A 2011 email to then-Secretary of State Hillary Clinton shows how the U.S. pressured Iraq’s new allied government to increase oil production in order ‘to pay the greatest dividends’.U.S. State Department officials stressed that ‘Iraq is potentially one of the largest oil producers in the world’ but lamented that it was not meeting its full potential.
In the email which was released by the State Department in response to a Freedom of Information Act request they outline plans ‘to help move the country in the right direction’ — that is to say, to increase Iraq’s oil production by at least 150 percent in the next five years with the help of ‘oil contracts with international companies’.
Less than five years later the U.S. had exceeded its goal with Iraqi oil production up 175 percent.
Since the illegal U.S. invasion in 2003 Iraq’s oil production has skyrocketed – while domestic consumption has only slightly increased.
Barrel prices have completely cratered.
With alternative energies on the rise geopolitics may never be the same.
As 2015 drew to a close many in the global energy industry were praying that the price of oil would bounce back from the abyss – restoring the petroleum-centric world of the past half-century.
All evidence however points to a continuing depression in oil prices in 2016 — one that may in fact stretch into the 2020s and beyond.
Given the centrality of oil (and oil revenues) in the global power equation this is bound to translate into a profound shakeup in the political order – with petroleum-producing states from Saudi Arabia to Russia losing both prominence and geopolitical clout.To put things in perspective, it was not so long ago — in June 2014 to be exact — that Brent crude – the global benchmark for oil was selling at $115 per barrel.Energy analysts then generally assumed that the price of oil would remain well over $100 deep into the future and might gradually rise to even more stratospheric levels.Such predictions inspired the giant energy companies to invest hundreds of billions of dollars in what were then termed “unconventional” reserves: Arctic oil – Canadian tar sands – deep offshore reserves and dense shale formations.It seemed obvious then that whatever the problems with and the cost of extracting such energy reserves sooner or later handsome profits would be made.It mattered little that the cost of exploiting such reserves might reach $50 or more a barrel.
As of this moment however Brent crude is selling at $33 per barrel – one-third of its price 18 months ago and way below the break-even price for most unconventional “tough oil” endeavors.
Worse yet in one scenario recently offered by the International Energy Agency (IEA) prices might not again reach the $50 to $60 range until the 2020s or make it back to $85 until 2040.
Think of this as the energy equivalent of a monster earthquake — a pricequake — that will doom not just many ‘tough oil’ projects now underway but some of the over-extended companies (and governments) that own them.