Indonesia leaves OPEC, GM downsizes By Humberto Marquez
CARACAS - Indonesia pulled out of the Organization of Petroleum Exporting
Countries (OPEC) almost at the same time as US automobile giant General Motors
decided to build fewer pickup trucks and make an electric car.
"We may be seeing the beginning of the end of the reign of oil and OPEC,
because the global energy matrix is changing," Elie Habalian, a professor of
graduate studies in oil economics and former Venezuelan governor at OPEC, told
Inter Press Service.
Indonesia joined OPEC in 1962, two years after it was created, and was the only
member in southeast Asia. Traditionally, its output was over 1.5 million
barrels of crude a day, but that fell this
decade to under 900,000 barrels per day (bpd), while domestic consumption is
over 1.1 million bpd.
It leaves behind its longstanding fellow OPEC members Algeria, Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and
Venezuela, and two new member countries that joined in 2007, Angola and
Ecuador. The group extracts over 30 million bpd, equivalent to 37% of world
production.
Since Indonesia is no longer a net exporter of oil, in these new circumstances
it does not make sense to belong to the organization, said Indonesian Energy
Minister Purnomo Yusgiantoro, adding that his country would continue to
prospect for oil and, if any is found, will apply to rejoin OPEC.
Although it has signed five new oil and gas exploration contracts with foreign
firms and is planning to put another 46 areas out to tender, Indonesia
illustrates how agreements on new investments may be delayed while older
reserves run out.
Around the world, several times this decade, "companies have invested only when
it was too late, consumer countries have used up the 'cushion' [excess of
supply over demand] and the oil market has been invaded by speculators and
investment funds," said Venezuelan consultant Evanan Romero.
Against that backdrop, oil prices are shooting up - on Friday they once again
surpassed $130 a barrel - while exploring for new reserves is becoming more
difficult and costly. World reserves stand at 1.2 trillion barrels, 75% of
which are under the ground in OPEC countries, according to British oil giant
BP.
This month's issue of National Geographic magazine discusses the potential
drying up of oil production, which was 1 million bpd a century ago and is now
85 million bpd. Every year demand grows by 1.5%, while production yield falls
by 8%.
Experts like James Mulva, chief executive of US oil company ConocoPhillips,
estimate that an "optimistic scenario" for 2030 is that production might be 100
million bpd, but demand would be 116 million bpd.
The search for oil to bridge that gap faces stumbling blocks like Indonesia,
the decline of production in Mexico and the North Sea, and stagnation of output
in Russia, where production probably peaked last year at just over nine million
bpd.
"Even Saudi Arabia was talking six years ago about reaching a potential
production of 20 million bpd. Since then its has increased its capacity from 10
to 12 million bpd, so how long will it take to reach 20 million?" asked
Habalian.
In contrast, "when the price of a barrel is above $70, other energy sources
become competitive, and there is a large flow of investments towards them," he
said.
Vํctor Poleo, another professor of oil economics, told IPS that, in fact,
"the large energy corporations are using the income from high oil prices to
finance a shift away from oil", which in his view is aimed at new ways of using
coal as fuel.
The world's four largest oil corporations, Exxon Mobil, Shell, BP and Texaco,
rake in profits of between $18 billion and $42 billion a year.
According to Habalian, "There will be oil for several decades to come, but it
will give way to a different energy matrix, especially in transport, and that's
where the changes decided this week at General Motors fit in."
The giant automotive consortium, famed for the (misquoted) 20th century
aphorism "what's good for General Motors is good for the United States,"
decided shortly before its 100th annual shareholders meeting to close down four
plants (two in the US, one in Canada and one in Mexico), which means the
dismissal of 10,000 workers.
The four factories were making pickup trucks, 4x4s or sports utility vehicles
(SUVs). GM chief executive Rick Wagoner justified the move because "since the
first of this year, US economic and market conditions have become significantly
more difficult".
"Record gasoline prices are changing consumer behavior and changing it rapidly,
and we believe the changes are by and large permanent," Wagoner said.
The company may even sell off its Hummer brand, a gas-guzzling civilian version
of the Humvee made by GM for the US army. GM will make smaller and more
fuel-efficient cars and has promised hybrid gasoline-electric vehicles by 2012.
By late 2010 it plans to launch the Chevrolet Volt, a compact electric car
running on batteries rechargeable 7,000 times, giving them a useful life of 10
years, and a range of 64 kilometers, which can be extended to 600 kilometers
using its small combustion engine to recharge the batteries. This motor uses
gasoline, and may also use ethanol.
"Before these changes in consumer lifestyles in industrialized countries take
effect, because of [US] gasoline prices of over $4 a gallon, OPEC had already
lost leverage. Now it is stock market speculation that is influencing oil
prices," Habalian said.
"Above and beyond events like the withdrawal of Indonesia, which after all has
been a net oil consumer for years, it's the loss of its capability to guarantee
a stable market that is hurting OPEC. In spite of the flow of cash to its
members, the future of the group looks rather gloomy," he said.
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