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Testata registrata presso il Tribunale di Patti Reg. n. 197 del 19/07/2006
The Architecture of World Oil: Realities and Delusions
Ferdinand E. Banks*
The world (crude) oil price recently exceeded eighty dollars per barrel (=$80/b) for the first time ever, and the leading investment bank in the world, Goldman Sachs, has raised its forecast for the end of 2007 from $72/b to $85/b. Among other things, this suggests that oil price irritations will not disappear for buyers of that commodity for many years, even if from time to time this price stabilizes at a lower level. The present paper reviews some issues of crucial importance for the global oil economy, and in particular those accorded special attention in my recent lectures at the Asian Institute of Technology (AIT). I also present – on a non-technical level – some concepts that in most energy economics courses are ignored in favour of the irrelevant Hotelling model of exhaustible resources (1931). In addition I want to examine several financial aspects of the oil market – especially the influence of hedge funds on the oil price – and also to offer a few comments on the subject of insufficient refining capacity, which is occasionally accused of being the origin of high gasoline prices.
When I walked into the faculty of economics at the University of Uppsala one day in October, 1973, I knew immediately that something was drastically wrong. I didn’t know whether the King had abdicated, the Third World War had started, or the national curling team had lost a crucial match, but without talking to anyone, I was sure that somehow, somewhere a calamity had taken place. I had previously experienced a similar feeling at the University of Stockholm on the day when President Kennedy was assassinated.
The bad vibes in l973 were derived from what some people called “the Arab oil boycott”. First and foremost the United States and Holland were to be taught a lesson, but other countries that in word or deed supported Israel in the latest Middle East war were also informed – directly or indirectly – that their oil supplies were in jeopardy. The exact details of the ensuing oil controversy are no longer in my memory, but one thing I remember perfectly: this was a map in a U.S. congressional document showing landing zones for marines and paratroopers in the Gulf. Professor Douglas Reynolds of the University of Alaska once informed me that a military commitment by the U.S. was alluded to by Henry Kissinger in one of the American news magazines. This was confirmed by Dr Mamdouh G. Salameh, who added that Dr Kissenger used the expression “strangulation” when referring to the boycott, and told a number of persons that it could not be tolerated by a “great power”. However when I mentioned this contingency to a so-called oil expert in Rome a few years ago, she looked at me as if I had taken leave of my senses.
Thus far this year I have had cause to consider that boycott on two occasions. The first was in my course on oil and gas economics at the Asian Institute of Technology (AIT), where I took great pains to clarify that oil economics is often taught in a sub-optimal manner, since many teachers choose to ignore the macroeconomic and geopolitical consequences of an interruption in the flow of what is justly called the most important commodity in the world. That importance is largely reflected in the costly adjustments often associated with finding and introducing substitutes for oil, particularly in the short and perhaps the medium run. Moreover, the discomforts that could eventually result from higher oil prices cannot be fully ameliorated by e.g. tinkering with demand reduction, since crude oil has a significance in the modern economy far above that suggested by a comparison of the relatively unexceptional monetary value of oil production and/or imports to the Gross Domestic Product (GDP) of a typical oil importing country. For instance, as pointed out by Hillard Huntington (2007), increased oil prices have a negative effect on (GDP) that can bring about critical losses in purchasing power.
The other time had to do with the showing in Sweden of the French drama-documentary La Fin de Petrole (= The End of Oil). According to that production, the bad news arrived in (or shortly after) 2013, at which time the oil price ostensibly touched $150/b, and the results were massive social and economic dislocation. This does not seem entirely fictitious, because in l973 in the wake of the first oil price shock, gasoline prices in the U.S. rose 40 percent, and according to Curtis Rist (1999), the ensuing panic included bad language, threats, fights and occasional shootings at gas stations. Here I can mention that 2013 was mentioned as the year for the global oil peak in an official or quasi-official French report that I have heard of but still have not seen, although I did see an article by Patrick Artus – a well-known French academic turned finance professional – in which he claimed that we are steadily moving toward an oil price of more than $385/b.
Before continuing, let me say that an oil price at or near $385/b is completely beyond my comprehension in theory or fact. As for $150/b, that is unfortunately quite conceivable, though hardly in 2013, because if it did appear on or around that year, then the map that I saw in 1973 or l974 would probably make a reappearance on a number of desks and computers in the Pentagon and similar facilities.
I occasionally contribute to a forum in the U.S. called EnergyPulse (www.energypulse.net) that mostly treats electric power, and some very smart people in that forum have questioned the economics of relying on biofuels (and hydrogen) as a replacement for conventional motor-fuels. A similar position was recently taken in a long presentation in Le Monde Diplomatique (2007), and almost certainly elsewhere, but even so I have decided to believe that a resort to less efficient motor fuels than those derived from crude oil are preferable to war. The key observation here is that although it may be uneconomical to attempt to replace a large fraction of conventional oil with a synthetic product, the possession by oil intensive countries of enough capacity to produce a few million (oil equivalent) barrels per day of e.g. biofuels in the near future, and slowly increasing this amount over time, might make all the sense in the world. The logic here is that it is less costly to build ahead than having to carry out a vital activity in a short period of time! The European Union (EU) wants biofuels to provide 10% of EU vehicle fuel in 2020, but it is arguably better to be absolutely certain of at least 5% by e.g. 2012, even if for one reason or another the original goal is judged undesirable. (The same reasoning applies to the U.S., where Congress has a goal of displacing 15% of projected annual gasoline use with alternative fuels by 2017.)
More Oil Realities and Suspicions
A forecast for 2006 once published by Deutsche Bank (DB), suggested a slowly declining price for oil. DB (and most other) forecasts then tended to settle in the $50-$60/b range, which was reputedly described at an OPEC ministerial meeting as “beautiful”, because at the end of the 20th century oil was selling for much less than $20/b, and in OPEC gatherings the talk was about trying to boost that price into the $22-28/b range, and to keep it there. Beautiful or not, the price has now spiked to above $80/b, with the result that some of the richest cities and perhaps regions in the world are to be found in the Middle East. A few of us forecast the present price several years ago, with the Texas fund manager Mr T. Boone Pickens setting the date of its arrival as the end of 2007, and while I unfortunately have no access to his ruminations about 2008, the prestigious investment bank Goldman Sachs has predicted $95/b, and warned that a spike to $90/b is possible before the end of the present year (2008). These prices are above what I regard as the danger level, and so I take every opportunity to suggest that increased attention should be paid to when the global oil production might peak, since an unanticipated peaking of global oil production with the prevailing oil price close to $90/b might send that price off the Richter Scale and cause a world recession. There is a very wide spectrum of opinion on this matter, and estimates range from those of the Association for the Study of Peak Oil (ASPO), who see the peak coming in the fairly near future – perhaps less than a decade – to the prestigious energy consultancy CERA (Cambridge Energy Research Associates), who reject the idea of a distinct peak, but instead prefer to think in terms of an undulating plateau.
Behind the eccentric concept of an undulating plateau is apparently a ‘model’ of some sort, and perhaps one that is described to CERA’s faithful clients and admirers as statistical or econometric. I make a point of never constructing, meticulously viewing, dreaming about or for that matter tolerating from my students any verbal contemplation whatsoever about econometric models unless I have no choice, but even so I occasionally think in terms of assembling in one form or another a theoretical creation whose centrepiece would be a differential or difference equation that was capable of exhibiting an undulating plateau.
I have refrained from this project because, as a hard-core teacher of mathematical economics, I consider it pretentious or absurd or both. If I changed my mind, however, the basic structure would feature a peak, followed by a severe macroeconomic meltdown that abated the demand for oil, but possibly reduced the (real) cost of finding and producing that commodity. Assuming a steady increase in reserves – though, realistically, at a lower rate than in the past – production could eventually start to rise again. Sooner or later output would arrive at another peak that could be at least as high as the previous, but in any case this ‘cycle’ would be repeated. Let me emphasize though that while these mechanics might seem impressive if tendered by a sympathetic lecturer in a seminar room or at a conference, they are probably too abstract for real people (like myself) in the real world.
The focal point for a construction of this sort is inter-temporal profit maximization by oil producing firms, together with the location of new deposits, and the availability of technology for further exploiting old deposits. This kind of technology – such as state-of-the-art horizontal drilling – is frequently shown in advertisements in the daily and weekly press, and to a certain extent is overrated.
Ideally, some way could be found (in such a model) to explain why – until recently – the market has systematically underestimated future demand and overestimated future supply, which is a phenomenon that is usually ignored. There is also the matter of building into such a model a few subtleties of multistage strategic games, by which I mean that the information content of prices has a tendency to be inadequate or deceptive because of the configuration of the supply side of the market. More informally, persons on the supply side are often in a position and inclined to depart from the truth when discussing the availability of reserves and production capabilities. In game theory this is called information manipulation, and it takes place because the executives of the (private and state) firms practicing it prefer more money to less money. An important but advanced discussion of this is found in Vives (1999).
A few symbols will now be introduced, because as I explained to my students in Bangkok, there are many irrational beliefs in circulation about how the OPEC countries should comport themselves with regards to their production of oil and gas. But before readers who do not like symbols tune out or – optimally – ignore these symbols and proceed with the verbal discussion beyond, some mention can be made of what is taking place in equations (1) and (2). In (1) conventional private companies are engaged in maximizing the present value of profit for operations that extend over a time horizon designated as N. What they have to do is to choose outputs for each of these periods, which means applying a little differential calculus to expression (1). On the other hand, in (2), we are considering the maximizing of welfare by, for example, a state company of the type found in the middle east. Their intention is to go beyond profits and take into consideration the development of the society.
Consider, to begin with, the situation in Saudi Arabia just prior to the nationalization of oil. The oil majors operating in that country were (conceivably) thinking in terms of a conventional inter-temporal profit maximization exercise of the kind that is characterized by an expression of the following sort:
In the first parenthesis we have profits in period ‘t’, or revenue (ptqt) minus cost (ctqt), while in the third parenthesis we have the given amount of the resource (e.g. oil), R, at the beginning of the present period, distributed over N periods (q1 + q2 +…..+ qN ≤ R ). The second parenthesis, (1+r)-t, merely discounts the profit in period ‘t’: profits in distant periods have less value than those of e.g. today. In conventional presentations N is taken as given, and c is usually regarded as a constant that is equal to both average and marginal cost for the N periods. ‘pt’ is the expected price for the period ‘t’, and the implicit assumption is that these prices as well as the amount of the resource (R) are correctly forecast at the beginning of the current period. λ is a Lagrangian multiplier, and gives us the scarcity value of the resource: e.g. it is zero if R exceeds the amount of the resource extracted during the N periods (because then the resource is not scarce).
In these circumstances, if we differentiate V with respect to the values of q, and manipulate slightly, we obtain the famous Hotelling (1931) expression Δp/p = r, where p here is defined as the ‘net’ price – or price minus the marginal cost – and this net price increases at the rate r. In terms of the real world, where the frequency curves of oil deposits take on a distinct ‘bell’ or ‘normal’ appearance, this is a nonsense result! In order to obtain something approximating realistic frequency (or distribution) curves, it is necessary to assume that ‘c’ can increase rapidly as time passes and the deposit is exhausted. This is because the most important variable for an individual deposit is NOT ‘r’ – which your favourite economics teacher might have decided to believe – but deposit pressure and its significance for the cost of extraction. As pointed out in my new textbook, it might also be useful to be aware of something called the ‘natural decline rate’, which involves the ‘deterioration’ of a deposit due to previous production. This will be referred to with a mathematical expression that is located at the end of this section, where it can be easily ignored.
Does this mean that equation (1) is bunkum? Not quite. Management does think in terms of maximizing profits, and perhaps even discounted profits. Moreover, they have been dealing with these issues long enough so that they do not need equations and perhaps discussions of the type presented above to help them determine how much they should produce each period over some time horizon N, whether that time horizon is pre-selected or is an endogenous variable in the optimization process. Moreover, shareholders expect ladies and gentlemen in the executive suite to busy themselves with profit maximization and not ivory tower mathematics of the (often irrelevant) kind foisted on many graduate students in economics.
We have a different situation when these deposits are nationalized. If we take the case of Saudi Arabia, the management of the oil majors came to the conclusion that for profit maximization they should aim at a peak (and plateau) production of 20 million barrels per day (= 20 mb/d), and maintain it until cost or depletion issues necessitated a decline. After nationalization, the government of that country made it quite clear that for the achievement of their social and economic goals, a production of 20mb/d was inappropriate. This should be taken notice of because, as far as I can tell, both the International Energy Agency (IEA) and the US Department of Energy (USDOE) have failed to get this message: they give the impression of believing that Saudi Arabia will eventually raise their production to something close to 20 mb/d, because the predictions offered by the IEA and USDOE for global oil output in 2030 cannot possibly be realized unless Saudi Arabia supplies close to this amount .
We can now proceed to construct an expression similar to (1) for a country like Saudi Arabia, but instead of maximizing profits, the government of that country would desire to maximize a nebulous ‘something’ that might be called welfare, which will be designated as W*. One way to bring this about might be to join forces with other large oil producing countries to fix outputs, and specifically to make sure that the inevitable decline of production in major deposits does not take place until a very long time into the future. As for profits, which are still defined as revenue minus costs, there is no objection to these being as large as possible, but the object of the exercise is to specifically maximize welfare, which is a broader concept than just the profits of the oil extraction sector. Consequently, in their version of (1), the time horizon would likely be an endogenous variable, and one step in its determination might involve taking different values of T and seeing how – with the values chosen for outputs in the T periods – they influence W*. The discount factor would also be labelled ρ (i.e. ‘rho’) to distinguish it from ‘r’ – where in financial economics the latter is often specified as the real or nominal interest rate, and is an opportunity cost. It is also possible that more constraints would be appropriate.
In theoretical welfare economics dealing with a topic of the kind being discussed in this section, ρ would probably be lower than r. This is because unlike textbook enterprises, the Saudi government would not (in theory) weigh profits from producing oil against the gain from e.g. purchasing bonds or factories in other countries, because they also have to consider things like employment and the availability of various goods and services for future generations in their own country. As early the l970s the Saudi government unambiguously indicated that concepts of this nature were foremost in their thinking. Other governments in the Gulf region have recently been even more articulate on this matter.
I can mention that normally I never hesitate to employ expressions like (1) above and (2) below in my lectures, however I stress that these equations are worthless unless students can also discuss the sort of conjecture that takes place in the boardrooms of important oil companies or e.g. the governments of large oil and/or gas producing countries. Taking Wt as welfare in period ‘t’, we immediately obtain the following simple relationship:
As noted, Wt(….) is a much more complicated expression than e.g. (ptqt – ctqt). I have received mail from people who believe that expressions such as (2) should not exist, and instead governments should pretend that they are the agents of private corporations and concentrate on maximizing the profits of various enterprises without overly concerning themselves with social issues such as employment. In general I make a point of not paying any attention to this approach, because it is outside the purview of mainstream development economics. Someone who might be inclined to agree with this is Major Chavez, who has just announced that his government plans to finance a major petrochemical complex in Venezuela.
In my recent work I have attempted to explain that regardless of when the global output oil and gas production actually peaks, it will be best for all concerned if our political masters thought in terms of the near as compared to the distant future, because if it should arrive unexpectedly, it could lead to a very ugly economic and political scene. Moreover, I am convinced that they are thinking in these terms, but prefer to give another impression because they do not want to jolt the peace of mind of their constituents. That being the case, every effort should be made to clarify for the television audience that peaking is not an abstract issue, but one that virtually everyone should attempt to comprehend in broad outline, and should keep in mind before ordering their next SUV or private jet.
By way of gaining a deeper insight into these matters, let us take a country where the output of oil has peaked, and examine its oil production history over time. The United States (U.S.) is a perfect example, because this is where the modern oil age ostensibly began, and that country once appeared to possess all the technology and willpower necessary to hold a peak at bay indefinitely. Instead, oil production peaked toward the end of l970 although there was still a huge amount of oil available in the form of exploitable reserves. Moreover, despite the giant Prudhoe Field (in Alaska) coming on stream later, production never again attained the l970 level. In studying the situation in the U.S. we see bell-like (or normal-like) curves for deposits/wells in Pennsylvania, California, Oklahoma, Texas, etc. These curves can be aggregated to give bell-like production curves for particular regions, and further aggregation provides a bell-like curve for the entire U.S.
We also have bell-like curves for Russia, the UK North Sea, Algeria, Indonesia etc. The third largest oil field in the world – the Cantarell field in Mexico – recently peaked, which almost certainly meant that an output peak for Mexican oil was near. (The Cantarell field’s output in 2006 was 13% lower than the previous year, and a similar decline is expected in 2007). Another very important oil source is the Norwegian North Sea, and this will also very likely peak in a year or two, if it isn’t already peaking. Fifteen more years down the line, or earlier, we may have peaking for at least some of the major oil producing countries in the Middle East, and if not fifteen then twenty. Moreover, new technology will not change this situation, and so at some point in the time range 2010 – 2030, we will be confronted with a bell-like oil production curve for the entire world. This is not something that rational people should look forward to because of its macroeconomic implications. Important observers in the French government have apparently predicted 2013 – or thereabouts – for this traumatic event, while I prefer the period 2015-2020.
Although many of the curves referred to above have been in existence for well over a hundred years, and highly visible to anyone not afraid to look at them, the discussion above would not have been given much credence by the movers and shakers a decade or two ago (except, of course, in the executive suites of the oil majors, where the bosses and underbosses have all the answers on this matter, but prefer to keep this important information to themselves). Today it is not easy to find concerned persons who are prepared to deny that the global oil picture has changed considerably over the past few years, although a few sceptics very definitely exist. Some of these sceptics are fanatics, while others are charlatans, but many are simply protecting their incomes. Where this latter group is concerned, it seems to be the case that many oil company executives have a tendency to change their estimate of the future availability of oil after retiring. For instance, Ronald Oxborgh – the British lord and former CEO of Shell UK – said that oil prices could reach $150/b in order to close the gap between demand and supply which he believes to be approaching.
This section will be concluded with a discussion of natural decline, which is deemed appropriate because this is constantly referred to by the executives of many oil firms, but is unfortunately absent from the learned literature. Several years ago Mr Lee Raymond – the former CEO of Exxon-Mobile – gave an interview in which he emphasized the importance of the natural decline rate of oil deposits. Like many persons who read that interview, I mistakenly shrugged it off, however in examining the work of Matthew Simmons dealing with the likely peaking of the global oil output, it is clear that this is a topic whose basic elements should be understood by everyone concerned with the future of world oil.
As suggested above, rather than turning to the technical literature, I consulted GOOGLE, where I found several useful examples by Simmons. He cites an oil field in which individual wells are declining at a rate of 18%/year, while the output of the field is only declining at 10%/y. What is happening is that if the inputs being used are held constant, then instead of the production of a well remaining constant, or nearly constant, it declines by 18% on the average. This is where ‘natural decline’ comes into the picture, and one way it can be described is in terms of the loss in capacity that would occur in a given structure/asset if no remedial or offsetting action is taken.
The 10% decline of the field (instead of 18%) can thus be explained by the fact that inputs are not constant. In other words, remedial action takes place in the form of drilling new wells and/or taking steps to increase the output of existing wells (via, e.g., injecting water or carbon dioxide or the use of surfactants to increase viscosity). These procedures can be labelled investment, and in monetary terms have the same significance as the investment required to produce, process and transport in one manner or another the output of an oil field.
A few equations might be useful for continuing the discussion, although the key observation has already been made. If we had no natural decline, we could think in terms of a capital good without depreciation. Positing uniform monetary returns ‘A’ to this asset over a time horizon ‘T’ and with τ ≥ t, then discounting of the kind introduced in Economics 201 will yield for value (V) of the asset:
|V = A||e-r(τ – t) dτ =||[1 – e-rT]||(3)|
The discount ‘rate’ is r, and this a result for which students of mine were promised a failing grade if they were unable to reproduce it on request. (As easily confirmed, if T approaches ‘infinity’, then we get V = A/r).) Even more important however is the following approximation of (3). With erτ ≈ (1+r)τ we obtain:
How do we use this? Suppose that we buy an asset for which V = $1000, r = 10% and T = 2 years. Among the ways of paying for the asset are $1000 on the day that it is purchased, 1000(1+r)2 = $1210 after two years, and A = $576 at the end of the first and second years. Note also that δA/δT ≤ 0, and δA/δr ≥ 0. This is one of the most important expressions in economics, and it is derived in my textbooks without calculus! It also needs to be pointed out that as in the work of the late Thomas Stauffer (1999) , the asset discussed below is an oil deposit rather than a conventional capital good. Now let’s examine a case that in economic theory is called “depreciation by evaporation”, where an asset is subject to a constant force of mortality ‘Ө’. In this situation (3) would take the following appearance:
|V = A||e-(Ө + r) (τ – t)dτ =||[1 – e- (Ө+r)T]||(5)|
Equations (3) and (5) could possibly serve as an interesting starting point for a comprehensive exposition if many readers were not allergic to integrals, but even if they were madly in love with the calculus, the important thing is a satisfactory interpretation of (5). What this expression says is that the presence of a natural decline reduces the value (V) of the deposit. Put another way, output can be maintained but only as a result of investment, and in the long run investment might become too expensive. Here it might be useful to mention that, according to information at my disposal, annual decline rates for Iran may be as high as 8%/y onshore and 13%/y offshore, while for Saudi Arabia the figure is ostensibly 2-4%. Determining the suitability of these estimates however will be left to somebody else.
It has been claimed though that if e.g. Saudi Arabia’s decline rate averages 3%/y, then capacity must in some way be boosted every year by almost 300,000 barrels per day in order to maintain an output of 9-10 million barrels/day (mb/d) in the medium to long run. “In some way” here means additional investment in existing fields or the opening of new fields. A problem here is that the deposits of that country are old, and investments required to maintain output could become very costly because of damage sustained by fields due to (among other things) production processes which involve the extensive use of water. As a result, given the expected demand for oil, Saudi oil field managers may have concluded that optimal behaviour on their part is to minimize the expansion of output, even though the government of Saudi Arabia has promised the oil importing countries that it will raise its production.
Some Negative Roll Models
The major dilemma is simple and widespread, and cannot be referred to often enough: Mr and Ms consumer are still unable to comprehend that we are moving toward a world in which we are not going to have access to the inexpensive oil to which we believe we are entitled, and even more important, oil that is to a certain degree essential because of past behaviour (e.g. investments in durable consumer and investment goods). Some years ago the Energy Journal presented a special issue called ‘The Changing World Petroleum Market’ (1994) in which the future oil and gas scene was examined in detail by a number of prestigious energy economists. In their vision of the 21st century, not only was oil “plentiful”, but OPEC was a fragile construction due to the enormous amount of oil and gas that could or would eventually be discovered in the unexplored or only partially explored regions of the globe.
A basic difficulty was and is the inability of many observers to accept that technology cannot discover or produce oil that does not exist; and where it does exist, it may not be in sufficient quantities, or possess the ideal qualities. A perfect example here is the tar sands of Northern Canada, whose resources have now been officially added to proved Canadian reserves of oil, thereby in theory turning that country into a rival to Saudi Arabia in the oil reserves league.
Professor Douglas Reynolds has examined the realities of Canadian tar sands in a recent issue of the OPEC Review (2005). As he makes clear, “Physics, economics and engineering management all point to one thing – oil sand is not the same as crude oil. By defining oil sand bitumen as proven reserves of crude oil, we are setting up the oil and energy markets for a large price spike – a shock.” To this can be added that while reserves are impressive, the expected increase in production from these reserves over the next decade is comparatively modest. Some of this comment is applicable to the heavy oil of Venezuela, along with a reminder that a mention of heavy oil and oil from tar sands often brings forth the observation that the energy required to transform these resources into a usable form is almost as great as the amount of energy that is obtained. This does NOT mean that these assets should remain unexploited, but that in the long run a negative net energy balance is usually regarded as an unsatisfactory state of affairs.
Another important issue concerns attracting investment dollars to ventures that may turn out to be only marginally profitable. This is something that has not been adequately appreciated by a number of influential observers, however Professor Maureen S. Crandall of the United States National Defense University, in a discussion of the huge resources that ostensibly will be made available by a more intensive exploitation of the Caspian region (2005), makes the following unwelcome statement: “But this producing region as a whole, while accounting for billions of dollars in investments, is unlikely to be a large and sustained future producer and contributor to the world’s energy supplies, and cannot be considered of strategic energy importance to the U.S.”.
The same assessment applies to a number of other ‘oil producing regions of great promise’, and perhaps can best be summed up with a quote from Craig Bond Hatfield (1997). “The coming era of permanent decline in oil-production rates and the economic and social implications of this phenomenon demand serious planning by the world’s governments.” The extent and consequences of this decline is not certain, but it might be useful to remember that the major part of today’s oil production – at least 70% – comes from deposits discovered before 1970. The long-run significance of this situation should be apparent when we realize that for every barrel of new oil that will be discovered this or next year, at least two and perhaps between three and four barrels will be consumed. Similarly, rumors have started making the rounds that the relatively new discoveries in Russia and West Africa may not live up to expectations.
Next I want to make a few remarks about Mexico and Norway. As indicated in my published work and lectures, the U.S. is far and away my favourite example when discussing the great world of oil, because a substantial portion of the television audience still believes that the country once fondly referred to in the U.S. Army as ‘The Big PX’ and ‘The World’ will always have sufficient ingenuity to deal with a possible shortage of any resource. As it happened though, discovery in the U.S. peaked in 1930, and forty years later (in l970) production peaked in the lower ’48. Similarly, discoveries peaked in the UK North Sea about 1965, and production in 1999-2000. An important difference here is that where the U.S. is concerned the background to peaking might have been forecasts of low oil prices in conjunction with increasing costs of production, but in the UK the main issue was not forecasts of low oil prices but the depletion of physical resources: the UK North Sea has been thoroughly explored, and oil firms with the means to capitalize on offshore deposits generally feel that it no longer has much to offer. For the record, global discoveries of crude also peaked about 1965, and 1980 was the last year that globally discoveries were greater than production. These observations help me to conclude that an impartial observer should have some difficulty believing that global peaking can be delayed past 2020.
In the paper by Curtis Rist mentioned earlier, realities of this nature are ignored and attention is focussed on possibilities in the Gulf of Mexico, with considerable attention payed to new technologies and the efforts of the oil major Chevron. In my humble opinion Mr Rist may be completely mistaken about the resources in or near that particular body of water, as well as the assets in other supposedly oil-rich provinces, and he has also forgotten to consult the new or the old scientific literature on those aspects of theoretical economics which provide some insight into the ‘ideal’ valuation of production factors and outputs, as well as the complexity of dealing with uncertainty.
Suppose that we look at equation (1) again, and imagine that we forecast perfectly future prices and costs, as well as the amount ‘R’ of the resource present, and that oil executives choose the value of N that they are supposed to choose according to the logic/instructions found in your favourite microeconomics textbook. In these circumstances, the N values of ‘q’ that they choose to produce after a fairly simple mathematical exercise are those that would be judged correct in a textbook world.
Predicting the actual future values of price and cost is not an easy assignment, but we would normally expect to have more luck with R, given the state of geological knowledge. Nevertheless, surprises are possible. The Cerro Azul Number 4 was one of the world’s greatest oil wells, initially producing 230 million barrels of oil per day, but after 60 million barrels of oil had been obtained, it produced nothing but salt water. More discouraging, oil company geologists and executives soon expressed the belief that no matter how high the price of oil climbed, nor how efficient extractive technology might eventually become, that particular structure was history.
Conventional economic analysis breaks down completely when faced with this kind of situation, because the valuations of factors of production, the outputs of oil over the time horizon N, and also the (scarcity) value of the stock of oil in the ground are not computable using traditional algorithms, and in addition a complete system of futures and options markets that was capable of dealing with things like an unexpected exhaustion of the oil deposit are only found in the (largely unread) learned literature. Furthermore, had the managers/owners of a project like the Cerro Azul Number Four been aware of the true amount of oil in the ground they would almost certainly have specified a different intertemporal production program, even if – as is almost certainly not the case in the real world – optimal markets for the management of risk (and uncertainty) had been available. The forecasting failure described here is not a catastrophe – except possibly for many employees and investors in the project – but it is another example of a state of affairs where the axioms of competitive economic theory are not very helpful, nor can it be remedied by prominent economists telling their audiences that any discomforts that are experienced due to the interference of reality could have been ameliorated by turning the existing market form into the kind found in the early chapters of your economics book, and in addition installing a complete system of derivatives ( i.e. futures and options) markets.
Much more interesting is the recent situation in the Gulf of Mexico. The Canterell field – the third largest in the world and perhaps the largest offshore structure – began to decline several years ago, but the oil major Chevron assured the media that hope should not be abandoned because another huge deposit had been located, which they called Jack. Dr Fredrik Robelius of Uppsala University had another opinion about Jack though: he called it a myth and a ‘bluff’ (or in English a fake or a phoney). Len Gould, in a comment published about the same time in EnergyPulse, used the same language. To this can be added an observation that draws on some advice offered by Nicholson and Snider (2007), which is that Adam Smith’s famous “invisible hand”, whose function is to direct the economy toward an efficient outcome under perfect competition, does not necessarily operate when players interact strategically in a game or game-like situation. Moreover, a game-like situation may be unavoidable when some agents (e.g. producers) are large relative to the market, and there is asymmetric information (in that these producers possess information that is unavailable to other market participants.
In his article Rist makes heavy weather of some deep-water probes in the Gulf of Mexico. Despite featuring state-of-the-art technology, these ventures have mostly been disappointments, although Professor Eric Smith of Tulane University has suggested that it is too early to claim that there cannot be any profitable outcomes in that region. Unfortunately I must confess that my own knowledge of that part of the world is far from comprehensive, but much of what has happened and is happening reminds me of the situation in the Norwegian North Sea, which still remains an important source of oil for the oil importing countries.
In l992, after several notable disappointments, Statoil discovered an important source of oil in a field that was named Noone. Much has been written about expected future ‘strikes’ as prospecting moved north into deeper waters, since the Norwegian Petroleum Directorate claimed that at least one-third of the amount of oil that had already been lifted remained to be found; but as things have turned out, Noone was the last major discovery in Norwegian waters. Optimism still prevails in the corridors and restaurants of power despite the decline in the ratio of exploratory successes to the total number of oil wells drilled in or near Norway, but in my opinion this optimism is based on the large amount of gas that has been discovered, as well as the future price of oil and gas. The interesting thing here is that even if another Noone were found, it wouldn’t amount to much – quantity-wise – in the present oil picture, where global output is escalating as a result of the rapidly increasing demand of China and India. Moreover, the U.S. appears well on the way to importing the 70% of requirements that the United States Department of Energy predicted will be the situation in 2025, and consumption is growing rapidly in eastern Europe. This might also be the place to note that from a strictly theoretical point of view, Norway probably produced too much oil in the past, which perhaps was the result of mistakenly believing that the price of oil would never exceed $30/b.
Almost thirty years ago Crown Prince Fahd of Saudi Arabia informed the large oil importing countries that their best strategy was to moderate their consumption of oil, while introducing as rapidly as possible alternative sources of energy. (Similar thoughts were expressed by the very visible and highly respected oil minister of Saudi Arabia, Sheikh Zaki Yamani.) Prince Fahd also emphasized the need to preserve his country’s petroleum wealth for future generations, and made it clear – by actions as well as words – that Saudi Arabia recognized its position as a critical component in the global oil supply nexus – both present and future – and would do everything possible to maintain an adequate margin of spare capacity that could be used in the event of an unforeseen escalation in global demand.
It is likely that Saudi Arabia no longer has a great deal of spare capacity, and if they do not have any, then there is none on the face of the earth. On this and similar topics readers should turn to Dave Cohen (2007a, 2007b). It has been suggested that Iraq may be able to assume this function some day, but this is strictly in the realm of supposition. Regardless of what we assume or do not assume, it should be carefully noted that in the light of the expansion of global demand, the production capacity of the Middle East is far less impressive than it was a decade ago, and this is the case even if foreign oil firms were given carte blanche to prospect and produce wherever they choose. The output of Norway has almost certainly reached a summit, Russia is at or approaching a peak (but in any case the macroeconomy of that country is progressing in a fashion where there will probably be less oil to export) and in a decade or earlier there will be a peaking of at least one of the large suppliers in the Middle East. Accordingly, it is not too early to ring the alarm bells.
One final observation. A sustainable cartel agreement among oil producers was deemed impossible by e.g. the late Professor Milton Friedman, even if it led to higher prices and profits, because given Friedman’s way of looking at the world, it would be too tempting for an individual producer to produce and sell more oil at the higher price. Since as things stand at present there is no excess capacity except, possibly, in Saudi Arabia, “more” cannot be produced. Instead, as small increases might still be possible in non-OPEC suppliers, OPEC producers are holding their output essentially constant, which makes all the economics sense in the world. The recent announcement by OPEC that they will produce more oil in order to stop the rise in the oil price is thus a misunderstanding, or perhaps a message to the market that OPEC is willing to give some consideration to making the impossible possible, although how they intend to go about that agenda remains to be seen.
Oil, Money, and Refining
It is often contended that hedge funds, brokerage funds and other financial players are a major cause of the unexpected rise in oil prices, and therefore the price of motor fuel – i.e. gasoline/petrol. It has also been said – at least once by the energy minister of Saudi Arabia – that the increased price of motor fuel is due to a shortage in refinery capacity. These topics will be briefly commented on in this section.
Readers of the financial press can hardly avoid encountering inflammatory statements about hedge funds, and careful readers will also learn that certain influential persons believe that the escalating oil price is not the result of supply and demand, but an escalation of pressure on oil markets due to financial activities of one kind or another, and particularly those associated with the world’s hottest investment vehicle – hedge funds. Here it needs to be appreciated that in financial economics ‘hedging’ generally means taking actions to avoid price risk, and so ‘hedge’ funds should actually be named speculative funds. Obviously they can’t be named that, because to one degree or another speculative means gambling, and since the directors of at least some hedge funds occasionally consider their clients fools, these ‘instruments’ are called the opposite of what they actually are.
Important assets that are traded in this market are futures, options and swaps, which are ‘paper’ assets (and in some ways analogous to the shares/stocks in your safety deposit box). Often we see reference to ‘forwards’ in discussions about hedge funds, but since forwards have to do with e.g. physical oil, it is unlikely that hedge funds find these to be of much interest. In fact it has been claimed that futures were introduced to supplant forwards. As one hedge fund manager told his interviewers, “We’re not buying zillions of barrels of oil and sitting there hoping it goes up.” Both physical and paper energy market assets are discussed in a non-technical way in my new textbook, as well as my finance textbook (2001), where it is mentioned that the three basic paper assets are building blocks for more complex financial innovations.
As pointed out by EnergyBiz Insider (September 12, 2007), many hedge funds are in deep trouble, and in the case of one unlucky fund – Amaranth – an independent U.S. congressional panel concluded that its large position in natural gas futures markets was a prime contributor to severe market volatility. (Note again that the ‘exposure’ of this establishment was in paper markets as compared to physical markets.)
The same charge has often been brought against hedge funds with heavy commitments in oil futures. A large part of the trading in paper assets in the U.S. takes place on the New York Mercantile Exchange (Nymex), and its management claims to have made considerable efforts to eliminate speculative trades of a size and timing which could suggest price manipulation. At the same time it is stressed that high trading volumes adds liquidity to this market which, as I point out in my textbooks, is essential if non-speculators (and speculators) are to be able to buy and sell futures with the same ease that they can trade in shares or bonds. Without adequate liquidity, a futures market has no future, and oil futures markets have an important hedging fundtion
Other critics of hedge funds include U.S. Senator Carl Levin, and the Fox News strong-man Bill O’Reilly. Levin is critical of “massive trades by a dominant speculator”, while Mr O’Reilly has informed his large audience that the high oil price is due to “these Vegas-type people who sit in front of their computers and bid on futures contracts”. He concludes his analysis with the farcical pronouncement: “Supply and demand? – my carburetor, this has nothing to do with the free market”.
The last quotation is from a presentation in Fortune by Nelson D. Schwartz and Jon Birger (May 29, 2006). Unfortunately Messrs Schwartz and Birger did not read an earlier discussion in that very useful publication by Carol Loomis, called ‘The risk that won’t go away’ (March 7, 1994). According to Ms Loomis few people understand these assets (e.g. futures), and that includes most of your colleagues in the non-financial world, to include what she calls “top brass”. I say ‘right-on’ to that, and include in the ranks of those who lack understanding – or ‘smarts’ as they are sometimes called on Wall Street – her esteemed co-workers at Fortune. One of the difficulties here is that to comprehend the relation between the oil market and the financial market it is necessary to have a reasonable insight into both, and even a likely future Nobel winner in economics – Professor (of finance) Robert Schiller – is somewhat vague on the history and mechanics of the oil market, as he demonstrates in a recent article in Forbes (2007).
Persons interested in the elementary mechanics of the oil futures, options and swaps markets are referred to my textbooks, because I want to confine my remarks here to hedge funds. The best short review of this activity can be found in a one page article in Newsweek (October 1, 2007) by Mohamed A. El-Erian, who was president and CEO of Harvard Management Company. In his article he emphasizes the lack of competence of MOST hedge firm managers, which is something that I have made it my business to advertise for at least the last decade. Their success – such as it is – is largely due to the naiveté of their clients. Some of these executives, of course, are stars and superstars, but even superstars have a way of burning out. Long Term Capital Management (LTCM) included in its top brass at least a half dozen superstars, to include the best mathematical financial economist in the world, but if the former governor of the Federal Reserve System had not come to LTCM’s aid with a few billion dollars mobilized from the major banking corporations, the faulty bets made by LTCM might have cut the ground out from under U.S. financial markets.
El-Erian puts it this way. “Even funds that have done well can suddenly stumble, and with disastrous consequences, when the investment terrain becomes unusually bumpy.” He notes that “What is an upside in good times can be a heavy burden when the going gets tough”. He did not bother to mention however that ‘when the going gets tough, the tough get going – to their ski lodges in Sun Valley or condos on the French Riviera, because during the relatively short period in which they have “done well”, many of them are able to bank a sizable piece of cash. At last count there were about 8500 hedge funds in the world, and every year between seven hundred and a thousand go out of business. El-Erian correctly views this as follows: “For each superstar manager, there are hundreds of mediocre ones”. He can say that again! I have encountered several of the latter in Sweden and Australia, and would not trust them with my wet raincoat, much less my humble pension. Amazingly enough though, in the latest ‘shakeout’ even some superstars failed to deliver for their investors.
Henry Blodget – a former securities analyst and financial market insider – asks the question: “were hedge funds ever hot?” (2006). I think I can say that for most of the persons reading this article the answer is no, because the few ‘hot’ funds normally try to limit their clients to persons and institutions belonging to the financial elite. To get an idea of what we are dealing with when the subject is hedge funds, one of the beneficiaries of this activity interviewed by Schwartz and Birger confided that the oil futures market was mostly in contango, which according to him could be taken advantage of by oil firms that were concerned with avoiding price risk. Contango means that that the price of paper oil in the futures market is greater than that of physical oil in the spot (i.e. physical) market, and this was indeed the atypical situation for a record 28 months until July of this year (2007), however before the shock increase in oil prices a few years ago, the ‘time-spread’ in that market has mostly been in backwardation, with the futures price lower than the spot price.
There are several explanations here. One goes back to John Maynard (Lord) Keynes, who introduced the expression “normal backwardation”. What this roughly means is that sellers of commodities like oil and oil products are more anxious to hedge than buyers of these items – presumably because they have more to lose. Accordingly, to hedge against a price fall they are particularly aggressive in SELLING futures contracts, which pushes down their price. A useful comment here is that selling futures contracts to hedge against a price fall is as easy as buying these contracts in order to hedge against a price rise, but unfortunately liquidity in the oil futures market tends to be inadequate for contracts with maturities of more than three or four months. Thus it is necessary to ‘roll’ these assets forward, and this requires more than a little expertise. One famous case involving dubious expertise concerns one of the largest corporations in Germany, and their losses ended up as more than a billion dollars.
In addition to the above explanation for a decline in the price of futures, if buyers of (physical) oil suspect that oil will be more expensive in the future, then they will bid up its price on the spot market in order to increase their inventories. Now we seehow backwardation arrives, and why recently it is experienced so often.
That brings us to refining, whose deficiencies are often associated with high motor fuel prices. It is easy to get the impression that there is not enough refining capacity to refine (at low cost) the output of crude oil, and so there would be no problem for motorists if only more refineries were constructed. Unfortunately, however, it is not as uncomplicated to build and operate a refinery as it is a fast food outlet. Refining is one of the riskiest of all industrial pastimes. Refining and red ink have a way of going together, and with only a relatively small number of exceptions, the winners in this business tend to be the large integrated oil companies who have upstream profits (from crude production) that enable them to carry substantial refining losses should they occur. The obvious deduction here is that the center of gravity of refining and petrochemicals belongs in the Middle East, and it is very possible that this is where it eventually is going to be found.
The bad news for refiners usually begins with large shifts in demand. Refineries produce kerosene and fuel oil that give light and heat, gasoline and diesel fuel which in an input for transportation, lubricating oils, lighter products that are building blocks for the petrochemical industry, and asphalt. Refineries typically are configured to produce a certain ‘cut’ of these outputs, and it can happen too often that suddenly demand for that basket declines while demand for another increases. Refineries that want to stay in business then have no choice but to make costly investments (i.e. upgrade) in order to accommodate the new demand. It can also happen that demand falls for the product(s) to which they are most intensively committed, or the cost of inputs – and particularly light or heavy crude oil – unexpectedly increases, or they are not sufficiently alert to compete with other establishments in a game where mistakes or misjudgements are exceptionally costly: even firms with good management that have the financial resources to make large investments can miss out in their timing..
To make matters more complicated, there are large expenses in the offing that have to do with environmental issues. It was once claimed that as many as 20 of the approximately 124 refineries in the U.S. that produce gasoline and diesel may elect to close their doors rather than to do the expensive upgrading required to meet the more demanding environmental laws that are scheduled to take effect soon. This is not a welcome development in a country where it has been about 30 years since the last refinery was constructed.
Concluding Remarks – or a Summary of the Bottom Line in Oil Economics
As I attempted to convince my students in Bangkok, there are some ‘facts’ that they should always have at their fingertips. Those can be found at great length in my textbooks, but a short presentation will be given here, because the curse of energy economics is the enormous amount of wishful thinking about the energy future that often appears in the academic literature as well as the media..
Recently the International Energy Agency (IEA) published its latest ‘World Energy Outlook’, in which the conclusion was advanced that the availability of oil in terms of reserves and production will not be a problem as long as a few trillion dollars can be made available to finance new wells and pipelines, as well as capital intensive items such as refineries and tankers.
In addition, that organization has postulated an increase in the world oil demand from the present 84 mb/d to 121 mb/d in 2030. Normally, I would express some curiosity as to the scientific background for that estimate, however I have heard something like it elsewhere, and it is the same as a recent estimate of the United States Department of Energy (USDOE). At the time when this 121 mb/d is supposed to be produced, OPEC is pictured as being responsible for about one-half (as compared to approximately 38% just now). This suggests an OPEC production of approximately 60 mb/d. At the present time Saudi Arabia supplies almost a third of OPEC oil, and given their reserve situation relative to the other OPEC (and non-OPEC) countries, this fraction will hardly decrease. (Saudi Arabia has proven reserves of 260 billion barrels, while second place Iraq has 120 billion barrels.) Accordingly, it seems that IEA experts believe that Saudi Arabia will supply about 20 mb/d in 2030.
It will not be easy for Saudi Arabia to supply 20 mb/d in 2030, or at any other time in the near or distant future. A high-ranking Saudi official recently stated that 15 mb/d should be possible, which undoubtedly was reassuring for motorists in the large oil importing countries – if they were listening; but although my knowledge of geology is limited, the energy economics that I have taught left me with the belief that the 12.5 mb/d recently promised by the Saudi Arabian king to President George Bush is a more realistic goal. This particular output is supposed to become available by 2010, however there are some students of the Saudi oil sector who say that it will never happen except in the form of surge capacity – that is, capacity that can provide an output of 12.5 mb/d over a short period, as compared to sustained capacity.
There is also some question as to what OPEC as a whole will be able to achieve. A report from the consulting firm PFC Energy (as mentioned in the Petroleum Economist, October 2004) states that OPEC is producing about 8 billion barrels a year more than it has been finding. This situation might change if e.g. Libya and Iraq intensify their exploration activities, however there is little or no reason to believe that this will be of other than marginal significance for the IEA and USDOE targets mentioned above.
During the question and comment phase of a long lecture that I gave at the Royal Institute of Technology (Stockholm), I was cheerfully informed that OPEC producers are increasingly aware that erratic behavior on their part might result in their being confronted by a deluge of synthetic liquids, with a natural gas based product being the most popular. This sounds consistent with the approach taken in most intermediate microeconomics textbooks, but even so it has no basis in reality for the oil market – it is a delusion, because there is not enough natural gas to bring a “deluge” about except in the fantasies of journalists, and for various reasons coal is no longer a contender. Of course, even if it were possible, the producers of onventional oil might – in theory – dump their prices when the new oil comes on the market, and therefore wipe out the profit of the intruders. I can also note that your favorite book on game theory probably suggests that the mere threat of dumping prices should suffice to keep potential suppliers of unconventional oil from investing too much money in this activity. More realistically, though, big producers would simply not bother to increase production, as they have threatened to do if too much biofuel becomes available..
Almost thirty years ago Crown Prince Fahd of Saudi Arabia emphasized the need to preserve his country’s petroleum wealth for future generations, and made it clear – by actions as well as words – that Saudi Arabia recognized its position as a critical component in the global oil supply setup, and would do everything possible to maintain an adequate margin of spare capacity that could be used in the event of an unforseen escalation in global demand. It is increasingly being said that “everything possible” no longer amounts to a great deal, given the geological situation in Saudi Arabia.
Let me sum this part of the exposition up as follows: regardless of what is claimed or promised, Saudi Arabia will never produce 20 mb/d of oil, and it will be best for all concerned if this spurious target disappeared from official or semi-official discussions of the future oil supply. Some very smart people associated with the oil industry have the same opinion about the 121 b/d forecast by the IEA and USDOE.
One of the most important oil economists of the twentieth century, Professor Morris Adelman of Massachusetts Institute of Technology, has informed us that “Glamour robs people of their common sense.” (1994). The lapse in common sense that is relevant here involves what Professor Adelman identifies as a “mistake”, by which he specifically means the glamorous OPEC countries assuming control of the oil in their countries. Instead of showing foreign enterprises the door, the professor believed that the host countries should have “left the companies in place, to invest and produce efficiently, and to compete on the narrow margins left to them”.
Last year the French oil company Total, and Shell, were awarded the first petroleum exploration contract in Saudi Arabia since l974, however this was limited to gas. As Business Week (October 25, 2004) pointed out, it gave those enterprises “a foothold in the world’s richest oil patch”, but even so it is dubious that they are there as major players, because the simple truth is that they are no longer needed. The opposite belief hardly deserves to be called a delusion.
In the last few years, Sheikh Ahmed Yamani (who was mentioned above) has become a favorite with the oil optimists. This is largely due to his comparing oil to the stones of the Stone Age, saying that there were plenty of stones remaining when the Stone Age came to an end. The contention here is that it would not be a good thing for a major oil producer to have large reserves of oil remaining when the oil age is over and some other ‘age’ is moving into high gear.
Regardless of what ‘age’ we are interested in, the resources of the large oil exporters will continue to be valuable as an input for the energy intensive industries that are being constructed or could be constructed in e.g. the Middle East. Saudi Arabia, for instance, should eventually be able to assemble a petrochemical industry of the absolute top rank. If a country like South Korea could build a viable petrochemical export industry although it lacks domestic petrochemical feedstocks, or perhaps more important, inexpensive energy for running these facilities, then a country like Saudi Arabia should have an unbeatable competitive advantage. Moreover, something that is seldom appreciated is the value of petrochemicals in modern life for everybody in every country. Preserving oil for this purpose is one of the reasons why the price of oil should not be allowed to fall to the level where scholars like Professor Adelman once felt that it belonged.
Professor James M. Griffin of Texas A & M University deserves some attention at this point. Professor Griffin is a theorist who constantly talks of cheating by OPEC members, and whose knowledge of game theory leans heavily on what is known as a tit-for-tat strategy which, to his way of thinking, has something to offer for “deterring cheating”. This probably is true in theory, but dubious and irrelevant in fact, because the “enormous OPEC reserve base” that researchers like Griffin attribute to OPEC has actually not existed for many decades: given the actual and potential economic growth in the world economy, there is no such thing as an enormous reserve base!
There is instead a limited amount of oil in the crust of the earth that it is in the interest of both buyers and sellers to have access to for many more years in both the stock and flow sense – that is, not just as petroleum in the ground, but available as inputs for the durable items that were purchased by consumers and producers in the belief that they would not be kept from using them because of the lack or high price of a critical input, where by “critical input” I specifically mean oil and not oil substitutes.
Finally, in line with the discussion in the first section of this paper, the former governor of the U.S. Federal Reserve System, Alan Greenspan, has said that in his memoirs he has been explicit with what everybody who thinks about these matters believes to one extent or another, which is that the war in Iraq is about oil. I have thought about this topic for many years and initially concluded that this was not the case, but he could very definitely be correct. The military enterprises in Iraq and Afghanistan could plainly be classified a gratuitous waste of time, money and lives if energy were not somewhere in the picture; and since even unimaginative politicians are capable of getting the message in the long run, energy (in the form of oil and gas) is most likely the best explanation for the expansion of these half-baked crusades.
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* University of Uppsala, Sweden, and Asian Institute of Technology, Bangkok.
Pubblicato su www.AmbienteDiritto.it l'08/10/2007