web analytics

Is the petro world in decline?

Written By: - Date published: 10:00 am, June 2nd, 2016 - 13 comments
Categories: capitalism, Economy, energy, peak oil - Tags:

Petro world decline

A few articles have caught my eye about a decline in the influence of petro-states and petro-multinationals. A little quote to start, about energy economy shifts undercutting nations such as Russia, Venezuela, Nigeria, and Saudi Arabia:

There Will be Mahem: Petro-States Are Going Down and Taking The World Economy With Them

The most basic assumption behind their operation – that global oil demand will continue to outpace world petroleum supplies and ensure high prices into the foreseeable future – no longer holds.

Some analysts are convinced that world oil demand is heading for a peak and is going to slowly decline:

The IMF believes that slowing worldwide economic growth, international climate change agreement, and the spread of non-carbon reliant generation will continue to dampen demand.

With its 2 June meeting shortly, OPEC seems to have gained stronger collective market share, but by committing to high production it has lost almost all price control power it used to have. It may be strong as a collective, but has nowhere near the raw power recalled from the early 1970s. While in the medium term the US Energy Information Service says global oversupply will decrease somewhat, predictions are for a mere US $50 a barrel.

At the same time as many states who have held the earth to ransom with oil production are facing real economic threat, so too apparently are those multinational oil companies who have held economies to ransom. The Financial Times says the long twilight of the big oil companies is happening:

The Financial Times editorialises that these petro-multinationals should simply accept their weakened status:

Rather than investing in potentially stranded oil and gas projects, or gambling on new technologies that they do not fully understand, the oil companies would do better to continue returning money to shareholders through dividends and share buybacks.”

Is the end of petro-states, petro-multinationals, and the entire petro-world, now visible?

13 comments on “Is the petro world in decline? ”

  1. Bill 1

    Is the end of petro-states, petro-multinationals, and the entire petro-world, now visible?

    Certainly, but not due to any ‘peak oil’ scenario or market volatility.

  2. Colonial Viper 2

    “Global oversupply” is 2% to 3%.

    That’s with all producers basically maxing out their production capacity.

    This situation can flip around within about 90 days or so into a serious shortage.

    I expect crude prices to keep rising into 2/2 2017. The hint that this will happen is if Brent breaks $51 or $52 bb.

    Another point – this situation demonstrates how massive global economy depression is good for quickly and sustainably reducing GHG emissions.

    As for this ridiculous ass-backwards headline

    There Will be Mahem: Petro-States Are Going Down and Taking The World Economy With Them

    It should more correctly lead:

    The world economy is going into the toilet, and petro-states are going down with it.

    • mauī 2.1

      I largely agree with that, I had heard an interview with an oil industry person saying that we’ll be back at $100 a barrel in a year or so. I’m not sure how these big price swings are are going to keep oil companies solvent.

      The oil countries are also going to see more war as other states scrap over what’s left and invade them, etc. The countries like the US and Russia who can protect their reserves will also be in a stronger position as everything the world needs, consumer products, food, infrastructure is all made from oil.

  3. linda 3

    Saudi royals are selling Saudi Aramco they sure as hell think so

  4. johnm 4

    The Boiling Pot

    Richard Heinberg

    In the energy world, the growth of unconventional oil and gas supplies appears to have postponed peak oil for a decade (conventional oil production flatlined starting in 2005; all the supply increase since then has come from tight oil, tar sands, heavy oil, and deepwater oil)—but at what cost? Unconventional oil production carries higher environmental risks, including increased greenhouse gas emissions per liter of finished fuel.

    And it took massive investment to finance the surge in unconventionals. If it hadn’t been for easy-money central bank policies in the wake of the 2008 global financial crash, it’s likely the fracking boom would have been an unnoticeable blip. A few years of sky-high oil prices were also necessary. But high prices weakened demand for oil, just as drillers flooded the market with the wrong grades of crude in the wrong places at the wrong time. The result: an oil price crash (starting in mid-2014) and financial bloodletting within the industry.

    We appear to be in a new era in which oil prices are either high enough to stimulate new supply, in which case they are also high enough to cripple the economy; or they are low enough to stimulate the economy, but also so low as to decimate the industry. There is no longer any tenable middle ground.

    Today’s price of $50 per barrel is high in historic terms, but still too low to allow the industry to recover from the past two years of staggering losses. The trouble is, the unconventional production binge required a lot of cash, and most of it was borrowed. According to data compiled by FactSet and Yahoo Finance, the U.S. energy sector is drowning in $370 billion of debt, double the amount a decade ago. Just to make interest payments, energy companies shelled out $16.7 billion in 2015—half of their total operating profit. And despite rebounding oil prices, the situation is getting worse, with over 86 percent of energy sector operating profits going to interest payments in the first quarter of 2016. Unless prices zoom back past $100 a barrel, the tens of billions of dollars in debt coming due between 2017 and 2020 will likely trigger a wave of defaults and bankruptcies.

    That could spell serious trouble for an economy that has been on life support for eight years now. After the nearly catastrophic crash of 2008, low interest rates, bailouts, and quantitative easing succeeded in restoring a sense of economic normalcy, though at the cost of more financial bubbles (in housing, fracking, and tech) and increased economic inequality. But what will the wizards of finance do when things turn ugly again—as they inevitably will, sooner or later? Negative interest rates will prove more than a little unpopular with savers, and throwing trillions more at banks and investors won’t help the masses afford to pay interest on their mounting debt or to buy more consumer goods.


    The world economic order is collapsing and this time there seems no way out
    Will Hutton

    Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.

    The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective.

    The heart of the economic disorder is a world financial system that has gone rogue.



    A surprisingly frank article that captures many points missed elsewhere but still skirts entirely the cardinal issue. What we face is not a financial crisis, though it plays out as one. It is a crisis in the continually falling global average rate of profit. Capitalism can no longer mass-produce goods at prices low enough for shrinking consumer markets to buy and that still ensure a profit.

    Whilst the expansion of credit has become an enormous problem, it is a symptom of the underlying crisis, not a cause. In fact, the expansion of credit, which took place in industrial credit, lending to producers, consumer credit, lending to households, and financial credit, lending to brokers and dealers, was a means by which capitalism prolonged the boom period for an extra decade and so forestalled the eventual collapse we’re seeing right now.

    This is why all the reformist talk of new strategies, democratizing the Euro and so on, can come to nothing. And it’s also why the reformist programme of Syriza failed in Greece. Capitalism today is in a worse state, in structural terms, than it was in the 1930’s, when the crisis ended in a world war.

    There is no feasible reform programme. The capitalists, as a class, want to cut to the chase. They want to savagely attack the conditions and rights of working people in order to extend the period of their rule so far as they can. They offer nothing but a gloves-off policy, not only to the class they exploit but also to themselves, as competitors for ever-decreasing markets. They move to a rapid concentration of capital in the most efficient corporations while everyone else can go to the wall, including entire countries such as Greece.

    That this crisis is truly global and is already leading to war and mass migration, should be no surprise. But the almost total silence on the subject by the most eminent bourgeois economists and their lackeys in the press, needs to be well and truly broken. Good that Will Hutton has said a few things, added some facts, but those who wish to address matters seriously will have to do much more.


    • Draco T Bastard 4.1

      But while it knows there needs to be an international co-ordinated response, no progress is likely.

      There only needs to be a global response if you’re concerned with protecting the global rich from the risks that they took. If you’re not concerned about that then a country can do a clean default and renew their own currency.

      The heart of the economic disorder is a world financial system that has gone rogue.

      It hasn’t gone rogue – it’s always been rogue. That’s why it’s been variously banned by societies and religions for the last 5000 years. A financial system based upon debt simply doesn’t work. But we keep getting the greedy schmucks in to power and they make it legal and then we let them run down society.


      Capitalism has never worked and will never work. It will always result in exploitation of the many by the few and result in collapse of society. Exactly what we’re seeing today.

    • Ad 4.2


      The OECD current report doesn’t see that kind of cataclysmic crisis looming; what they observe in the medium term is a continuation of low global growth.

      Their commentary to National Radio this morning positions New Zealand as one of the best performing economies and due to be so for quite some time.

      They outline the potential for major downturns, of course, but note the global trends are for sustained low growth.

      Which in turn affects oil consumption for many years to come.

  5. ianmac 5

    Surely if the supply falls away the cost of petrol will become astronomical. $5+ per litre?

  6. Infused 6

    No. You just don’t understand the economic warfare the US/Opec are currently in with the Arabs/Russia etc.

    This high output was done for a reason. Opec had no ‘real’ say in the matter.

    This little war has had its effect. You will see crude rise for the next few years, peaking in 2020.

    • Ad 6.1

      I’ve seen that commentary as well, with the Saudis essentially hoping that burning off the alternative players will eventually prop their prices back up.

      That’s a gamble they don’t appear to be winning so far.

    • Rocco Siffredi 6.2

      If it’s the US/OPEC against the Arabs/Russia, who are the Arabs exactly? Most of them are in OPEC.

      Why would Iran & Venezuela team up with the US to fight an economic war with Russia that destroys their own economies?

      If you believe oil prices will rise until 2020, have you got your options in place?

  7. Steve Withers 7

    I’m buying a Nissan Leaf in the next few weeks. It will be “good enough”.

    My intention is that I have already bought my last petrol-driven car.

    Though I mainly use the train and buses…..I have the car for those longer (20km?) regional trips that need to get from A to B in ways that public transport currently can’t match.

    Like getting to anywhere on Te Irirangi Rd. The buses appear to not use it at all because traffic makes it too unreliable. Instead they run up anddown parallel streets and you need to walk from – say – 160 Chapel Rd to get to anywhere nearby on Te Irirangi.

    There are still part of town (much of Howick and Botany) where you can punish yourself trying to use public transport…..but a car is better.

    • Ad 7.1

      As Aucklanders, we’re pretty unusual for having only one car.
      We’re looking at the Hyundai Sonata hybrid as our replacement.


      It’s a plug-in hybrid. And shiny like a car.

      Other than that, like you we train in every day, and cycle on the weekends.
      But good to have a car four touring purposes.

      It’s possible we’ll just keep thrashing the Volvo into the ground, and just wait until we build in Wanaka for this kind of capital purchase. Great to see there are more options coming out.

      Te Irirangi Drive still has the design width capacity in future to have a dedicated bus line put up the middle of it. Unfortunately this government prefers to do the Reeves Road flyover before it really gets AMETI Panmure to Botany underway.

Recent Comments

Recent Posts

  • Equitable response to Omicron vital
    The Green Party supports the Government’s decision to move Aotearoa New Zealand to traffic light level Red at 11.59pm tonight, but says its success will depend on the support that is made available to the most vulnerable. ...
    3 days ago
  • How we’re preparing for Omicron
    As countries around the world experience Omicron outbreaks, we’re taking steps now to ensure we’re as prepared as possible and our communities are protected. ...
    6 days ago
  • What’s Labour achieved so far?
    Quite a bit! This Government was elected to take on the toughest issues facing Aotearoa – and that’s what we’re doing. Since the start of the pandemic, protecting lives and livelihoods has been a priority, but we’ve also made progress on long-term challenges, to deliver a future the next generation ...
    2 weeks ago
  • Tackling the big issues in 2022
    This year, keeping Kiwis safe from COVID will remain a key priority of the Government – but we’re also pushing ahead on some of New Zealand’s biggest long-term challenges. In 2022, we’re working to get more Kiwis into homes, reduce emissions, lift children out of poverty, and ensure people get ...
    2 weeks ago

  • Government’s Family Package continues to deliver for New Zealanders
    The Families Package helped around 330,000 families in its first year - more than half of all families with children in NZ These families received an estimated $55 per week more from Families Package payments in 2018/19 than in 2017/18, on average Families Package increases to the maximum possible Accommodation ...
    BeehiveBy beehive.govt.nz
    2 hours ago
  • New Zealand retains top spot in global anti-corruption rankings
    Justice Minister Kris Faafoi has welcomed news of New Zealand’s ongoing position as top in the world anti-corruption rankings. The 2021 Corruption Perceptions Index released by global anti-corruption organisation, Transparency International, ranks New Zealand first equal with Denmark and Finland, with a score of 88 out of 100. “This is an ...
    BeehiveBy beehive.govt.nz
    15 hours ago
  • Testing improvements see New Zealand well prepared for Omicron
    New Zealand’s PCR testing capacity can be increased by nearly 20,000 tests per day to deal with a surge in cases as part of our wider COVID-19 testing strategy, Associate Minister of Health Dr Ayesha Verrall said. “We have continued to adapt our public health response to safeguard the health ...
    BeehiveBy beehive.govt.nz
    20 hours ago
  • 5,000 portable air cleaners for schools on their way
    As schools are preparing to return, Education Minister Chris Hipkins has announced 5,000 air cleaners have been ordered for New Zealand schools. “As we know, along with vaccination, testing, good hygiene and physical distancing, good ventilation is important in minimising the risk of airborne transmission of the virus that causes ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • New Zealand to move to Red from 11.59pm today
    All of New Zealand will move to the Red setting of the Covid Protection Framework (CPF) at 11:59pm today as Omicron is potentially now transmitting in the community, Prime Minister Jacinda Ardern says. “Nine COVID-19 cases reported yesterday in the Nelson/Marlborough region are now confirmed as Omicron, and a further ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Mandatory boosters for key workforces progressing well
    More than 5,785 (82%) border workers eligible for a booster vaccination at 6 months have received it so far, COVID-19 Response Minister Chris Hipkins says. “That’s a really strong uptake considering we announced the requirement the week before Christmas, but we need to continue this momentum,” Chris Hipkins said. “We ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • NZ to move to Red
    Nine COVID-19 cases reported yesterday in the Nelson/Marlborough region have now been confirmed as the Omicron variant, and a further case from the same household was confirmed late yesterday. These cases are in a single family that flew to Auckland on 13 January to attend a wedding and other events ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • New Zealand to provide further help for Tonga
    Aotearoa New Zealand is giving an additional $2 million in humanitarian funding for Tonga as the country recovers from a volcanic eruption and tsunami last weekend, Foreign Affairs Minister Nanaia Mahuta and Defence Minister Peeni Henare said today. This brings Aotearoa New Zealand’s contribution to $3 million. “This support will ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Quarterly benefit numbers show highest number of exits into work
    The Government’s strong focus on supporting more people into work is reflected in benefit figures released today which show a year-on-year fall of around 21,300 people receiving a main benefit in the December 2021 quarter, Minister for Social Development and Employment Carmel Sepuloni said. “Our response to COVID has helped ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Northland to move to Orange, NZ prepared for Omicron 
    Northland to move to Orange Rest of New Zealand stays at Orange in preparedness for Omicron All of New Zealand to move into Red in the event of Omicron community outbreak – no use of lockdowns Govt planning well advanced – new case management, close contact definition and testing rules ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • RNZAF C-130 Hercules flight departs for Tonga as Navy vessels draw nearer to Tongatapu
    A Royal New Zealand Air Force C-130 Hercules has departed Base Auckland Whenuapai for Tonga carrying aid supplies, as the New Zealand aid effort ramps up, Foreign Affairs Minister Nanaia Mahuta and Defence Minister Peeni Henare said today. “The aircraft is carrying humanitarian aid and disaster relief supplies, including water ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • New Zealand prepared to send support to Tonga
    New Zealand is ready to assist Tonga in its recovery from Saturday night’s undersea eruption and tsunami, Foreign Affairs Minister Nanaia Mahuta and Defence Minister Peeni Henare said today. “Following the successful surveillance and reconnaissance flight of a New Zealand P-3K2 Orion on Monday, imagery and details have been sent ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Aotearoa New Zealand stands ready to assist people of Tonga
    The thoughts of New Zealanders are with the people of Tonga following yesterday’s undersea volcanic eruption and subsequent tsunami waves, Foreign Affairs Minister Nanaia Mahuta says. “Damage assessments are under way and New Zealand has formally offered to provide assistance to Tonga,” said Nanaia Mahuta. New Zealand has made an ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Record high of new homes consented continues
    In the year ended November 2021, 48,522 new homes were consented, up 26 per cent from the November 2020 year. In November 2021, 4,688 new dwellings were consented. Auckland’s new homes consented numbers rose 25 per cent in the last year. Annual figures for the last nine months show more ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Report trumpets scope for ice cream exports
    Latest research into our premium ice cream industry suggests exporters could find new buyers in valuable overseas markets as consumers increasingly look for tip top quality in food. Economic Development Minister Stuart Nash has released a new report for the Food and Beverage Information Project. The project is run by ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Honouring the legacy of legendary kaumātua Muriwai Ihakara
    Associate Minister for Arts, Culture, and Heritage Kiri Allan expressed her great sadness and deepest condolences at the passing of esteemed kaumātua, Muriwai Ihakara. “Muriwai’s passing is not only a loss for the wider creative sector but for all of Aotearoa New Zealand. The country has lost a much beloved ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Have your say on proposed changes to make drinking water safer
    Associate Minister for the Environment Kiri Allan is urging all New Zealanders to give feedback on proposed changes aimed at making drinking water safer. “The current regulations are not fit for purpose and don’t offer enough protection, particularly for those whose water comes from smaller supplies,” Kiri Allan said. “This ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Planting the seeds for rewarding careers
    A boost in funding for a number of Jobs for Nature initiatives across Canterbury will provide sustainable employment opportunities for more than 70 people, Conservation Minister Kiri Allan says. “The six projects are diverse, ranging from establishing coastline trapping in Kaikōura, to setting up a native plant nursery, restoration planting ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • New Zealand congratulates Tonga's new Prime Minister on appointment
    Minister of Foreign Affairs Nanaia Mahuta today congratulated Hon Hu'akavameiliku Siaosi Sovaleni on being appointed Prime Minister of the Kingdom of Tonga. “Aotearoa New Zealand and Tonga have an enduring bond and the Kingdom is one of our closest neighbours in the Pacific. We look forward to working with Prime ...
    BeehiveBy beehive.govt.nz
    3 weeks ago