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ARE oil prices likely to end globalization?

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Lancelot Trillard

on 9 September 2013

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Transcript of ARE oil prices likely to end globalization?

How many oil barrels are consumed everyday ?
In which of these products is there oil?
Which country is the biggest oil producer in the world ?
a) 8.4 millions
b) 84 miilions
A) Angola
B) Russia
C) Saudi Arabia
Heart valves
Link between oil prices and globalization
Globalization acts to increase world oil prices
ARE oil prices likely to end globalization?
c) 840 millions
d) la réponse d/ The answer d
Oil is transformed into gasoline (44%), into other fuels (35%), and in many other products/processes (asphalt, farming, plastics…)
Globalization is oil dependent, yet oil is limited (it takes hundreds of millions years to form)

Oil facts
Each of the main financial crisis leaded an increase of the oil prices.

We can exlain the price reduction between 1981 and 1997 by two ways:
A reduction of the oil consumption (between 1980 and 1983) and an intensification of the oil production.
Globalization : Shift in oil demand

Accounted for 12 percent of global crude demand(2012)

Beijing was buying 5.1 million barrels per day(2013)

Leave the US behind in monthly oil imports(10/2013,EIA) in annually(2014,EIA)

Forecast to rise to 6.45 million barrels per day

China to overtake US as world’s largest oil importer
Globalization : Shift in oil demand

Last year, OPEC and two non-cartel producers, Mexico and Russia, consumed 14 million barrels a day. That is almost two china’s.

OPEC revises up 2013 global oil demand growth, 2014 unchanged
The oil cartel revised 2013 world oil demand growth up by a marginal 17,000 bbl/day from its previous report to 800,000 bbl/day, based on “actual and preliminary data for the first half of the year.”
The petroleum industry in Russia is one of the largest in the world. Russia has the largest reserves, and is the largest exporter, of natural gas. It has the second largest coal reserves, the eighth largest oil reserves, and is the largest producer of oil. It is the third largest energy user.

Oil : A double-edge issue

« In fact, one day at Ski Dubai uses the equivalent energy that a North American would consume in a month's worth of driving. So the question isn't really how much productive capacity that OPEC has. How much export capacity is the real question, and every year that is less and less, because every year, more and more is consumed at home. » 
Jeff Rubin, former Chief Economist with CIBC World Market

International demand for oil is high but the supply hardly keeps up

Oil : A double-edge issue
High oil prices and the effects of the current recession lead to less per capita demand for oil in the US
The demand for oil is decreasing in rich countries like the US but emerging countries’ demand is still growing.
And it’s harder to extract the oil because it is a finite resource. The scarcity of oil still drives the prices up.


Shift in dependence

Since 1973 oil shock and transport booming : New strategic areas and dependent relationships appeared

Current « WINNERS»

The oil issue leads to
rethink the ‘winners’ and the ‘losers’

Oil issue led to the emergence of a new worlwide strategic map…

Historical « WINNER »

Since the end of WWII : Western countries stated their economical supremacy & BRICs speed up their development

…However oil issue creates double-edged new strategic winners
Western countries huge investments
Ex : The United States invest 100 millions dollars each year in African petroleum
equipments and import 60% of Africa petroleum ressources

Neo colonialism
Are some of these oil producer countries really ‘winners’?
Even in some OPEC countries, Majors’ financial capacity is still superior to remain masters of the worldwide strategic game.

The oil issue leads to
rethink the ‘winners’ and the ‘losers’

The oil issue leads to
rethink the ‘winners’ and the ‘losers’

The shift of manufacturing to less developed countries increases the purchasing power.
Example : Employees can afford a motorcycle or a car.

When oil prices rise, many other prices tend to increase in the same time.
Example : Food, raw material, planting, …

Economies are shifting from manufacturing to service.
Example : China tends to produce more services.

Race for green energies:
Put an end to the oil dependency ;
Many possible solutions but still not efficient enough ;
Leads a growth of the world investments about 93% between 2007 and 2012

Correlation between countries with high levels of globalization and the investment in renewable energies.

What are the solutions to this deadlock?

What are the solutions to this deadlock?

Regionalization ?

Offshoring a solution to reduce the labor and production costs, but importation (transportation) costs are increasing : To a “recentralization”
The US invest back in the homeland: Shifting of investments.
Conclusion : A combination of rising wages in Asia and rising transportation costs have made it cheaper to produce products closer to where it will be distributed.
General Electric
Will this oil crisis claim the end of globalization

Thanks for your attention
Thanks for your participation
Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization.
Jeff Rubin
A new way to grow
Sarkozy & Stiglitz
Full transcript