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Oil World in Chaos and the Desperate Plight of the Petro-States


#1

Oil World in Chaos and the Desperate Plight of the Petro-States

Michael T. Klare

Pity the poor petro-states. Once so wealthy from oil sales that they could finance wars, mega-projects, and domestic social peace simultaneously, some of them are now beset by internal strife or are on the brink of collapse as oil prices remain at ruinously low levels. Unlike other countries, which largely finance their governments through taxation, petro-states rely on their oil and natural gas revenues.


#2

Mr. Klare would perhaps have us forget that for the last two decades of the 20th century the oil price was about $20; then it rose to about $50 by 2005 and these same petro states were dancing the jig. Now it's $50 again and we're supposed to have pity on them?

It isn't the oil price but the cost of production having, in many if not most cases, risen which has narrowed the profit margin. The increased cost of production - this is the real oil price, but hardly ever discussed - narrowed the margins, but not if you had 'old' oil, as all these states do.

The windfall from the $100 oil era was largely squandered. The current 'collapsed' price is just a return to trend on the graph of historical prices. Over time, prices will always be above the cost of production. But in an industry in which that cost can be anywhere between $10 or less and $140 [??] , stabilizing the midpoint is the biggest commodity price calamity in history.

Welcome to the 'undulating plateau' predicted by the oft dismissed 'peak oilers'.


#5

Yes indeed. The fracking boom is not sustainable for long.