Saturday, July 17, 2010

Could the US Go to War Over an Oil Spill?

What if oil spilled from a well drilled by a state-owned oil company from Russia, Venezuela, Brazil, or other sovereign nations were staining the beaches of the Gulf of Mexico? Would the US government push a sovereign national oil company to the wall, as it has with private BP? The scenario is distinctly possible.
The oil industry is dominated by state-owned companies. Multinationals might have more name recognition with the public -- ExxonMobil, Royal Dutch Shell, BP, Chevron -- but they have full access to 6 percent of worldwide oil reserves. Eighty-eight percent of reserves are held by national oil companies, which also represent the majority of worldwide production. (It's unknown the percentage of oil that state-owned companies get from outside their countries' shores.) Companies such as Aramco, Petrobras, Sinopec and Pemex aren't household names, but they will be as oil becomes scarcer and they can throw around their weight even more due to their dominance of existing oil reserves.

We're already seeing potential hotspots, and the United States isn't the only country that should be worried. Chevron and Rosneft (owned by the Russian government) will begin drilling in the Shatsky Ridge of the Black Sea at the end of 2011. The Black Sea is bordered by Russia, Georgia, Turkey, Bulgaria, Romania and Ukraine -- countries that, to put it lightly, don't always get along. Any substantial accident would be seen as a Russian oil company contaminating its oft-slighted neighbors. Cue the international crisis.

More potential trouble could happen in the South China Sea, where China-owned CNOOC continues to expand its operations. As many as 10 countries surround the South China Sea, and its importance as a major shipping zone and an area of ecological diversity cannot be overstated. It is already a geopolitical hotspot, and any disaster caused by a state-owned company might unravel any diplomatic progress being made. _WaPo
If private oil companies have access to only 6% of the world's oil reserves, most of the inevitable accidents will occur under the control of sovereign national oil companies. And these companies are drilling closer and closer to US territorial waters. Brazil is in the Gulf, and Russia and China are coming, perhaps also Venezuela.
Even the Gulf of Mexico might see trouble again. Brazil's Petrobras drills in the gulf, and has been ramping up its operations in the area for several years. Brazil has relatively good relations with its neighbors in the Americas, but a Deepwater Horizon-style disaster could significantly change the political dynamics of the region.

It doesn't have to be a blown offshore platform that changes everything. Accidents can happen at any point in the supply chain. A recent death at the Port Arthur, Tex., refinery (owned by Shell and Aramco) highlights the potential for more tension. A substantially destructive accident at any step of the oil extraction, refining or transportation process could stain relations as well.

If we can be sure of one thing in the aftermath of the BP spill, it's that it won't be the last. Countries have not used the BP oil spill to stop offshore development: Deepwater production is anticipated to increase by two-thirds within five years, and state-owned oil companies in general are poised to continue their strong growth.

Strides in renewable energy aren't happening quickly enough to substantially reduce global demand of oil. That oil isn't plentiful enough to be extracted as easily anymore, meaning companies are using more and more potentially dangerous methods to get at it. As BP has shown, danger can only be averted for so long. _WaPo
Obama Pelosi is moving rapidly to impose a moratorium on new drilling, and to ramp up the costs for oil production to levels that become ruinous to private oil companies. That just leaves the sovereign national oil companies to mop the deck with the carcases of defunct private corporations. And it forces the US to import all its oil from capricious sovereign companies -- who are often also state sponsors of terrorism. Nice going, O-P!



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