Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Sunday, March 06, 2016

This Could Explain One Of The Biggest Mysteries Of Cheap Oil

The price of oil has crashed over the last year and a half. In the middle of 2014, a barrel of crude cost over $100. Now it's worth just over $30.

Normally, such a collapse would lead OPEC to pump less oil. The idea is that less oil on the market helps keep prices up. But despite a historic fall in oil prices, the Saudi Arabian-led international oil cartel hasn't budged: The biggest step it has taken so far is offer to freeze production at its current record levels. Production cuts are not on the table.

The big question is, why? One theory is that OPEC simply has less control over the oil market than it used to, thanks to the shale gas revolution. Another possibility is that OPEC wants oil prices to be low precisely in order to drive shale oil producers, which have higher costs, out of business.

Here's a simpler hypothesis: Maybe the Saudis aren't cutting production in the face of low prices because huge portions of their oil reserves might eventually become worthless. That's what James Rowe, an environmental studies professor at the University of Victoria, thinks.

If that happens, today's oil prices won't look low -- not when there's an overabundance of an asset that can't be sold. But oil prices are the lowest they've been in 12 years, you say. How could they ever be considered high?

This explanation relies on two related ideas: a carbon bubble and stranded assets. The carbon bubble refers to the fact that energy companies around the world are sitting on five times more fossil fuels than can be burned, the research nonprofit Carbon Tracker estimates. Those assets, worth about $2 trillion, are referred to as "stranded assets."

So what does that mean for an oil company that controls a state? It might as well sell as much oil as possible while still can.

Saudis can't sell oil for $100 a barrel, obviously, but Rowe said they "appear to be positioning themselves for the next best option: gobbling up as much of the earth’s remaining carbon budget for themselves before the bubble bursts. Isn’t it better to sell at a lower price than to receive nothing at all from vast unburnable reserves?"

By the time the world has moved on from oil, Rowe said, Saudi Arabia "will have sold what it could while its reserves were still burnable."

And the country will have moved on as well. Its oil minister, Ali Al-Naimi, has said Saudi Arabia will be a solar exporter by the middle of this century.

Original Article
Source: huffingtonpost.com/
Author: Ben Walsh

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