of oil is the Organization of the Petroleum Exporting Countries (OPEC). OPEC is a group of 13 countries that produce and export petroleum, including Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela, among others. OPEC was established in 1960 and aims to coordinate and unify the petroleum policies of its member countries, in order to secure fair and stable prices for petroleum producers and ensure a regular supply of petroleum to consumers. OPEC has a significant influence on global petroleum prices and production, and its decisions have major implications for the global economy and energy markets.

  

 

• Any Quality Difference?

For example, crude oil from the Middle East, such as those produced by Saudi Arabia and Iran, is typically of a high quality and has a low sulfur content, which makes it easier to refine into high-value products like gasoline and diesel. In contrast, crude oil from Venezuela and Canada is typically heavy and contains a high amount of sulfur, which makes it more difficult and expensive to refine.

 

The ingredients of each country's oil can also vary depending on the geological formation and extraction method. For example, oil from the North Sea, such as those produced by Norway and the United Kingdom, is typically light and sweet, while oil from the Gulf of Mexico, such as those produced by the United States and Mexico, is typically heavier and contains more sulfur.

 

The differences in oil quality and ingredients can have significant implications for the refining process and the end products produced from the crude oil. For example, refineries that specialize in processing heavy crude oil may not be able to process light crude oil efficiently, and vice versa. Additionally, the differences in oil quality and ingredients can also affect the environmental impact of oil extraction and refining, as heavy crude oil often requires more energy and produces more emissions during the refining process.

 

• The Price Change of Oil.

 

The price of oil has experienced significant fluctuations throughout history, driven by a range of factors including global demand, supply disruptions, geopolitical events, and economic conditions. Here are some key price changes of oil by timeline:

 

1973-1974: During the Yom Kippur War, Arab countries imposed an oil embargo on countries that supported Israel, leading to a significant increase in oil prices. The price of oil quadrupled from $3 per barrel to nearly $12 per barrel.

 

1980-1986: The Iran-Iraq War and oversupply of oil led to a steep decline in oil prices. The price of oil dropped from a high of nearly $40 per barrel in 1980 to less than $10 per barrel in 1986.

 

1990-1991: The Gulf War led to a temporary increase in oil prices due to supply disruptions. The price of oil briefly rose to nearly $40 per barrel before falling back to around $20 per barrel.

 

1998-2008: Growing demand from emerging economies, such as China and India, led to a steady increase in oil prices. The price of oil rose from around $10 per barrel in 1998 to nearly $150 per barrel in 2008.

 

2008-2009: The global financial crisis led to a sharp decline in oil prices due to a decrease in demand. The price of oil dropped from a high of nearly $150 per barrel in July 2008 to around $30 per barrel in December 2008.

 

2014-2016: A combination of oversupply, slowing demand from China, and the lifting of sanctions on Iran led to a sharp decline in oil prices. The price of oil dropped from around $100 per barrel in mid-2014 to below $30 per barrel in early 2016.

 

2018-2020: Increasing tensions between the US and Iran, supply disruptions in Venezuela, and production cuts by OPEC and Russia led to a modest increase in oil prices. The price of oil rose from around $50 per barrel in early 2018 to around $70 per barrel in mid-2019 before falling again in 2020 due to the COVID-19 pandemic and a collapse in demand. The price of oil briefly went negative in April 2020, with prices as low as -$37 per barrel, due to a supply glut and lack of storage capacity.

 

 

• The Rival? Shale Gas and Oil.

 

Oil and shale gas are related in that they are both hydrocarbons and are often found together in the same geological formations. Shale gas is a type of natural gas that is trapped within shale rock formations, and it can be extracted using hydraulic fracturing, or fracking, which involves injecting water, sand, and chemicals into the shale rock to release the gas.

 

The development of shale gas has had a significant impact on the global energy landscape in recent years, as it has helped to increase the supply of natural gas and reduce dependence on other fossil fuels, such as coal and oil. Shale gas is also considered to be a cleaner-burning fuel than coal, as it produces fewer emissions of greenhouse gases and air pollutants.

 

The use of shale gas dates back to the 19th century, when it was first discovered in the United States. However, it was not until the 21st century that shale gas production began to increase significantly, due to advances in fracking technology and higher natural gas prices. The United States has been at the forefront of the shale gas revolution, with shale gas production increasing from less than 1 trillion cubic feet per year in 2005 to nearly 20 trillion cubic feet per year in 2019.

 

The development of shale gas has also had a significant impact on the global oil market, as natural gas is often used as a substitute for oil in power generation, transportation, and other applications. In some cases, shale gas has also led to an increase in oil production, as the same hydraulic fracturing technology used to extract shale gas can also be used to extract oil from tight rock formations.

 

Overall, the relationship between oil and shale gas is complex and interrelated, and the development of shale gas has had both positive and negative impacts on the global energy landscape. While shale gas has helped to increase the supply of natural gas and reduce dependence on other fossil fuels, it has also raised concerns about environmental impacts, such as water pollution and methane emissions.

 

• OPEC.

 

The Organization of the Petroleum Exporting Countries, or OPEC, is a global organization that was formed in 1960 to coordinate and unify the petroleum policies of its member countries. The founding members of OPEC were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, and the organization has since grown to include a total of 13 member countries.

 

The primary reason for the formation of OPEC was to increase the bargaining power of its member countries in the global oil market. By working together to control oil prices and production levels, OPEC hoped to achieve greater stability and profitability for its members.

 

One interesting fact about OPEC is that the organization has had a significant impact on the global energy landscape over the past several decades. OPEC countries control a significant share of global oil production, and their decisions about production levels and prices have had a major influence on the global economy.

 

Another interesting fact about OPEC is that the organization has had a complex relationship with the United States and China. In the past, OPEC has been seen as a direct challenge to the dominance of the US in the global energy market, as the US has historically been a major consumer of oil. More recently, China has emerged as a key player in the global energy market, and OPEC has sought to build closer ties with China as a major customer for its oil.

 

Within OPEC, Saudi Arabia is often seen as the key player, as the country has historically been the largest producer of oil within the organization. Saudi Arabia has also played a major role in setting production levels and prices within OPEC.

 

Overall, OPEC has played a major role in shaping the global energy landscape, and its decisions about production levels and prices have had a significant impact on the global economy. However, the organization also faces challenges in balancing the interests of its member countries and responding to changing global energy trends and geopolitical realities.

 

• OPEC's Relationship.

 

The relationship between OPEC and China has become increasingly important in recent years, as China has emerged as a major consumer of oil and a key player in the global energy market. OPEC has sought to build closer ties with China by offering preferential pricing and investing in Chinese energy infrastructure. China, in turn, has sought to diversify its sources of oil by increasing imports from OPEC countries and investing in OPEC-member countries' energy sectors. However, OPEC's relationship with China has also been marked by tensions over pricing and production levels.

 

The relationship between OPEC and the US has been complex and often contentious, as the US has historically been a major consumer of oil and has sought to maintain its dominance in the global energy market. OPEC has often been seen as a direct challenge to the US, and the two sides have clashed over issues such as production levels, pricing, and sanctions. However, in recent years, the US has become less dependent on oil imports from OPEC countries due to increased domestic production, and its relationship with OPEC has become less adversarial.

 

The relationship between OPEC and the EU has been influenced by the EU's efforts to reduce its dependence on imported oil and increase its use of renewable energy sources. OPEC has often been seen as a major obstacle to these efforts, as the organization seeks to maintain its control over the global oil market. However, OPEC has also recognized the importance of the EU as a major consumer of oil and has sought to build closer ties with the EU through trade agreements and other initiatives.

 

The relationship between OPEC and Russia has been complex and often influenced by geopolitical tensions. Russia is not a member of OPEC, but the country has cooperated with OPEC in the past to control oil production levels and prices. However, the relationship between OPEC and Russia has been strained at times, particularly during periods of low oil prices or geopolitical tensions between Russia and OPEC-member countries such as Saudi Arabia.