Experts: No End in Sight for Oil Crisis

We're Getting Mutants in the MCU - The Loop


Experts: No End in Sight for Oil Crisis is a news report taken from the Act of War: Direct Action manual.


As the price of crude reached a new record price of $75.30 a barrel yesterday, a new report from the American Energy Production Group issued dire warnings today that no end to today’s oil crisis is in sight, and again called on to the White House to act.

The report tackles the by now well known reason to the crisis — that a rapidly growing global demand is quickly outstripping an equally rapidly diminishing world oil supply — by racking up some remarkable numbers. Last year’s global worldwide consumption rate was a startling 6 percent on a year-by-year basis, global car sales last year were up 4 percent, and global investment in alternative energy sources was down for the fourth year in a row, from $370 billion last year to $352 billion this year.The report puts most of the blame on the drying up of oil wells in the Middle East,but Americans are certainly partly responsible, too — their love affair with SUVs continues unabated — but developing countries have found that they, too, have a taste for the black stuff. China, in particular, is relying on oil to fuel its expanding economy.

Everybody, it seems, needs oil. And as demand is growing, supplies are dwindling. Energy companies have cut their production quotas dramatically. The reasons are varied. Some cite dwindling reserves, while others point to the increasing cost of extracting remaining oil reserves. The bottom line, though, is the same: Companies are telling us that we are all running out of oil.

Where are we headed? Nowhere we want to be, if history is any indication. The 1970s Arab embargo was devastating. Libya raised the price of oil overnight from $4.90 a barrel to $8.25 a barrel. Several Middle Eastern countries voted to stop supplying oil to the United States altogether, effectively turning off the spigot. OPEC nations put up a united front, leaving the global community on tenterhooks. The resulting price hikes and long lines at the pumps were the tip of the iceberg. The embargo led to the one-two punch of rampant inflation and global recession. It took years for the American economy to recover.

And the 1970s crisis was artificial. OPEC chose to stop producing oil for political reasons. They had the goods; they just didn’t want to sell to us. Once the political storm had passed, the oil started to flow again.

Today’s crisis won’t be solved by appeasement policies. There’s no angry sheikh in this scenario, sitting on an oil well, refusing to sell his wares. The problem is more fundamental. The oilmen can’t sell us what they don’t have.

What little crude there is on the market is selling at usurious prices. The energy companies deny responsibility for the price inflation. In their view, the global economy has overwhelmed any efforts at price controls. By this logic, it is the customer’s rampant demand that is setting the price.

Some may ask, whatever happened to market competition? Economics 101 professors are clear in their explanation of how industry competition benefits the consumer. But today’s oil industry is far different than it was in the 1970s. Mergers and acquisitions have transformed the marketplace. Companies that were once big are now enormous. Historically, oil companies have resisted consolidation, eager to guard their piece of the pie. But as that pie has dwindled, these companies first accepted, and then embraced a merger & acquisition policy as a way to stay afloat in turbulent times.

The situation is bleak. But one company, TransGlobal, presents itself as a small light at the end of the tunnel. CEO Harold Kingman announced in Davos last month that his company will soon begin drilling in Egypt. TGE engineers have developed new technology that, if successful, will unlock the Egyptian oil reserves previously thought too expensive to extract.

In an effort condemned by other oil conglomerates as predatory pricing, TransGlobal is pricing its crude at 10% below the set commodity price of $75 a barrel. TGE traders are forthright about their belief that now is the time to capture market share, in anticipation of a coming oil glut.

This scenario holds its own dangers. If TransGlobal succeeds in pushing other energy companies out of the market, competition disappears — and with it, the built-in market mechanisms that keep prices competitive. But that problem is theoretical. Today’s crisis is real.

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