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Page added on September 3, 2013
Syria and the geopolitics of oil
The global energy market is ruled by geopolitics. With tensions continuing in Egypt, Libya and Iran, and with Syria now added to the mix, things are looking shaky in the Middle East.
This week, Counting the Cost discusses what might happen, and how the markets can avoid more potential oil shocks.
When there is the threat of trouble in the Middle East, the price of oil usually starts to climb. This week, US oil prices hit a two-year high as traders worried about what looked like the ever-more-probable chance of military action against Syria.
The Middle East accounted for 35 percent of global oil output in the first quarter of this year, according to the International Energy Agency. So any potential disruption to that supply has the market worried.
But it is not quite as black and white as one might think. Back in May 2011, when NATO went into action against Libyan leader Muammar Gaddafi, US oil prices actually fell almost 10 percent. And it was the same 10 years ago, when the US-led coalition invaded Iraq and oil futures tumbled 15 percent.
The short story goes that prices rose because of fear, and then settled when the actual battles commenced.
But in the case of 2013, US oil stockpiles are up, increasing by the most in four months. There are now 362 million barrels of crude oil sitting in tanks as a back-up in case supplies are interrupted.
In fact, Syria itself does not really export oil in any great amount. It is the opposite of previous conflicts – Libya and Iraq – where the possibility of war meant a real threat of oil disruption to the rest of the world.
In this case, Syrian oil is more important to the Syrian economy than anywhere else.
So why is the oil market in a flurry? To discuss recent developments around Syria and the geopolitics of oil, we speak to Dr Mamdouh Salameh, who has worked in the business for 30 years and is now director of the Oil Market Consultancy Service, based in the UK.
Shale gas revolution?
As geopolitics impact the oil market, are there things that could help to offset some of that volatility? In North America, experts say a boom in oil production may help to moderate those shocks.
Some estimates suggest the US could be sitting on the gas equivalent of a trillion barrels of oil. So, could something like shale gas be the answer to the world’s energy problems?
There has been a lot of talk about shale gas lately, particularly the protests against its extraction.
Critics say governments are sometimes not being honest about the environmental risks of shale gas exploration.
Even though it is gaining more publicity now, shale gas actually has quite a long history as an energy source.
Shale gas was first extracted in 1821 in the town of Fredonia in New York state. But it was in 1947 that the process of fracking was developed; a process whereby rocks containing the gas are blasted apart with high pressure liquid.
In the 1970s it became bigger business, when the US saw the first industrial-scale extraction of shale gas.
So, is shale gas as important as it is often described? We discuss this with Cornelia Meyer, an independent energy expert and CEO of the MLR Corporation, who joins us from Geneva.
Property buy-up
Elsewhere, Middle East investors are pouring money into European property markets.
A new report out from the international commercial real estate company CBRE, has shown that in the first half of this year, buyers from the Middle East accounted for nine percent of the entire market, with 25 percent now coming from anywhere outside of Europe.
London remains the hot spot; nearly 50 percent of all property investments by Middle Eastern buyers are in the British capital.
In the last few years, there have been some real landmark British properties snapped up.
Qatar’s sovereign wealth fund bought up the famous Harrod’s department store, and also financed the Shard, which is now the tallest building in Europe.
5 Comments on "Syria and the geopolitics of oil"
BillT on Tue, 3rd Sep 2013 12:11 pm
Al J., the new addition to the US propaganda mill. More BS.
Hmm. So we have 5 days worth of oil sitting in tanks if there is a problem. I wonder how many days it will take to remove a few sunk tankers from the Strait of Hormuz? 60? 90? 365? Never?
shortonoil on Tue, 3rd Sep 2013 2:43 pm
Al Jazeera is financed by Qatar, who is also financing the Syrian rebels, along with SA. Qatar, along with Israel now have a lot of NG they would like to ship into Europe. They have to go through Syria to get there. Of course Syria is a Russian alley, and Russia doesn’t want to loose its monopoly of the European market.
Of course there is the Sunni, Shite divide, which started right after the death of Mohammad. 1400 hundred years later its bases is still considered justification for murdering one’s neighbor. We now have the idiots in DC trying to control the lunatics in the ME. With the Empire now having a bought and payed for government, this may not turn out well!
DC on Tue, 3rd Sep 2013 3:19 pm
All that instability is being aided, abetted, financed, encouraged and where possible, directed by the US. The US and its hapless satraps want instability and chaos, not peace and stability in the ME.
Exactly like its western counterparts, AJ never mentions the simple fact that Syria is just the opening shot of a much wider US war, ultimately aimed at Iran, Russia, China, and anyone else they can ‘take out’ along the way.
bobinget on Tue, 3rd Sep 2013 3:55 pm
Canadian, Mexican (oil) supplies will go on uninterrupted. Because Ecuador is predominately Catholic, USD, nation we should be getting a few hundred thousand barrels P/D there as well.
One future oil import source may be Argentina. You don’t even want to know how large that shale stash is.
Nigeria and other African resources are questionable as is Venezuela, so deep in hock both are to China.
The US will NEVER become oil independent but with natural gas, North America certainly will. The US is now the world’s biggest NG producer and obviously consumer. Shell, BP, SA’s Sasol among others, are all building or planning GTL plants in North America.
(gas to diesel)
Speaking of SPR. We never refilled after the (first)
Libyan civil war. No doubt Obama will be blamed for that too.
I’m guessing we will see rationing for a year or two till
every possible resource is amped and ramped.
bobinget on Tue, 3rd Sep 2013 4:08 pm
PS
urvey finds 24 natural gas-conversion projects under evaluation
Houston, TX – March 13, 2013: From its 2013 natural gas conversion survey, Houston-based Zeus Development Corporation has identified 24 projects in North America where developers have announced plans to convert gas chemically into one of six slates of products: methanol and gasoline (8 projects), nitrogenous fertilizers (6 projects), Fischer-Tropsch premium fuels (6 projects), direct-reduced iron (2 projects), syncrude (1 project), and ethanol (1 project).
The combined capital cost of the projects is estimated to approach US$60 billion. A summary inventory can be downloaded below.
“These are just the projects that have been announced publicly,” said Chris Cothran, energy analyst at Zeus Development Corporation. “Many more are under evaluation, but remain confidential.“
An abundance of shale gas in North America, estimated to exceed four quadrillion cubic feet of reserves, is attracting gas-conversion industries back to the U.S. and Canada. Developers such as Agrium Inc. (NYSE:AGU), Nucor (NYSE:NUE) and Royal Dutch Shell (NYSE:RDS) intend to bring processes that they have perfected overseas to gas-rich, industrial locations like Alberta, Louisiana and Texas. Some, like Methanex (Nasdaq:MEOH), the world’s largest methanol manufacturer, even intend to relocate established plants to North America. See http://goo.gl/xMm3i.
“The most investment capital we believe will be spent to build plants to convert natural gas into premium liquid fuels,“ Cothran said. “Two processes: one known as Fischer-Tropsch and the other from ExxonMobil, which converts natural gas to gasoline via methanol, represent 75% of the total US$60 billion investment.“
Click to download the Zeus Inventory of Proposed Natural Gas Conversion Projects.