Perspectives on the International Petroleum Market
On April 1, 2016 INCIPE held a Working Breakfast titled Perspectives on the International Petroleum Market. Adrián Lajous, Ex-Director of PEMEX and current Non-Resident Fellow at the Center on Global Energy Policy of Columbia University, headlined the event.
Petroleum has been the center of the international economy in recent decades. It remains crucial in a world of expanding and modernizing technologies. This market demonstrates its significant global influence by dictating many aspects of the geopolitical sphere. Several factors characterize the current international petroleum market a time of insecurity and instability. After the end of a long period of high prices, the present low prices have no anticipated end. The world-wide economic crisis beginning in the previous decade, issues in various states and regions, and a change in the producers and overall supply of petroleum, have all influenced the current trend.
While there exist continuities in the international petroleum market, changes in various participating states have affected the current dynamics. Brazil and Venezuela currently suffer from political crises, the latter also coping with hyperinflation; Canada has decreased its crude oil production; Mexico has drastically decreased its production of oil and gas, with a crisis in PEMEX, its state-owned petroleum company and the government intervention that followed; the European Union’s fuel production has also decreased.
Conversely, the United States of America has expanded its presence in the international petroleum market with increased inland production, especially through the production of shale oil. Retrieved through a process called fracking, shale oil brings the US closer to energy independence. While the environmental effects of fracking are still being studied, the importance of oil independence means this process will continue at least into the near future. Similarly, Russia recently recorded record high oil production.
The Middle East region is also vital when discussing the oil market; The US, Russia, and Saudi Arabia produce 40% of the world’s oil, meaning Saudi Arabia can no longer control the international oil market independently. Iraq, another significant actor in the market, is not planning to reduce its oil production, in part due to the proximity of violent conflicts. Iran, after having been excluded since 2012, is reinstating itself in the oil market, although just recently violating its internationally imposed sanctions relating to nuclear materials.
As for Mexico’s PEMEX, it is working to recuperate from its aforementioned crisis. The company is in the process several reforms. With these planned changes, PEMEX hopes to have a different look by the year 2022 and reestablish its relevance in the international spectrum.
Along with the increased oil supply, there has been an increase in environmental considerations and focus on the reduction of energy use, especially that which comes from fossil fuels. This has led to an international initiative, even at the political level, to shift to renewable energy sources. These efforts have lost effectiveness, though, due to the low oil prices; because they are predicted to be long-term, they do not help incentivize the use or development of renewable energy sources.
In addition to the factors that directly affect the international oil market, there exist other issues that indirectly influence the market. These include the new and more severe security issues affecting the entire international community, as well as the large quantity of violent conflicts, including those in Syria and Yemen. The international petroleum market has proved to be multidimensional and influenced by several diverse factors.
Members of various fields attended the Working Breakfast, including academics, businesspeople, and affiliates of several Embassies. The event ended with a questionnaire where attendees shared their views on different topics, including the long-term international petroleum market and the role renewable energy sources will play in the future.
Maria Peurach
INCIPE
