The Politics of International Oil
Gov 365P/MES 322K: Class 5
Introducing the problem of volatility
- issues of pricing upstream: recall
cost
of a barrel of oil in constant dollars
- why the huge variations?
- issues of supply: expensive
exploration, heavy investment for development;
lots of time between the
exploration and production
- iassues of demand: how can you predict
it?
- too much or too little?
- problem of excess capacity :
why should Saudi Arabia invest more
if its production will then exceed demand, reducing the price
of oil and hence its return on investmnent?
- managing supply to meet demand? how can you,
as an oil producer, control production to protect your
investment?
- monopoly - John D. Rockefeller's Standard
Oil Co.
- oligopoly - the "Seven Sisters" of Exxon,
Mobil, Chrevron, Texaco, Gulf, BP, and Royal Dutch Shell (plus
Compagnie Francaise des Petroles)
- government control of production
- Texas Railroad Commission 1891-1991
history
video
- market-demand pro-rationing=conservation??
-i.e. "maximum efficient rate of output" (MER)
- issues of regulation: "hot oil" and
interstate commerce: Connallly Hot Oil Act of 1935
-
Main page
Sept. 14, 2009