fossilfuelopolis

Prospecting the academic grounds on global energies patterns

History

hist_petro_price

This page aims to give the reader a broader overview of…

History of oil production

oil field process of production

oil field process of production

 

 

 

 

global_trends_oil_production

Since the 70s, as will be explained below the production is mainly drawn from the giants and super-giants mostly situated in the Middle East. This trend is reflected below. Further information on where giants and super-giants in this report.

robelius

History of the oil market

“The global oil market has never been a free market. As early as 1912, Great Britain nationalized its overseas supplies by acquiring control in the Anglo-Persian Company (BP’s ancestor) and secretly arranging 20-years preferential terms for the British Admiralty. In the 1930’s, the US department intervened in Kuwait to secure concessions for American firms. Oil is a strategic commodity whether during war or peacetime. OPEC was an instrument of US power. […] This perception fed widespread support for Al-Qaeda and Osama Bin Laden throughout the Islamic world because it was believed that the Saudis were carrying out US policy, particularly on oil price, volume production, and exports.” (Wihbey, 2009: 97)

In the early twentieth, western oil companies develop the oil technologies […] and start exploring abroad in theirs colonies. Majors companies known as the 7 sisters control most of the oil production from the exploration to the refining.

Drilling in the Middle East being far less costly than in US, most of the production is re-oriented there under the control of …

“For the twenty-five years after the WWII, the international fuel economy was dominated by the increasing exploitation of Middle East oil reserves. The enthusiasm […] was due to its exceptionally low costs. By the mid-60s, the maximum economic finding cost of Middle East oil lay between ten to cent per barrel, which was about 5-10% of the realized free on board price that had been set on world markets by the oil companies in the 50s. […] The price threat to US producers was stark. By the late 40s, with oil selling for around 2.50 dollars a barrel, such that stripper-well operators in Texas could earn a 10% profit, Middle East oil with a total cost of 85 cents a barrel, was already highly price competitive” (Martin Chick, in “Oil producing Countries and Oil companies”)

But in the 60s-70s a range of national re-appropriation of theirs undergrounds occur in many countries. In southern countries this process occurs through the decolonization (Algeria, Africa, …Middle East) while in Norway for example the debate over how much control the State should exercise on the oil company start raging.

The picture below presents the power of national oil companies (as declared reserves in oil (equivalent) barrels)

NOCs

However, interpreting this picture raises two concerns:

  • First, it gives the impression that Nations through theirs national oil companies control over theirs resources. For southern countries (in Africa notably- but this phenomenon was also highlighted in South America) nothing is less true. In the 60s, when African states nationalize theirs undergrounds, their lack of technological mastery necessarily force them into accepting technological supervision. This subject has been weakly documented but part of it is treated in “The scramble for African oil” by D Yates. The case of SONANGOL, the Angolan oil company, is characteristic of this western supervision (hence appropriation of oil resources). This case in described on this page.  Nigeria, the main African exporter to the US, where Shell and BP operate.
  • PEMEX, the Mexican oil company, is another example of the long process to acquire independence from western dominance.
  • The second concerns is the endogeneity of reserves estimates. Since announcements of reserves is determinant on the market (for both prices and investors behaviors), case of misreporting are frequent. As an example, Saudi Arabia has always been suspected to over-evaluate its resources, BP was recently reviewing its estimations downward.

History of the oil estimated reserves

As explained above, estimation of global oil reserves is a dynamic subject; highly controversial. Reading from the 80s gave the following estimates:

while contemporary estimates now fall within the range 2,000-4,300 billion barrels (Gb), compared tocumulative production through to 2007 of 1,128 Gb.

As the price of oil increases (as explained in the section reserves and market), exploration and exploitation of new fields become profitable. The recent announcement of a new start of oil exploitation (of schist/shale oil) in the US, the count of unconventional oil as reserves (in Canada, and Venezuela) as explained by P W are examples of this dynamic.

global_trends_proved_reserves

History of the oil consumption

Oil consumption is mostly American until the 50s. Britain and France still rely heavily on their coal industries, Martin Chick referring to the UK as a “coal-producing” economy. (insert table)

France rely increasingly on fuel imports from the 50s to the first oil shock as depicted in the above table.

“In fuel-poor France, from the Jeanneney Plan for the contraction of the French coal-mining industry from 1960s onwards, governments explicitly pursued a policy favoring oil imports, albeit from what were deemed to be “French” sources” (Martin Chick, ibid).

‘Since Jeanneney opposed giving ‘an absolute priority’ to French coal mining if it placed coal-burning French industries in an international competitive disadvantage, he also viewed any talk of a protectionist fuel policy as contrary to French national interests’ […] ‘in general he pursued (within the European Coal and Steel Community […] which was designed to maintain fuel prices at a high level to all Community members’.

And Martin Chick to insist: ‘More particularly, in pursuing a fuel policy favouring oil imports, there was a distinctly French aspect to the sourcing of these imports. France had long sought le pétrole franc and l’indépendance pétrolière and during the 60s this carried over into favouring oil imports from Algeria. Yet supplies of Algerian oil came at a rising cost to France during the 60s. During the 70s, French companies were to lose most of their oil assets in Algeria, while the French government was forced to stand by as Algeria became a member of OPEC and encouraged the organisation’s moves to increase prices. Throughout the early 70s, the Algerian government steadily increased the per-barrel tax payable by French companies. Since to boycott Algerian oil would hurt mainly the French companies, France found itself committed to paying an expensive price for such security of oil supply […] With three quarters of France’s energy requirements being met by oil in 1973, even such a supposedly “friendly” source of oil as Algeria was not looking particularly “secure” or reliable.”

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