1. Oil: a globalized product
Case study
Manuel Compagnon
Lycée Jean-Baptiste Dumas - Alès

2. I) A growing demand
Oil is both an energy and a raw material for chemistry.
Since the second industrialisation, in the end of the XIXth century,
it became a strategic raw material.
After WWII, industrialized countries, and especially the USA, got
accustomed to a cheap and abundant oil.

3. The production seemed to be able to grow indefinitly.

4. In the middle of the 70’s, industrialised countries became aware
of their dependence on oil, and new energies have been
increasing, like gas or nuclear energy.
But even if it was slower, the growth of the demand of oil has
been continuing.
Why ?

5. There are mainly two reasons for this continuing growth :
-first, globalization means more flows, and more flows means
more transports, which need oil. 60 % of the oil is used by
transports !
-then, globalization means more industrialized countries (eg.
China), whose industry needs energy and raw materials, and
where the middle class and mass consumption are rising.

7. But what about production ?

8. Production has been growing slowly since the 80’s, and is stagnating
since 2005. Why ?

9. -extracting oil is getting more and more expensive, while oil is getting
rare
-producers (including OPEC (Organization of the Petroleum Exporting
Countries) members) want to spare their oil instead of selling it too
cheap

10. Anyway, as a fossile energy, oil will be over one day. « Peak oil »
could happen from 2015 onwards…

11. What are the consequences of such a situation ?

12. So, if the production stagnates while the demand is growing, it
creates tenses and prices are increasing…

13. II) The global oil system

14. How could you
describe this map ?

15. The map of the
global oil system
shows that there are
production areas
and consumption
areas.

16. Among the
production areas, we
can see :
-the importance of
the Middle East,
(which should
continue, with 61 %
of proven oil
reserves)
-some big oil
producers (Russia,
the USA)
-many others
important oil
producers, whose
number increases
while oil exploration
discovers new oil
fields.

17. Logically,
consumption areas
are mainly
industrialized or
emerging countries.

18. So we can see huge
oil flows between
production and
consumption areas.
Oil remains the most
transported product
(in weight).

19. 2/3 of the oil is transported by
supertankers (here in Ras Tanura,
Saudi Arabia). Pipelines are
important too.

20. Oil prices depend on demand and
supply, and are mainly set in two
places :
-NYMEX (NY Mercantile Exchange,
which is a stock market (photo))
-ICE (IntercontinentalExchange,
which is a forward market based
in London)

21. III) Geopolitcal and geoeconomic issues

22. • Oil and money : economical issues
For producing countries, oil is a huge source of income,
especially since the beginning of the XXIst century because prices
have been increasing strongly.

23. Oil producers invest their money into sovereign wealth funds. These
funds make profit or advertisement thanks to foreign investments
(e.g. Qatar which bought the PSG).

24. Here is a page taken
from the site of one of
the seven funds of the
Arab United Emirates

25. This money can be very helpful for the economy of the country :
for example, Norway uses this money to pay pensions to retired
workers. But many countries are not able to use this money
efficiently, which is wasted without any profit for the population,
such as in Russia.

26. Oil companies are some of the biggest TNCs in the world, and
are still very profitable :

27. In fact, 7 of the 10 biggest TNCs are oil
companies !

28. • Oil and geostrategy: political issues
Many political events, and even wars, are linked to oil :
-some civil wars are linked to oil, like the Nigerian civil war,
between 1967 and 1970 : the Ibos wanted to be independent,
but their territory was full of oil and Nigeria refused (pay
attention to the fact that the Ibos were supported by France and
Israel, while Nigeria was supported by the USSR and the UK…and
that at least 1 million people died !).
For the same reasons, China will never let neither Tibet nor
Xinjiang be free !

29. -industrialized countries want to secure their oil supply : that’s
the main reason of the Gulf Wars (the USA considered Saddam
Hussein a threat for Kuwait and Saudi Arabia (1990), and finally
as someone not enough reliable (2003)…).

30. The US 5th fleet is in charge in controlling this part of the world,
which includes the strait of Hormuz.

31. That’s also the reason why France helped rebels in Libya
recently, and is so worried about Mali… Did you really think that
it was (only) for human rights… ?

32. -oil needs to be transported, and controlling the routes makes
you rich and powerful

33. Comment on this map :

34. For example, the oil extracted from countries around the Caspian
Sea, can take a Russian, a Turkish or an Iranian route… Western
TNCs invested a lot of money to support the Turkish project,
because Turkey is more reliable.

35. What are these cartoons about?

36. -The rising of China is a major political challenge. China needs oil,
and is a strong competitor of the USA: investments in Nigeria,
partnership with Iran, Myanmar, … and even investments in
Canada, where western TNCs were hesitating about exploiting oil
shale !

37. Conclusion :
Oil is a good example of a globalized product, and shows well
that globalization includes both economical and political issues.