Corruption and the resource curse will outweigh any positive economic gains.
Nader Elhefnawy, Visiting Assistant Professor of Literature at the University of Miami, April, ‘8
(The Impending Oil Shock, Survival, Volume 50, Number 2, p. Ebsco) [Bozman]
Moreover, it is unlikely that a period of higher revenue from oil will provide a launch pad for more permanent economic power, given the poor record of resource-exporting countries.37 Philippe Le Billon, among other experts, has identified a ‘clear pattern of economic underperformance and governance failure among resource dependent countries’ – the so-called ‘resource curse’.38 Rents from this revenue stream provide a cushion to governments that would otherwise be insolvent; raise the exchange rate of their currency sufficiently to undermine the competitiveness of other sectors; and discourage economic diversification away from a single commodity subject to dramatic market fluctuations.39 They also tend to be at the discretionary control of elites, fostering not only corruption, but rent-seeking by various interest groups, and a tendency on the part of policymakers to mollify disaffection with that revenue rather than seek more fundamental solutions to problems.40 Indeed, corruption and overdependence on a single resource typically result in the ‘overextraction of rents from the resource sector’, at the expense of needed maintenance.41 Oil exporters have tended to perform especially poorly in this regard, their revenues typically providing elites with the means to placate domestic interest groups, and fortunes that are invested and secured abroad, as in the case of Saudi Arabia.42 The result has often been the frustration of hopes for development rather than their realisation, and it may be expected that such tendencies will be exacerbated by higher revenues.
AT: Saudis Fill In
1. The Saudi’s can’t fill in-statistics and energy industry experts conclude.
Steve LeVine, Analyst for Business Week, 7-10-08
(http://www.businessweek.com/print/bwdaily/dnflash/content/jul2008/db2008079_865368.htm) [Bozman]
Saudi Arabia's ability to calm panicky oil markets has been waning for years. With oil prices doubling since last summer, to more than $140 a barrel, Saudi King Abdullah on June 22 convened an extraordinary meeting (BusinessWeek.com, 6/22/08) of OPEC members, international oil industry CEOs, and foreign leaders in an effort to calm the markets. The kingdom's message was clear: Saudi fields can pump oil to market quickly, if demand warrants. However, it appears that for at least the next five years, and possibly longer, the Saudis are likely to produce less crude than promised, according to fresh data on the kingdom's oil fields obtained July 9 by BusinessWeek. Saudi officials have said they would increase production capacity to 12.5 million barrels a day next year, from the current 10 million barrels a day, and could even ramp up to as much as 15 million barrels a day if the market demanded it. As proof to a skeptical audience, the normally highly secretive Saudis were a bit more more open, escorting journalists on a visit to their new Al Khurais field (BusinessWeek.com, 6/23/08), east of Riyadh, and disclosing some field data. Oil companies want in But the detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data. BusinessWeek obtained a field-by-field breakdown of estimated Saudi oil production from 2009 through 2013. It was provided by an oil industry executive who said he had confirmed it with a ranking Saudi energy official who has access to the field data. The executive, who has proven reliable over several years of reporting interaction, provided the data on condition of anonymity to protect his access to the kingdom and the identity of the inside contact who confirmed the information. Saudi Aramco officials in the kingdom could not be reached for comment on July 9. Three industry analysts in the U.S. said the document's overall conclusion—that the Saudis cannot sustain higher than 12 million barrels a day maximum production for the next few years—appeared to be reasonable. "My view is that when they finish their expansion program they are unlikely to be above 12" million barrels per day, says Roger Diwan, a Middle East energy expert with PFC Energy, a consultancy in Washington, D.C. Lawrence Goldstein, an analyst with the Energy Policy Research Foundation, an industry-funded research group, said that uncertainty about Saudi production remains a problem for the market. "The only ones who know could be the Saudis," Goldstein says, "and they might not know because they haven't tested the deliverability system in as much as a decade." A principal reason for the dramatic surge in world oil prices has been a tight balance of global supply and demand, combined with a lack of spare capacity to produce more crude in a pinch. So that what previously might be considered a barely consequential guerrilla attack in oil-rich Nigeria, or an empty Iranian threat to close the strategic Strait of Hormuz, results in a far more dramatic oil market reaction than ever before. Once again Saudi Arabia has emerged as the central energy player, the only oil producer on the planet seen as having the spare capacity to rapidly boost crude exports. The kingdom also has close ties to the West, and until 1980 the precursors of Exxon (XOM), Chevron (CVX), and Mobil were partners with the Saudi state oil company. Now most of the major oil giants are hoping to get back in, and one way they have suggested is by helping the Saudis maintain the fields, an overture that has been rejected. "A Bunch of Empty Boasts" On oil matters, the kingdom's credibility has been clouded by intense secrecy. The Saudis, for instance, refuse, unlike Russia, Venezuela, and Norway, to release detailed assessments of their oil reserves, which has made many skeptical. "They are just a bunch of empty boasts," Matthew Simmons, chairman of Houston investment bank Simmons & Co. International, says of the kingdom's recent promises of 12.5 million barrels a day. He is also skeptical of Saudi reserve estimates. One dramatic part of the data concerns a site called Ghawar, which has been the kingdom's workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013. "That's why Khurais is so important—to make up for that decrease," said the oil industry executive who released the data. He was referring to a supergiant field that is to come online later this year and produce an estimated 500,000 barrels a day of crude. In last month's gathering in Saudi Arabia, officials of the kingdom told journalists that Ghawar had produced just under 5 million barrels a day from 1993 through 2007. Mainly the data show flat production; apart from the addition of Khurais and a heavy oil field called Manifa, no increases appear in any of the fields during the next five years. Production at Manifa is to begin in 2011 with 125,000 barrels a day, according to the data, and rise rapidly to 900,000 barrels a day two years later. Though 2014 is not included in the data, one of the fields listed—Shaybah—is to have a volume increase to 1 million barrels a day that year, from 750,000 barrels a day from 2009 to 2013, according to the oil executive. Still, despite its enormous reserves and bullish statements, Saudi Arabia appears likely to fall well short of the daily production it has targeted in the near term.
AT: Saudis Fills In
2. The Saudis cant fill in-their production is declining.
Richard Heinberg, Senior Fellow at the Post Carbon Institute, ‘5
(The Party's Over : Oil, War and the Fate of Industrial Societies, p. 264) [Bozman]
Global spare production capacity (the amount that exporting nations could produce if called upon, over and above what they are now producing), is now at its lowest point in recent decades ? reportedly a mere 1 to 2 million barrels per day out of a total global output of about 83 million barrels per day. And most of the spare capacity exists in one nation ? Saudi Arabia. But even this assessment, worrisome as it may be, rests on the assumption that official Saudi reserve estimates are correct. As mentioned in Chapter 3, for the past three years oil investment banker Matthew Simmons has been publicly questioning whether Saudi oil wells really contain all of the oil that Saudi officials claim is there. In articles in the New York Times and in his new book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, Simmons has been quoted as saying that his extensive review of 200 technical papers by scientists working in the Saudi fields has led him to doubt the published figures. For many years, the country?s five major oil fields ? including Ghawar, the largest oil field ever discovered ? have provided the core of Saudi production, but oil field operators are injecting millions of barrels of sea water each day in order to maintain pressure within the underground systems. This practice maintains extraction levels; however, the aging Saudi fields ? all discovered between 1940 and 1965 ? are inevitably being depleted. When the inevitable decline in extraction rates begins, seawater injection could actually accelerate the process, resulting in a rapid drop-off in oil available for the export market.
3. Domestic political tensions prevent the Saudis from increasing oil production.
Paul Roberts, Journalist, Finalist for the National Magazine Award, ‘4
(The End of Oil, p. 252-253) [Bozman]
4. Saudi’s are within years of peaking.
Richard Heinberg, Senior Fellow at the Post Carbon Institute, ‘4
(Powerdown: Options and Actions for a Post-Carbon World, p. 28) [Bozman]
However, the picture may be even bleaker than the Baker policy paper suggested, as some experts now believe that OPEC excess capacity has been overestimated. In recent reports, the US Department of Energy has revised downward some of its estimates of excess capacity in Kuwait and Indonesia. And oil analyst Matthew Simmons is currently at work on a book in which he calls into question the actual production capabilities of Saudi Arabia, the nation with the world?s foremost reserves and the ?swing producer? that for decades has had the power to set global oil prices. Simmons has concluded, after a review of roughly 150 technical papers written since 1962 by geologists and engineers at Saudi Aramco and its predecessor, Aramco, that Saudi production may be within years of peaking. Saudi oil structures are ?heterogeneous,? with complex underground fractures that can impede recovery. Since the 1970s, the Saudis have used a recovery technique known as ?water injection,? in which heavy, salty water is pumped into the reservoirs to push oil to the surface. Simmons notes that the Saudis are currently injecting about seven million barrels a day of seawater. ?Water injection gives the appearance of eternal youth,? according to Simmons. ?That?s why the Saudi fields look so robust.? However, injection can damage wells and could prevent the recovery of predicted quantities. If Saudi Arabia ? the country on which the rest of the world relies for excess capacity ? is itself close to a peak in production, then a global oil peak could be imminent. 11
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