A few months ago GLOBAL PERSPECTIVES predicted that the price of oil would rise to unprecedented levels. It hit new highs in 2006 and some believe the price could reach $100 per barrel. The impact on economies of developed nations would be major.
Why? Because the world supply and demand for oil among the world’s giant oil nations is a perfectly “balanced” market. That means, that buyers are buying every single barrel that is produced, and sellers have eager buyers for every barrel they can bring to market.
But, when there is a problem in the world, whether it be natural disaster, a bomb blast that disrupts transportation, or a political change that lowers production, this “perfectly balanced” market has potential to run askew. Because of the resultant increased demand, vs. supply.
With the disastrous situation in Iraq, an uncertain situation in Iran, sabers rattling in North Korea, plus the daily increasing demand for oil by India and China, the world oil market becomes a dicey proposition.
Thus, now a collection of small countries largely inignored or off of the radar screen of public media, have found that their “oil” is like the “deciding vote” or the “swing vote” in the world oil economy. Without these “little guys” and their combined production, oil prices could easily climb to historic highs and seriously impact the world economy.
Who are they and how much do they produce?
1. Ecuador produces 533,000 barrels of oil a day. The country has recently proposed a tax on foreign oil producers, similar to a “windfall profits” tax. The country needs the revenues, and companies such as Occidental Petroleum are protesting loudly. Ecuador produces 15% of all of the oil used on the U.S. Pacific Coast. China has recently been courting Ecuador’s leaders for a piece of that production. The United States is largely asleep at the wheel on this, and needs to take steps to improve support, relations, and understanding of Ecuador’s needs. They are an educated and friendly people, but the USA has historically snubbed Ecuador. It is time for the USA to grow into a mature relationship with this producer. Boothe and Associates has contacts and expertise to help investors enter the Ecuadorian market.
2. Argentina produces 777,000 barrels of oil a day. It is one of South America’s strongest economies. Production is declining because investors have been dwindling. American oil companies have capital. It is time for them to take advantages of the opportunities now available to develop new resources in Argentina.
3. Venezuela is the largest producer in Latin America, with 2,600,000 barrels a day. The United States made a huge mistake by sponsoring efforts to have its popular President, Hugo Chavez taken out of office. We need a new face of democratic cooperation with Venezuela. Chavez is a political liberal, but that may be what his country needs at this point of development. He has done many good things for the people there. U.S. Foreign policy leaders should remember the old adage, “He who has the gold makes the rules” and Chavez has the largest pool of black gold in Latin America. We need the friendship of Venezuela.
4. Chad produces 180,000 barrels of oil a day. The government is under attack by rebels, but a new pipeline allows exports to the Atlantic Ocean. Perhaps we should take efforts to help stabilize Chad's government, and strengthen our relationship with Chad.
5. Equatorial Guinea produces 358,000 barrels of oil a day. It is a “pirate’s haven” but it is the third ranking African exporter to the USA.
6. Egypt produces 696,000 barrels a day. Mubarak has been generally friendly to the USA but the Muslim community is strong there, and terrorists continue to clash with non Muslim groups. This country controls the Suez Canal. But better U.S. relations in Egypt would pay rich dividends.
7. Sudan, with 241,000 barrels a day is another corrupt haven, and has enormous potential for future development.
8. Yemen at 405,000 barrels a day has similar problems with Muslim radicals, and is potentially a "hot spot".
9. Bahrain produces 198,000 barrels a day, and also has Sunni vs Shiite in conflicts.
10. Azerbaijan with 450,000 barrels a day is dealing with an independence movement. It has a new pipeline form the Caspian to the Mediterranean.
11. Syria with 458,000 barrels a day has an unstable government, with declining oil fields.
12. Mongolia, a new entry to the world oil market has huge reserves. China has purchased most of Mongolia's production and takes the oil directly to refineries just across the border in China. But Mongolia is a friend of the USA and serious effort should be made by U.S. oil companies to develop and expand oil production there. If Mongolia had internal refineries, it would not be so dominated by China. U.S. oil companies have the capital and expertise. BBA Mongolia is the leading "American/Mongolian" joint venture to help companies enter the Mongolian market with the proper contacts and credentials. Munkhdelger Boldbaatar in the USA said: "Mongolia needs investors. We can guide U.S. investors to reputable projects and help get goverment approvals for new business operations in Mongolia." She has offices in the USA and Mongolia and can be reached at: 817 738 9595.
"Today's exceptionally tight market gives marginal producers unprecedented power and greater geopolitical importance" said Ian Bremmer, President of Eurasia Group. He then said "Small producers now have the ability to press and have more leverage." If for example Nigeria or Bahrain shuts down production, the United States faces severe market shortfalls, and substantial price increases.
The United States sources of oil are under threat. China is aggressive in trying to buy what have historically been USA contracts. They are playing a political game, and doing it very effectively. The USA must develop a coordinated effort to protect these sources and improve our relations with these nations. REGARDLESS OF THIER POLITICS, RELIGION OR CULTURAL DIFFERENCES WITH US.