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

  • Twenty highlights of 2020
    As we welcome in the new year, our focus is on continuing to keep New Zealanders safe and moving forward with our economic recovery. There’s a lot to get on with, but before we say a final goodbye to 2020, here’s a quick look back at some of the milestones ...
    3 weeks ago

  • Jobs for Nature funding will create training and employment opportunities
    A major investment to tackle wilding pines in Mt Richmond will create jobs and help protect the area’s unique ecosystems, Biosecurity Minister Damien O’Connor says. The Mt Richmond Forest Park has unique ecosystems developed on mineral-rich geology, including taonga plant species found nowhere else in the country. “These special plant ...
    BeehiveBy beehive.govt.nz
    6 hours ago
  • Pre-departure testing extended to all passengers to New Zealand
    To further protect New Zealand from COVID-19, the Government is extending pre-departure testing to all passengers to New Zealand except from Australia, Antarctica and most Pacific Islands, COVID-19 Response Minister Chris Hipkins said today. “The change will come into force for all flights arriving in New Zealand after 11:59pm (NZT) on Monday ...
    BeehiveBy beehive.govt.nz
    12 hours ago
  • Bay Cadets learn skills to protect environment
    Bay Conservation Cadets launched with first intake Supported with $3.5 million grant Part of $1.245b Jobs for Nature programme to accelerate recover from Covid Cadets will learn skills to protect and enhance environment Environment Minister David Parker today welcomed the first intake of cadets at the launch of the Bay ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Cook Islanders to resume travel to New Zealand
    The Prime Minister of New Zealand Jacinda Ardern and the Prime Minister of the Cook Islands Mark Brown have announced passengers from the Cook Islands can resume quarantine-free travel into New Zealand from 21 January, enabling access to essential services such as health. “Following confirmation of the Cook Islands’ COVID ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Supporting communities and landowners to grow employment opportunities
    Jobs for Nature funding is being made available to conservation groups and landowners to employ staff and contractors in a move aimed at boosting local biodiversity-focused projects, Conservation Minister Kiritapu Allan has announced. It is estimated some 400-plus jobs will be created with employment opportunities in ecology, restoration, trapping, ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Border exception for some returning international tertiary students
    The Government has approved an exception class for 1000 international tertiary students, degree level and above, who began their study in New Zealand but were caught offshore when border restrictions began. The exception will allow students to return to New Zealand in stages from April 2021. “Our top priority continues ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Tiwai deal gives time for managed transition
    Today’s deal between Meridian and Rio Tinto for the Tiwai smelter to remain open another four years provides time for a managed transition for Southland. “The deal provides welcome certainty to the Southland community by protecting jobs and incomes as the region plans for the future. The Government is committed ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • New member for APEC Business Advisory Council
    Prime Minister Jacinda Ardern has appointed Anna Curzon to the APEC Business Advisory Council (ABAC). The leader of each APEC economy appoints three private sector representatives to ABAC. ABAC provides advice to leaders annually on business priorities. “ABAC helps ensure that APEC’s work programme is informed by business community perspectives ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Govt’s careful economic management recognised
    The Government’s prudent fiscal management and strong policy programme in the face of the COVID-19 global pandemic have been acknowledged by the credit rating agency Fitch. Fitch has today affirmed New Zealand’s local currency rating at AA+ with a stable outlook and foreign currency rating at AA with a positive ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Additional actions to keep COVID-19 out of NZ
    The Government is putting in place a suite of additional actions to protect New Zealand from COVID-19, including new emerging variants, COVID-19 Response Minister Chris Hipkins said today. “Given the high rates of infection in many countries and evidence of the global spread of more transmissible variants, it’s clear that ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • 19 projects will clean up and protect waterways
    $36 million of Government funding alongside councils and others for 19 projects Investment will clean up and protect waterways and create local jobs Boots on the ground expected in Q2 of 2021 Funding part of the Jobs for Nature policy package A package of 19 projects will help clean up ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand Government acknowledges 175th anniversary of Battle of Ruapekapeka
    The commemoration of the 175th anniversary of the Battle of Ruapekapeka represents an opportunity for all New Zealanders to reflect on the role these conflicts have had in creating our modern nation, says Associate Minister for Arts, Culture and Heritage Kiri Allan. “The Battle at Te Ruapekapeka Pā, which took ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Better care for babies with tongue-tie
    Babies born with tongue-tie will be assessed and treated consistently under new guidelines released by the Ministry of Health, Associate Minister of Health Dr Ayesha Verrall announced today. Around 5% to 10% of babies are born with a tongue-tie, or ankyloglossia, in New Zealand each year. At least half can ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Prisoner disorder event at Waikeria Prison over
    The prisoner disorder event at Waikeria Prison is over, with all remaining prisoners now safely and securely detained, Corrections Minister Kelvin Davis says. The majority of those involved in the event are members of the Mongols and Comancheros. Five of the men are deportees from Australia, with three subject to ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Pre-departure COVID-19 test for travellers from the UK and the US from 15 January
    Travellers from the United Kingdom or the United States bound for New Zealand will be required to get a negative test result for COVID-19 before departing, and work is underway to extend the requirement to other long haul flights to New Zealand, COVID-19 Response Minister Chris Hipkins confirmed today. “The new PCR test requirement, foreshadowed last ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • PM congratulates New Year Honour recipients
    Prime Minister Jacinda Ardern has added her warm congratulations to the New Zealanders recognised for their contributions to their communities and the country in the New Year 2021 Honours List. “The past year has been one that few of us could have imagined. In spite of all the things that ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • David Parker congratulates New Year 2021 Honours recipients
    Attorney-General and Minister for the Environment David Parker has congratulated two retired judges who have had their contributions to the country and their communities recognised in the New Year 2021 Honours list. The Hon Tony Randerson QC has been appointed a Companion of the New Zealand Order of Merit for ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • New Year’s Honours highlights outstanding Pacific leadership through challenging year
    Minister for Pacific Peoples Aupito William Sio says the New Year’s Honours List 2021 highlights again the outstanding contribution made by Pacific people across Aotearoa. “We are acknowledging the work of 13 Pacific leaders in the New Year’s Honours, representing a number of sectors including health, education, community, sports, the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Supporting seniors to embrace technology
    The Government’s investment in digital literacy training for seniors has led to more than 250 people participating so far, helping them stay connected. “COVID-19 has meant older New Zealanders are showing more interest in learning how to use technology like Zoom and Skype so they can to keep in touch ...
    BeehiveBy beehive.govt.nz
    3 weeks ago