The first reference I have chosen to illustrate my topic is an article named ‘Shocked! How the oil crisis has hit the world’ published in the paper The Independent on 31st of May. I have chosen it because I have found it very interesting with its comparison of the different impacts of oil crisis in different parts of the world.
As I said before, oil takes place in a lot of usual products. An oil crisis can have important consequences in our daily life. This article compares the current situation in United Kingdom, Europe, United States, South America, Asia, Africa and Middle East, Australia and cin Arctic.
Reading this article, we notice that the developed countries do not live that crisis in the same way that the poor countries. In UK or Europe in general, to fight the crisis the governments opt for a political solution. The British government plans to help the families which need it the most with a reform about the increase of social assistance. The population protests about the raising in oil prices with demonstrations of lorry drivers or fishermen. In US, the authorities try to dissuade people to use their car and favour buses or subways; whereas in Africa, unhappiness is felt with violent riots because of inflation and famine. Even Middle East which is the biggest producer of petroleum does not escape to the crisis. Indeed, there are also riots in south of Yemen. In Gaza, people have to replace diesel with olive oil. The main threat for those countries will be the lack of aid distribution.
The countries the most affected are indisputably the developing ones. Their government have less power than the one of developed countries, there is a difference of means. That is why the crisis is not managed in the same way.
The second reference is an article dated from the 18th January 2004. It talks about the consequences of the confession of the bosses of Shell. Indeed, they would overvalue the petroleum reserves of 20%. This leaded to the demission of Sir Philip Watts and Walter van de Vijver but also to the investors’ uncertainty. The latter wonder what will happen for the returns of their investments knowing that Shell is already in the bottom of the FTSE 100 scale.
Shell defends itself saying that it did not really lie because the oil is in the ground. The investors’ issue is to know how much it will cost to bring these reserves. Facing its competitors, Shell is in a tricky situation. It wanted to be better than them with exaggerating its years of reserves, but at the end BP and Exxon have findings and development costs cheaper than Shell.
We understand why the company had to lie about its reserves when we know they are important for this kind of company. They represent the future of the business. In the same time, the reserves are less and less abundant with the raise of consumer countries and no new discovery in terms of wells.
Let us make a comparison with the last article. As direct consumers of developed countries the oil shortage will have important impacts given that the prices will be felt in petrol pumps or for the basic products (apparel etc.). In developing countries, the problem is the same but on a larger scale, and the consequences can be tragic: riots, civil wars...
Here, to go even deeper than a financial problem, it is the whole world in which the crisis is going to be felt. It is an economic and social issue.
Given that the resources are not infinite, it would be preferable to find an alternative. That is what my third article dated on 7th February of this year deals with. The title is ‘Biofuels are bad for feeding people and combating climate change’. Nowadays, to respond to the issue how to replace oil in the future years, scientists thought about the biofuels which are made from renewable resources, as plant biomass or vegetable oils and treated municipal or industrial wastes.
At first sight, it is a good substitute to petroleum. Made from natural resources, the shortage risk is low. Nevertheless, it exists some bad points for this alternative. Let us talk about the impact of the environment. First of all, to farm the land for fuel production leads the land clearing (cf Amazonian forest). And without a doubt, there are no really savings about carbon dioxide emissions. In effect, the biofuels do not emit necessarily less CO2; it depends on what the land was previously used for. The greatest threat here is global warming.
In any case, for US which is a big consumer (and also a big producer) of oil, if they convert all their maize production it definitely won’t be enough to satisfy all the demand. And yet, US is a very big country with a huge cultivated area.
At economic and social levels, the direct effect is the increasing of food prices and in the same way, the decrease of access to the neediest populations to food, for example in Africa. To illustrate with another example, in France which is a great product country, the cost of vegetables or even wine would go up.
Finally the solution is not to leave the biofuels, but just to develop and use them in the right way. The most certain thing is that biofuels won’t never replace petroleum if the consumption holds.
The next article is extracted of the website “Ohmynews” which is a Korean newspaper online. It depicts the situation which the whole world will face if the petroleum reserves will become scarce in order to make people realise of the limit of the reserves. It emphasizes how that resource is so important in our society.
The fact that petroleum won’t be longer available in the ground will logically lead to an increasing of prices. So it follows logically that the long-distance flights will be more expensive and so won’t suit every pocket. Plane becomes a luxury mean of transportation. That poses a problem for goods transportation and represents a real danger for international trade. Despite this, it would decrease unemployment caused by outsourcing in developing countries.
In the other hand, only rich people will have access to cars because of too much maintenance costs. That is why everyone will favour public transport and walking to help to reduce obesity.
We can conclude by saying that this article does not make the picture so dark. The journalist realises that this resource is endangered but it does not look serious to him. He just mentions the existence of biofuels which would reduce unemployment because their production needs a lot of people. Without talking about globalization that it will help.
This article can be linked to the next report. Indeed, they share the same point of view: the disappearance of petroleum is not serious because oil is not irreplaceable, the right solution is to find an alternative and to set it up.
The next reference talks about the solutions proposed to meet energy needs. It is given as an example with UK. I have chosen is the Energy Review Report 2006. This document has been presented to Parliament by the Secretary of State for Trade and Industry. I preferred to focus on 4th chapter: Oil, Gas and Coal.
For information and according to this Report, 90% of the UK’s energy needs are met by fossil fuels. UK is not a producer of oil, it will be more reliant in imports in the future. This is why the main policy is to sustain good relationships with the Middle East, North Africa and all the largest oil and gas producers.
In the medium term UK risks to lose those reliable relations because of obligations to invest in the exploration, production and transport of energy in particular. There is also a risk of misunderstanding between producers and consumers, and at last but not the least, a risk of accidents and natural phenomena. It could go ahead the lengthening of supply chains. This is real threat because of the future increasing of global demand to 2030 due to the growth of emerging economies as China or India.
The challenges that UK has to take up are the following:
- to clear the oil market about transparency of data;
- to liberalise EU energy market;
- to develop the market for Liquified Natural Gas.
To reach those goals, the British government set up a strategy focused on the outcomes below:
- to enforce an internal market legislation and to make full use of European competition rules;
- to permit the diffusion of transparent, accurate and timely data;
- to establish an open investment framework in the production and transport of energy;
- to boost foreign investments in UK Continental Shelf with guaranteeing technological development.
Summary of literature review:
About this topic, it should have a real awareness of the coming risk because of the sustainment of developed countries consumption and the increase of developing countries one. That’s why the national governments have to react quickly or the main problem won’t be how to replace this resource anymore. Indeed, we could link the actual conflicts in Middle East (the war in Iraq, the conflict between Israel and Palestine), so we can imagine that in the future others disagreements will happen to keep the last resources to hand. There are several economical political and financial threats.
Certainly, biofuels are a good alternative but it is not enough to dismiss danger. Moreover, it will certainly lead to inflation so in the same way, social crisis.
Research design:
To answer to these objectives, first of all I think it is essential to study the environment of the oil market. There are few suppliers (Middle East, North Africa with Algeria and Libya etc.) but too many demand. It would be very interesting to know the external influences of the market. To do this, Pestel analysis is the more appropriate. Pestel analysis identifies the influences of the environment. It permits a global view of the market and its environment, to give priority to attractiveness and to take into account all the data with method.
Then to complete the examination of this market, we can add a SWOT analysis. SWOT analysis permits to analyse the external and internal environment with the Strengths, Weaknesses, Opportunities and Threats. As a result, it will permit to ascertain the strategic options to view, if they exist.
I am going to use also the both kinds of data, quantitative and qualitative. Quantitative data because of the necessity to count the reserves still available and how many years we can rely on it. I could also give some percentages about number of people who really realise what’s happening underground with our natural reserves, using questionnaires for instance. Thus, I can ask them “According to you, is petroleum really important in your daily-life except to use your car?” or “How do you imagine your future without oil?”, “Do you realise this resource is disappearing?” or “For how long do you estimate the reserves?” etc. My aim is to estimate their degree of awareness.
I would prefer to investigate the average young people (up to 25 years old) because I consider them like the ones who can influence the future behaviours. The using of a questionnaire to fill in by my colleagues at university would be a good way to collect enough data about awareness of people.
Later, when I’ll explain them everything known in 2008, I imagine a group interview. The aim of this collective discussion will be to pay attention to the suggestions, how they think they can manage to solve this problem.
Qualitative data because I think I have to compare the quality of biofuels and ones of classic oil. I will find this information through research made by experts. It would be interesting to know more about the effects of producing this alternative to petroleum, if it is not a long-term danger for environment or a social issue (i.e. problem of agriculture).
About the actions of the governments in the whole world I was thinking about looking for some reports, meetings, and statements of Parliament. In these documents, I hope finding all the pieces of information I need to conclude on their actions and to make sure that authorities are conscious of the reality of this problem. To link this issue to the war in Iraq for example, I could look at the historic of this country to understand better why US was interested by setting up there.
References:
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Wikipédia. (2008). Pétrole. Available: http://fr.wikipedia.org/wiki/Petrole. Last accessed 24 November 2008.
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Andy McSmith, Jerome Taylor and Nigel Morris. (2008). Shocked! How the oil crisis has hit the world. Available: http://www.independent.co.uk/environment/green-living/shocked-how-the-oil-crisis-has-hit-the-world-837477.html. Last accessed 01 December 2008.
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Oliver Morgan. (2004). Shareholders want to know where Shell's reserves went. Available: http://www.guardian.co.uk/business/2004/jan/18/oilandpetrol.news1. Last accessed 02 December 2008.
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David Biello. (2008). Biofuels Are Bad for Feeding People and Combating Climate Change. Available: http://www.sciam.com/article.cfm?id=biofuels-bad-for-people-and-climate. Last accessed 02 December 2008.
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Hartmut Kaiser. (2006). Bright Side of Crude Oil Shortage. Available: http://english.ohmynews.com/articleview/article_view.asp?article_class=7&no=304872&rel_no=1. Last accessed 03 December 2008.
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Department of Trade and Industry. (2006). The Energy Challenge. Energy Review Report 2006. Available: http://www.berr.gov.uk/files/file31890.pdf. Last accessed 04 December 2008.
