A Modern Scenario of the World War

FROM THE REDACTION

The result of the meeting of the leading 8 countries’ leaders should be intensification of pressure on Iran, consideration of problems related to slowing down of the world economy’s growth rates, coexistence between the western stagnation-marked markets with the Asian rapidly growing ones and Russia’s dropping out of the West’s crusade for democracy and against dictatorial regimes (which are at the same rich in resources).

Currently the main leitmotif is the total control over oil and gas resources… During the last month the oil price has been fluctuating around 70 USD and that of gasoline – 730-840 USD/ton.
What is going on in the world oil business, what is the dynamics of the reserves and consumption, what are the price trends, and what the world economic policy will look like in the near future?.. What is the modern scenario and libretto of the world war? It is very important for the Georgian economy that basically lives at the expense of imported white distillates, which are a multiplier of the commodity and services market on the whole, and also because Georgia became an oil country in June.
The daily world production has grown from 77 million barrels in 2002 to the current 82 million barrels (see Table 1). According to experts, in 2005 it will increase to 89 million barrels and will reach 100 million barrels by 2015. The consumption is increasing in a similar way (see Table 2). At the same time, natural gas consumption (see Table 3). According to the reserves, quotas are distributed as it shown in the table (see Table 4).
Basic production growth is expected in the Middle East only (we use BP’s data, which is considered as official data in this sphere) See charts.
One thing is clear from this data: the reserves are running low in northern Europe, America and in a large part of Russia. They are still available in increasing quantities in the Middle East and in some regions of Africa. That is why, the main war is for the control over this mainly Muslim region, those who will have influence upon Iran, Iraq and the region on the whole, will control the situation during the next hundred years.
The second region that is also rich in resources is Central Asia – Turkmenistan, Kazakhstan, Azerbaijan, that is why transport corridors, including Georgia, that are important for the west, now basically determine the fate of the world politics and the underlying theme of the G8 meeting. Here Russia, which has obtained much money from oil, is not satisfied with the role of an ordinary participant, it aspires for a position of one of the world leaders and the one that is reckoned with, including from the viewpoint of the control over some countries, the way it controls Turkmenistan, Uzbekistan and partially Kazakhstan from the viewpoint of energy. For this purpose Russia needs dictatorial regimes in these countries. Then the rulers of these countries need as the breath of life Russia’s support that conducts ambitious undemocratic and absolutely unscrupulous policy, moreover it is their only support.
Thus, this war is not only for oil and the hegemony on the world market, but also the war between dictatorship and democracy. It is natural that here the US and the west, in spite of diplomatic variations, will not give up anything and… and what will be the result of the confrontation? Here is the main issue in the world today. It is not a simple question, since Russia is a nuclear country and rather powerful at that. Added to this is the fact that over the recent period it has accumulated 250 billion USD worth of reserves, this is a record indicator for the whole period of its existence and it will increase still more. At the same time, Russia has claims for not only supplying energy raw materials but for controlling the western markets by means of its largest companies and, as it can be seen, it will achieve much success in this sphere, since Europe has no choice, while Russia, on its part, has an alternative market in China. That is why the war against Iran is not only the Iran war. It is a war for the future. The diplomatic war against Russia is not only a struggle between the two big countries, it is a war for democracy and the future. And there will be the third one soon – the war between China and the west for repartition of the world market, since China, which is conducting the policy of serious protectionism, damping and subsidizing, is actively making use of the western policy of open market and is achieving a serious economic progress. It registers investors according to an entirely preferential treatment, is, along with Vietnam, a tax haven and at the same time it has lifted most of regulatory mechanisms, including in labor legislation, ecology, etc.
That is why production in China is growing at very high rates, oil products’ consumption is increasing, and it is the level of consumption in China and India that becomes one of the main price catalyzers.
What unites the G8 countries? Do they have anything I common? Yes, they have – it is the desire to control the market, and they are rivals on it. By means of transnational companies they are controlling 70% of the world business and are main competitors. No end of the struggle between Europe and the US is in sight. It seems that Europe is hopelessly losing here. It has a seriously low rate of economic growth. Enlargement, along with strong euro, caused big problems to it. Added to this is the unprecedentedly strong tax burden and the great social responsibility – capital is running from Europe.
Currently it is partially the US’s ally because it will not cope with the dictatorial regimes by itself and will not be able to make them open the market for the Europeans. Europe asks for opening of markets and a free economy from others, but when Russia asked for a share of England’s gas distribution business, they started talking of the national interests and forgot about the market, it happened so in the steel business in coalescence of the last world giants, etc. In other words, the open market policy was in a certain way deceptive for both under-developed countries and the ones rich in raw materials. When in the US they sold ports to the Dubai part, they got frightened – who owns the whole business in Dubai? It is up to you to answer this question and the one as to the citizens of which country are in the UAE on the basis of visa-free regime.
All members of the G8 have their own interests and they are rivals, but the struggle against dictatorship unites them and they are considering the ways of neutralizing Russia in this war.
What will the west offer to Russia in reality, what will it give up in this wrangle or what it has already given up – all this will become clear during the one year period.
The fact is that there has never been such a correctly strained situation in the world, the future of the humankind depends on how it will be settled and what kind of balance will take place. Waging a war against dictatorship we should be careful in order not to get a super and improved one that has no alternative, and the people of the world should not forget what real freedom is. What is left if we control the backbone of the inter-bank communications – “Swift”, read e-mails and tap all telephones???
The reason of all this is oil, the goal – hegemony, and we are led to the difficult results of any hegemony that has no alternative as history teaches us.
These conclusions are confirmed by the fact that disorders in Iraq make oil more expensive.
Washington – in the first decade of June the oil price rose by more than 1 USD. It is clear that assassination of Al-Qaeda leader in Iraq did not mean the end of disturbances in the country. According to Dow Jones agency, the officials from the Nigerian government say that daily oil production in the country has dropped by about 800 000 barrels.
The US oil brokers say that the oil market is “chained to the anxiety wall” and, besides, the global demand, geopolitical disturbances and the season of Atlantic hurricanes aggravate the situation. The July receiving price of light sweet crude rose by 1.28 USD and made up 71.63 USD at New York Exchange. In London the price of Brent crude rose by 1.43 USD and its futures costs 70.48 USD. Nymex gasoline rose in price by 5.06 USD and its price makes up 2.1528/gallon, heating oil rose in price by almost 3 cents and one gallon of it costs 2.0130. As to natural gas, it rose in price by 10 cents and 1000 cubic feet cost 6.294 USD.
The price of crude oil is more 30% higher in comparison with the last year. The demand for gasoline continues to grow, though it is a bit less in comparison with the normal one. In any case, the government’s statistics gives us this information.
Rising of oil prices was caused by the spread information saying that Iraq’s oil representative Mutana Al-Badri wad kidnapped in Baghdad when it was returning home from work.
Analysts are cautious when they speak about the air strike as a result of which Abu Musab al Zarkavi, who was considered as the leader of suicide terrorists and the one who masterminded terrorist attacks in Iraq, was killed. The attacks on the country’s oil infrastructure were not in direct relation to his assassination. According to analysts, it will take several weeks or months to study the situation on the market, reduce prices and adjust the situation. Representatives of Vienna Oil Association say that, in spite of al Zarkavi’s assassination, political disturbances and absence of a new frame law in Iraq will contribute to continuation of the trends related to reduction of oil export.
The issue of the Iran’s initiative and the west’s resistance is still vague. The Iranians and the westerns condemn each other’s initiatives, though the president of Iran called the west for solving of the problem by means of negotiations.
The season of hurricanes is also approaching, traders are worried that powerful elemental forces will cause considerable losses and disable the oil processing facilities located on the Gulf’s coast.
OPEC: in expectation of stability – $60
Over the period of the last 6 years Russia has profited by OPEC’s actions. The incomes from oil and natural gas export reach 600 billion USD. However, Russia’s role is coming to the end, it should finally decide whether it will become a member of G8. Nevertheless, Russia is a big country and can permit itself to be a neutral one.
Over the past five years the price of oil increased from 18 USD to almost 70 USD, there were serious changes in OPEC, especially because of the aggressive price policy of Venezuela and Arab countries. After 1990s the new pragmatic leaders came to power, that is why no one will make concessions because of the US trying to retain low prices. Over the recent period OPEC has been making oil more expensive, but it knows perfectly well that these actions should not reduce the level of demand on the market.
According to the widespread opinion, the average price of oil is 55-60 USD, these figures were cited by Saudi minister to comment the shaped situation. OPEC is trying to retain the average oil price for the reasons given below:
Ï% It has become clear of late that the price of 55-60 USD per barrel of oil does not create any problems for economic growth, while the price of 70 USD creates real problems for the economy;
Ï% The oil price of 55-60 USD will not reduce the demand on the market, and no one will try to look for an alternative fuel;
Ï% The mentioned figure is safe from political point of view, and in case of its increasing there is a threat of political repressions against OPEC;
Ï% With this figure the organization has a stable guarantee.
A new deal
In the matter concerning retaining the average oil price the main rivals are OPEC member countries, which, in case of increasing of the demand, cannot produce the sufficient amount of oil, in other words, they do not have large reserves of oil.
Only time can give an answer to this controversial issue. One thing is clear – OPEC countries, against the background of population growth and political changes in the Middle East countries, OPEC countries have large profits in comparison with the past. The oil organization criticized the project of the consumer countries, since they are seeking for the sources of obtaining alternative energy. OPEC is trying to make a new deal with the international suppliers. It should know the exact level of demand on the market and is trying to avoid the effect of price fluctuations on its incomes. Before, when oil prices were decreasing, it reduced oil production, while other producers did the opposite and gained large profits.
Of course it is not known whether the Arab countries and other producers will be able to increase production and retain average oil prices at the same time. However, it is clear that OPEC countries are not eager to support this idea till making a new deal.
Russia and OPEC
According to the volume of daily oil production, Russia is coming up with Saudi Arabia, however after this declaration the information is spread that the latter has 2.0 million of oil a day as a reserve. The volume of the output that is exported from the producing countries to the consuming ones has a great effect on the price of oil.
The demand for oil has increased in the world and Russia is implementing the export of crude oil in the amount of about 7 million barrels a day. Originally, when the price of oil was returning to the initial level, a certain pressure was exerted on Russia concerning the reduction of oil export, which had an underlying political reason. However, in 2001 Russia managed to avoid the conflict.
OPEC is seeking for a new deal with both producing and consuming countries, and in view of a large size of Russia, it is impossible to ignore it. It will not create a problem in the short run, since the demand is still high, and Russia’s export revenue is stable in spite of lack of the corresponding legal base, the creation of which is planned for the future, and the organization is sure to wish cooperation with Russia with the purpose of joint controlling of prices.
There was a time when Russia had an advantageous position and fell between two stools: it cooperated with the producers and their partners – the G8 countries, which are mainly consumers of energy carriers. In 1999 the existence of Russia only in the rank of exporter to the world market was less evident than it is during Mr. Putin’s presidency, when export revenues and the volume of export of both crude and processed oil have grown considerably. Russia excels all exporters that are not OPEC members or are under its influence.
If the demand or prices drop on the market, Russia may think of cooperation with the purpose of regularization of prices.
Russia’s role is increasing
The recent growth of oil prices is explained by the increasing demand in China and India, though the demand has decreased in the US and other countries.
According to the data, the average growth of demand will make up 1.5% a year: the slowed-down growth rate in the North (+0.3) will be compensated by the increased demand in China, India and Asia (3.0-4.0% a year), increasing of demand is expected in Eastern Europe countries as well – 2.5-3.0% a year.
After this data it is expected that export of Russian oil from the basin of the Caspian Sea will be increasing by 3.5% a year. They believe that Russia will finally pay attention to the legislation, administration and infrastructure. The research has shown that political factors have a great effect on the country’s plans and priorities, and no one can predict the fate of the planned increasing of export by 2010-2015. In case of actions in accordance with the plan, by 2015 Russia’s share on the market will be equal to 20%, and that of OPEC will reduce to 38.5%. It is another reason not to give Russia the right of retaining neutrality.
Russia’s reserves
Russia’s oil reserves make up 77 billion barrels, though over the past three years calculations have not been made a new technologies are involved in this matter, they say that its reserves make up about 150 billion barrels.
OPEC is growing along with oil prices
At the present moment there are 13 countries in the club
Global oil prices will be rising in future as well. The oil exporting countries should retain stability on the market. The quotas have not been changed for more than a year, and the prices have almost doubled during this period. At the meeting in Karakas OPEC decided to admit Bolivia and Ecuador, but without changing of the quotas.
It was not by chance that Venezuela was chosen as the meeting’s place – everybody knows about the aggressive address of president Hugo Chavez to the American president, Chavez is an ardent supporter of the idea of nationalization of OPEC countries’ oil sector. The cartel solemnly admitted Bolivia and Ecuador. Chavez has other plans as well, but his role in OPEC is not so big in comparison with that of Saudi Arabia, the US have a great influence on the latter. That is why the quotas for supplies have remained unchanged – 28 million barrels a day.
This decision was not an unexpected one for anybody, and it was even followed by cheapening of oil, though the price for light oil in the US again exceeds 70 USD/barrel. They say that a higher oil price will not be a surprise, since the geopolitical factor and various speculations contribute to this trend. One part of OPEC countries’ oil ministers started to convince journalists of the opposite in a usual manner, while others spoke of insufficient amount of oil. Qatar’s oil minister declared that OPEC is monitoring the situation, and the issue concerning the quotas may become relevant at the cartel’s meeting that will be held in September.
There is a turmoil on the market because of the Iranian nuclear program and the actions of oil traders, but no great importance is attached to them from the viewpoint of the medium-term readjustment.
The main thing is that the share of the cartel’s oil supplies to the market should increase from the current 41% to 43% with admitting of new members. According to expert’s forecasts, by 2010 every second barrel of oil will be OPEC’s. During the period of four years the organization is planning to treble the reserves so that by 2010 the daily supply should 34 million barrels. Correspondingly, the market share of other exporters will decrease, including that of Russia and Norway.
600 000 barrels of oil produced in Azerbaijan’s sector of the Caspian sea were transported by the 1768 km Baku-Tbilisi-Jeikhan oil pipeline and were loaded to the tanker that took the course for Europe. It is a pleasant news and, what is most important, it is the result of many months work of hundreds of people headed by the governments of Azerbaijan, Georgia, Turkey as well as companies and other organizations. Taking into account all the aspects, Tbilisi-Baku-Jeikhan is really a very important world project, and each participant involved in it has the right to be proud of the joint achievements. However, there is another aspect: it made Georgia, which has no oil deposits of its own, an oil country in the world oil business and a participant of the oil war.
In conclusion, on the basis of all the above stated, one can suppose that oil prices till the end of 2006 will be as follows:
American light – 70-85 USD/barrel
Brent – 68-80
Urals – 66-75
OPEC basket 62-68
The price amplitude of gasoline of European standard will be 740-900 USD/ton.