09:19 GMT +320 February 2017
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    End of Petroleum-Centric World? Falling Oil Prices to Shake Up World Order

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    Plummeting oil prices may challenge the established geopolitical status-quo and even result in war and turmoil, experts warn. Will the petroleum-centric world of the past half-century be restored again soon?

    The current slump in oil prices has affected giant oil corporations and the ancillary businesses; it also threatens to undermine economies of major energy-producing countries resulting in a "profound shake up" in the political order, according to Michael T. Klare, a Professor of peace and world security studies at Hampshire College (Massachusetts, United States).

    The American academic feels that the continuing depression in oil prices may stretch into the 2020s and beyond.

    "Generally speaking, oil prices go up when the global economy is robust, world demand is rising, suppliers are pumping at maximum levels, and little stored or surplus capacity is on hand. They tend to fall when, as now, the global economy is stagnant or slipping, energy demand is tepid, key suppliers fail to rein in production in consonance with falling demand, surplus oil builds up, and future supplies appear assured," the American academic explains in his article for TomDispatch.com.

    Klare refers to the temporary economic slowdown in China, the surge of oil output in North America (up to 9.2 million barrels per day), and most notably to Saudi Arabia's "steadfast resistance" to decrease its own production or that of the Organization of the Petroleum Exporting Countries (OPEC).

    What lies beneath the Saudis' refusal to curtail their oil output? Riyadh is possibly determined to punish Russia and Iran for its support of Syria, the US academic notes. On the other hand, Saudi Arabia is apparently making attempts to drive US shale producers out of the oil market.

    To add more fuel to the fire, Iraq and Iran continue to increase their output as well. As Daesh (Islamic State/ISIL) is losing ground in Syria and Iraq, Baghdad's oil production is expected to continue its growth, Klare remarks.

    As for Iran, its nuclear deal with Washington has opened doors for Tehran's re-entering the oil market. According to US Energy Information Administration forecast released in August 2015, "Iran has the technical capability to increase crude oil production by about 600,000 b/d by the end of 2016."

    "Only three developments could conceivably alter the present low-price environment for oil: a Middle Eastern war that took out one or more of the major energy suppliers; a Saudi decision to constrain production in order to boost prices; or an unexpected global surge in demand," Klare believes.

    American columnist James Stafford of Oilprice.com echoes Klare's assumption: according to Stafford, direct military confrontation between Saudi Arabia and its longstanding regional rival, Iran, could put oil back into "triple-digit territory" reaching up to $250 per barrel.

    "A war between the two countries could lead to supply disruptions, with predictable impacts on prices," he notes, citing Dr. Hossein Askari, a professor at The George Washington University.

    However, Klare and Stafford agree that although it is not impossible at this point the war between Saudi Arabia and Iran is a "speculative" issue.

    Klare adds that neither Saudi Arabia's decision to curtail its output nor a sudden spike in demand appears likely anytime soon.

    Indeed, according to the International Monetary Fund (IMF), growth rates of emerging and developing economies, which account for almost 60 percent of global GDP and 85 percent of the world's population, are now down.

    "Not only have oil and metals prices fallen by around two-thirds from their most recent peak, but supply and demand side factors suggest that they are likely to stay low for a sustained period," IMF Managing Director Christine Lagarde said at symposium in Paris on January 12, 2016.

    The more likely outcome of the slump, however, is a wave of unrest in oil-producing countries, Klare suggests. The American professor assumes that Nigeria, Venezuela, Algeria and Angola face the prospect of political turmoil.

    Although Saudi Arabia, one of the world's leading producers, has survived the initial shock due to its huge foreign reserves, Riyadh has already announced cutbacks in public spending prompting growing discontent among the population of the Gulf kingdom.

    In contrast, the Russian establishment is doing well with the Kremlin enjoying widespread popular support. Despite the slump in oil prices Russia's leadership "has indeed been moving ambitiously on the international front," Klare notes.

    "Whatever happens to oil and the countries that produce it, the global political order that once rested on oil's soaring price is doomed," the American academic suggests.


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    Oil, International Monetary Fund, falling oil prices, turmoil, emerging economies, oil companies, world order, war, geopolitics, Daesh, OPEC, Christine Lagarde, Iran, China, Nigeria, Iraq, United States, Russia, Algeria, Venezuela, Saudi Arabia
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    • avatar
      Ivan Zadorozhny
      Dethroning oil means dethroning dollar, end of US hegemony.
    • avatar
      rasojin reply toIvan Zadorozhny(Show commentHide comment)
      Ivan Zadorozhny, yes it would be the end of US hegemony with de-dollarization but the US will not just fade away. Hard to imagine but it will be even more destructive as it loses its power.
    • avatar
      Well this is all a result of OBAMA.. He wanted Russian regime change. Thought it could achieve it by FRACKING. Of course it disrupted the balance. After announcing that, " Russian economy is in tatters!. That's the UNITED STATES!".. he clearly said that he wanted to destroy Russia.
      U.S, U.K , E.U, NATO are seeking the destruction of Russia. Surrounding it with E.U and NATO puppets . Russian response? " OUR PARTNERS".. That doesn't work.
      By now Russia could had begin the process of industries replacement. Kicking out U.S , E.U industries from Russia. Buying off their investments. Not allowing U.K to invest in Russia's energy projects , since U.K refused to allow Russia or a Russian, some gas fields.
      THAT'S how you tackle them.
      GOOGLE refuse to do any request from Russian government, since it's seen as a PARIAH state, by their bosses in Washington and E.U. Want them to listen? FINE them, with copies of U.S fines. When they get a 1 B euros fine. watch how they stop playing. And DO stop them from operating in Russia per infraction. 10 days first. The growing by 10 extra days every time.
      This oil war was staged by enlisting Saudi house. Now everyone see why they want better ties with Russia. To create wedges with Tehran. Russia is known as a faithful ally, so is Iran.
      Lastly, the oil slump price is partly RIGGED.
      But it may go back to normal. Sooner than many believe. One is Saudi cannot pay it's budget and will succumb soon enough. So will many corporation in U.S, U.K , E.U. They need 100 a barrel price to thrive and come off this mess that left losses. Bet they DYING to see Obama GONE.. IF Obama take it slow to get in the helicopter OFF the Whit House , they may go and KICK him in to get RID of him.
      Unemployment will be RAMPANT. DOLLAR soon will begin to lose demand as prices go down, that's another area to explore. When the dollar is already been replaced for oil purchases.
      The dollar purchasing power is been very affected too. it lost at least 10%. reason the poorer is poorer. No X-mas, because of DAESH? REALLY? What a load of BULL HORN lies. No one was at it because of cash strap.
      Wasgington already is very strapped. Food stamps were reduced, and qualifying items added , many lost all food stamps. No raise for pensioners, welfare, and other things, except OBAMA, have the poor messed badly.
      Obama care raised premiums so bad many are facing fines.
      medical care is been contracted, where many can't get basic services.
      Small Businesses are going belly up, because the poor doesn't have cash.
      Police attacks on civilians will raise, why? No cash. So more taking of cash expected, right?
      THAT'S the UNITED STATES. Turning into a United Kenyan states.
    • avatar
      The only solution for Russia is to go full renewable energy. Many here do not know that Russia has more RE potential than all the oil and gas. This way it would be no more vulnerable to Oil attacks and would have clear moral ground.
      This kind of development would surprise all of the Russia opponents but is highly unlikely due to very strong oil lobby in Russia. If Russia can overcome this it will be invincible.
      From the other side if Russia decides to base its future on Hydrocarbons it will be finished as all the other develop nations are deeply into renewable including China. It is Russia choice.
      As for some comments here implying that low oil is bad for western countries this is just wishful thinking from one simple reason, their economies are diversified and do not depend on oil as much as Russia while in the same time is cheaper for their business.
      Oill is evil and every one who makes its living out of it will bare the consequences of going along with the filth such as Rockefellers (EXON), SHeLL and others.
      Think wise and get rid of the oil
    • avatar
      I say good riddance to the Petro dollar and the world revolving around oil.
    • AnomicDust
      Crashing the price of oil was a crude imitation of crashing jets into the WTC, presumably to suppress challenges to hegemony.
    • avatar
      Ivan Zadorozhnyin reply torasoj(Show commentHide comment)
      rasoj, Dollar acquring its power is destructive, dollar losing its power is destructive, it's just one big destructive world with the US presiding over it. It's not that scary up-close.
    • avatar
      It is most prtobably the british empire (anglo-saudi) that is waging economic war against Russia. The oil price was pumped up to fill the coffers of the investment banks, like a tax on energy.
      Now we will see banks going under instead, but then they have set the bail-in procedure in place, just in time for them!
      We need a reorganization of the whole world financial and economic system and BRICS needs to be the bloc that pushes this through, unless they want to fall one by one.
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