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Uncertainty in Worldwide Oil Supplies

by:Wingoil     2020-05-23
With oil being the main driver of economies today, it is clear that oil prices can make or break countries. Prices of oil are influenced by the market forces of demand and supply in every moment. Let us now delve deeply into the topic on oil supplies and check out why oil supplies are unstable. As many of you know, most oil-producing nations today are developing countries. We will now analyze oil supplies of the following countries: Russia, Kazakhstan, Nigeria, Venezuela and Canada. Each of the nations mentioned have potential to become major oil exporters if they can govern their oil production properly. Russia being a country blessed with huge oil reserves has shown the greatest potential in being the biggest oil exporter after Saudi Arabia. However, although it has a lot of oil, its government seems eager to reserve the oil for their own use and taxes domestic oil instead of developing the oil industry. I believe that this could be attributed to rampant corruption in the country where politicians want to pocket the tax revenue to increase their personal wealth. To add on, even if the Russian government does not intervene in oil matters, the industry is not motivated to develop oil infrastructure and technology because of oligopolies where only big companies of incredible financial backing can survive. Here, government policies have greatly limited the production capacity of oil in Russia. Also, with Russia's oil industry being dominated by mega-rich corporations, Russian oil capitalists are more keen to plunder the nation's oil money (when oil prices rise) and transfer it to their Swiss bank accounts instead of developing oil infrastructure that will exhaust their wealth. This is because they know that the country is corrupt, thus risky to invest in. Moreover, with control of oil production in the hands of these private individuals, it is hard to determine oil outputs for Russia since decisions by humans are dictated by emotion and personal gain, not considering benefits to the nation and global market. Having such unfavorable conditions, it is clear that oil supplies from Russia will be unstable and limited. Besides Russia, another potential producer would be Kazakhstan, home to big oil fields like Kashagan. However, this country is still troubled by racial conflicts and the nation has shown great instability. This has led to great disinvestment due to an extremely risky climate. Without investment, there is no transfer of advanced oil technologies from richer countries to this nation, a consequence that is far more costly here than in Russia (which is a big country with more talents). Despite having the Kashagan oil field, it should be noted that the oil there is hard to extract given the technological immaturity of the nation. This problem regarding technological development is aggravated with the racial conflicts that have labeled the nation risky. Although there have been pipelines developed to draw oil from Kashagan, they are susceptible to military attacks and natural disasters like earthquakes. Such events are definitely very unpredictable, causing oil supplies from Kazakhstan to be problematic.
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