Cipcommunity

Oil Producers vs. Oil Users

Oil Producers vs. Oil Users

Oil producers vs. Oil consumers The oil industry has very clear players, there are countries that consume the most of the oil production and there are countries that produce almost all oil. On the side of the biggest oil consumers are the US and Europe and on the side of the greatest Oil producers are countries like Saudi Arabia, Iran, Iraq, the United Arab Emirates and others. The Oil producers saw an opportunity to have major power and influence the price of oil by establishing an organization, so they unite and created the OPEC (Organization of the Petroleum Exporting Countries).

As a counter measure Oil Consumers decided to create also an organization, called International Energy Agency to represent their interests. Today the EU imports around 40% of its oil from the Organization of the Petroleum Exporting Countries (OPEC) and the US around 35%. [i] These countries have been having disputes since their organizations were created; many countries have made things more complicated, where others have been trying to alleviate controversies.

These are the cases of the US, which has been having a history of bad relationships with the OPEC members, and of the EU that since 2000 has been trying to have a better relation with OPEC members. The US relationship with OPEC The US and the OPEC members have been having disputes since 1960 when the US created a protectionist legislation to reduce the import of foreign oil and the these countries created the OPEC to counter the legislation. [ii] This was not pleasant for the US because it meant that Oil producer countries would have the power of Oil prices.

The OPEC members have been influencing the Oil prices with different measures, disputes, techniques. “In 1973, Middle East countries initiated a boycott against the US as punishment for backing Israel in the war. In 1979, the Islamic Revolution in Iran, along with the ensuing war with Iraq disrupted prices. Finally, Iraq’s 1990 invasion of Kuwait produced similar results. ” (Jason Ahdoot, Charity Morsey, David Vela) As a response to all these, the US has been also influencing differently oil production and prices.

The best example is, when in 2003 the US invaded Iraq excusing that the country was employing weapons of mass destruction that where threatened their security and that from the World. Many economists and politicians agreed that the plan of the US was to privatize the oil and affect the OPEC cartel[iii] In conclusion the US and OPEC members economic and political relationship is not good; actually I would describe it as a competitor’s relationship, which in the future would not have great outcomes if things do not change.

Because of all the problems that the energy sector is experiencing and that the oil production is coming to a downturn these countries will have to change their way of negotiating and will have to start looking for other options/solutions. Today there can be seen that the US is already thinking a bit about the problem, “The Obama’s administration is seeking more for a dialogue instead of telling OPEC how to handle the oil markets” (Energy Intelligence Group). The EU relationship with OPEC The European Union has had also many disputes with OPEC members, but the situation is less severe than the one of the US.

The European Union is the second Oil consumer of the World so the establishment of the OPEC was not to his liking, because it would also affect them. At that time the EU decided to join the US in the International Energy Agency, to encounter the power that was developing the OPEC and respond for its needs. But since 2003 the EU has taught things differently. The European Union saw that having a bad relationship with OPEC members was not helping and improving anything, so it decided to change its political and economic oil strategy.

In 2004 the EU and OPEC enhanced producer-consumer relations by establishing a high level bilateral dialogue. [iv] Since then the EU has been seeking to develop better relations with all oil producer members. For example, the EU has been supporting Algeria with its MEDA financial assistance and to reduce their social violence. [v] In conclusion the vision of the EU is to work with OPEC members as a team to enhance a win-win objective. Having a good economic and political relationship with them avoids disputes with Oil producers and lessens the possibility of them to want to damage EU economics.

In my opinion the EU saw, before the US, the coming of a future energy crisis, accepted that it is too dependent on oil and preferred to change its status to continue obtaining oil in the future. Approaches to bio-fuel There is also a huge difference between EU and the US approaches to bio-fuel and other energies. The EU has seen that Oil is finishing off and that in the future there will have to be other sources of energy, so it has been promoting them. It has been working very hard to develop in their countries alternative energies such as wind, solar, nuclear energy.

For example, Germany has extended recently the use of nuclear power plants to run for 10-15 more years to reduce the dependence on oil and is today the world largest producer of photovoltaic cells. On the contrary the US has not done anything yet, there has not placed a priority on promoting domestic and regional oil and gas production, neither promoting other energy resources. The Car industry Just the fact that worldwide Oil is running out has changed already the way the car business has been working for the last 70 years.

The car industry gets also affected with oil price fluctuations and high prices, because less people want to buy a car. Every day the price of Oil will get higher so for the car industry this means fewer sales and in the future the end of the industry if they do not change how cars are made. That is why today the Car industry is innovating and developing cars with alternative energy sources. Today we can see already on the streets Hybrid cars; this means they use half oil energy and half electricity.

But the future objective of the Car industry is to develop solar cars, electricity cars or ethanol cars and stop depending on oil. Besides the more the countries accept that Oil will no longer exist, the more they will spend on the development of new and alternative energy sources, which will help the Car Industry to adjust their cars faster. References Amy Harder. Oil Habit: How Can Cars Get Clean?. Retrieved, October 4, 2010, from: http://energy. nationaljournal. com/2010/10/oil-habit-how-can-cars-get-cle. php

Council of the European Union. EU-OPEC Energy Dialogue. Retrieved, June 28, 2010, from: http://www. consilium. europa. eu/uedocs/cms_Data/docs/pressdata/en/er/115524. pdf Deanna Harris . Oil supply crunch by 2012 – report. Retrieved, October 14, 2010, from: http://www. 3news. co. nz/Oil-supply-crunch-by-2012—report/tabid/421/articleID/181241/Default. aspx Energy Intelligence Group, Inc. United States: Opec’s Complex Relationship, Retrieved March 20, 2009, from: http://www. jetfuelintelligence. com/print_me. asp? ocument_id=254196 EuroActiv. Merkel: Nuclear plants could run up to 2035. Retrieved, August 30, 2010, from: http://www. euractiv. com/en/energy/merkel-nuclear-plants-could-run-2035-news-497274 European Energy Comission. EU-OPEC Energy Dialogue. Retrieved from: http://ec. europa. eu/energy/international/organisations/opec_en. htm European Neighbourhood and Partnership Instrument. Algeria. Retrieved from: http://ec. europa. eu/world/enp/pdf/country/enpi_csp_nip_algeria_en. pdf Greg Palast . Secret US plans for Iraq’s oil.

Retrieved March 17, 2005, from: http://news. bbc. co. uk/2/hi/programmes/newsnight/4354269. stm Hermann Schee. How did Germany come to be the world’s greatest producer of photovoltaic cells? Retrieved, October 17, 2010, from: http://www. opednews. com/Diary/How-did-Germany-come-to-be-by-Kevin-Anthony-Stod-101017-794. html James Kanter. OPEC warns against military conflict with Iran. Retrieved, July 10, 2008, from: http://www. nytimes. com/2008/07/10/business/worldbusiness/10iht-opec. 4. 1440361