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International Energy Policies: Choi And Hwang Add in library

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Question:

Recent decline in the global oil prices has shown the overarching influence and impact of OPEC member States’ collective energy policies on the global energy security vis-a-vis both the oil industry and national economies.
 
Critically discuss different policy measures that non OPEC member States can take to mitigate the impact of OPEC’s current trend as an international oil producer cartel?
 
 

Answer:

The upsurge of oil and gas usage across the globe is becoming a potential factor of economic and financial growth. Choi and Hwang (2012) have been critical in the approach while stating that oil and gas are the primary attributes economic growth of every nation across the globe. From the Western world to the countries of Middle East, in order to use the oil and natural gas the organizations are needed to abide by some specific policies to maintain the sustainability of the power and keep the teething competition aloof. In this current essay the researcher is going to discuss about the different policies that the non OPEC member states are to undertake in order to mitigate the impact on the international oil producers. This essay at the same time will also examine the energy policy frameworks to demonstrate the challenges that these countries are facing.

Ensuring stabilization in the international market place of oil and natural gas, OPEC plays the most pivotal role by deciding the international market price of these minerals. Cooper (2003) has critically mentioned that the basic motto of OPEC is to reduce the autocratic approach of any one of the Middle East Asian countries by stabilizing the market orientation with application of the successful marketing policies. The crude oil that seems to be marketed from these countries appears to be purchased by almost all countries of the world. But it needs to be mentioned that almost every county of the world is having the storage of crude oil which after the extensive usage needs to be exported (Ec.europa.eu, 2015). In order to indulge and control these approaches, there has been a radical fall in the oil price. This seems to have caused some rigorous effects on the conditional factors of export and import business of oil and natural gas. The oil price from the middle of 2014 has fallen radically which, as stated by Merino and Ortiz (2005), is going to stay low during the first quarter of 2015. But the impact of this price fall is severe in the market place.

 

Cunado (2011) has been seemed to be critical in stating that with the radical fall in the price shortfall in the government revenue generation can be easily noticed. As the oil companies are to face teething economic crunch, they prefer in slashing down the employees which results in increasing of the unemployment problem. Finally, the economy sustains an immense recession. All these directly cast its effect on the social instability.

The economy of the oil exporting countries in a large aspect depends on proper exportation. This helps in bridging gaps between budgetary deficits and helps the country in paying off the international debts. Venezuela, as for example, in 2014 has witnessed 14.1% budgetary deficit on it GDP which has significantly increased from 3.5% of 2008. A research identifies that with the drop of $10, Venezuela has lost around $7.5 billion revenue generation (Blog.euromonitor.com, 2015). This seems to have made the economy of the country vulnerable. On the other hand, countries like Saudi Arabia and UAE also seems to have lost a huge amount of money which brought turmoil in the economic situation of these countries. On the other hand, this sharp decline in the oil price has proved to be a booster for the major oil importing countries. The economic sustainability for these countries is successfully attained. For these countries it has proved to be a charming time of coping up with the major inflation rate.

With the fall of oil price, as mentioned by Cheon and Urpelainen (2012), a certain decline in the petrodollar can be seen. This allows in attaining a major setback in this approach both for the importing and exporting countries. Kavand and Shahmoradi (2011) on the contrary has mentioned, the revenue generated by exporting the oil to the demanding countries is in a large aspect is recycled by purchasing different products from these countries. But the fact is with this downfall as the level of earning goes down, the import also comes to a limited level. In this way a gradual setback in the petrodollar can be found. It has been identified to be one of the most severe effects that let the organizational and economical recession.

 

At the same time, as critically argued by Mann (2012), if some of the specific states of a country stand to be responsible in order to handle the price of crude oil, and if the downfall of price can be seen, this may not effect severely on the national economy as a whole. For instance, in USA, Texas and Alaska seems to be the major oil exporters. If Texas and Alaska get more setbacks in this business, it may not to cast its impact on USA as a whole (Forbes, 2015). With lowering of the price, more sophisticated the approach it may become.

Competition in the global oil market is gradually increasing, responsible in changing the market orientation as a whole. Al-Rashed and León (2015) has mentioned OPEC cartel has affected the oil market in the last four decades severely. But in doing so, it seems in a large aspect OPEC is becoming a challenge for the other small oil exporting companies. Merino and Ortiz (2005) has argued that the formation of OPEC had been aimed at reducing the autocracy of the oil companies of the world and thereby adjusting the price of the product. However, in the past few years OPEC has been seen to be severely lagging behind in order to manage the crude oil price. The notion of the oil price is not sophistically been managed which effects on creating more problems in this approach. As the natural resources are gradually decaying in these days, in order to adjust with these all projection on this effect of managing this ethics is having the ethical approach of managing the international business process. The process of economic development effects on the development of the effects. The approach of economic development is significant which helps in developing in marketing effects. The failure of managing all these economic approaches is helpful in managing the economic development. The sophisticated policies are significantly managed in this approach.

In the past few years, the non OPEC countries seem to have faced a severe setback in order to manage the economical ethics. The high inflation rate in these countries has become a sophisticated approach of managing the oil price. Resurgence of the soaring inflation seems to have cast its effect on managing of the economic pressure. But these countries seem to face difficulties in order to make their proper business in the international level. Internationally the crude oil manufacturers in the international field seem to pass through severe setbacks which have added more problems for the organizational development. Kavand and Shahmoradi (2011) seems to have been critical in this approach by stating that apart from the OPEC countries, the Western and American countries are on the verge of intense economic development and try to ponder upon the growth of the other countries. The BRICS countries (Brazil, Russia, India, China and South Africa) also play a pivotal role in oil and gas excavation (Globaleconomicanalysis.blogspot.in, 2014). But in the international market these countries are having only a little value. Cooper (2003) has argued that although the contribution of these countries in world oil trading business is limited, but their economy is largely dependent on oil trading. Non OPEC oil supply, a report of Al-Rashed and León (2015) sheds light, in 2014 has been estimated to have grown up by 1.73 mb/d. OECD countries are estimated to have received an average hike of 1.51 mb/d in the last quarter of the 2014. But this hike is in no way having any match with the global business of OPEC. In 2014 OPEC has received 26.69 mb/d hike which is far better than that of the other OECD and BRICS nations (Peak Oil Barrel, 2015). Both USA and Canada has received a sophisticated growth which results in conjuring the international market place.

 

Chalabi (2010) can be quoted by saying that the international policy of crude oil often seems to go through an intense level of market penetration which seems to cast a scurrilous effect on the national development. Political pressure and competitive setback are the main problems that non-OPEC countries are to suffer from. It is needed to be mentioned that OPEC countries has severely politicized in order to manage the market ethics. In order to attain the economical benefits, OPEC countries let not other non-OPEC countries to sell crude oil in the international market place. Rather, as mentioned by Mann (2012) largely the price of the crude oil is decided by the OPEC countries which let the non-OPEC countries to sell their products in the same price, creating trouble in order to manage the market. Cooper (2003) has mentioned that the severe approach of cherishing the competitive advantages by the OPEC countries is becoming the main problem for the other countries.

Mann (2012) has shown that 55% of the OPEC countries are from the Middle East while 8% are from OPEC Americans and 7% from the OPEC Africa, 15% are from the North America and 8% are from the other countries. More to be added, the OPEC countries are more intrinsic in their approaches which leads to develop the strategical economic ethics. In is needed to be mentioned that with the formation of the organizational structure the process of ethical development can be noticed. In the past few years, it is seen that OPEC has earned a lot in this business which helps in managing the international economy (Bridge and Le Billon, 2013).

Merino and Ortiz (2005) are of this view that as the trading of oil and natural gas is literally sophisticated in the approaches to lead the economic development both national and international, its impact in this current trend is literally sophisticated. In the international field of growth and development, as noticed by Cooper (2003), the economic setbacks are genuine approaches to manage the international ethics of management.

 

Now the question stands in this way what are the remedies that non-OPEC countries can apply. After Chalabi (2010) it can be said as like OPEC, the Western, European, Asian and African countries are needed to be collaborated to bring forth a new era of development. Controlling over the market place by these organizations helps in managing the international economic development. Chalabi (2010) is of this view that a cap is needed to be fit on the marketing policy and international policy of OPEC. The autocracy of controlling the price of the crude oil is needed to be reduced. Gradual decline in this approach is literally helpful. Approach of OECD and other oil companies is needed to be sophisticated in their approaches to monitor the marketing process of OPEC. At the same time, as the international economic ups and downs in a large aspect is controlled by the crude oil price, specifically managed and controlled by OPEC, is needed to be reduced. The dependence of international share market is over the oil price is needed to be curtailed up. The strategic growth of the market with unification of the non-OPEC countries is significantly needed. The economic strangulation is specifically needed to be cut up.

Throughout this particular essay the researcher has mentioned the points targeting at how the non-OPEC countries can step up to their approach to gain the market advantages. At the same time, the researcher has shed light on the current situation of trading of crude oil in by the OPEC and the non-OPEC countries. The researcher has come to this conclusion that to avoid the autocracy of the oil companies, OPEC has been formed but the situation seems to have never changed. Moreover, the impact of OPEC on the international economy has literally a provident approach in order to manage the strategical approaches. Finally, it needs to be mentioned that the change in the strategies of the OPEC business is literally needed to be changed.

 

References

Books

Aleksandrov, N., Espinoza, R. and Gyurkó, L. (2012). Optimal oil production and the world supply of oil. [Washington, D.C.]: International Monetary Fund.

Bridge, G. and Le Billon, P. (2013). Oil. Cambridge, UK: Polity Press.

Chalabi, F. (2010). Oil policies, oil myths. London: I.B. Tauris.

Journals

Al-Rashed, Y. and León, J. (2015). Energy efficiency in OPEC member countries: analysis of historical trends through the energy coefficient approach. OPEC Energy Review, 39(1), pp.77-102.

Cheon, A. and Urpelainen, J. (2012). Oil prices and energy technology innovation: An empirical analysis. Global Environmental Change, 22(2), pp.407-417.

Choi, S. and Hwang, S. (2012). Do traders' positions predict oil futures prices? A case study of the 2008 oil market turbulence. International Journal of Global Energy Issues, 35(6), p.456.

Cooper, J. (2003). Price elasticity of demand for crude oil: estimates for 23 countries. OPEC Review, 27(1), pp.1-8.

Cunado, J. (2011). STRUCTURAL BREAKS AND REAL CONVERGENCE IN OPEC COUNTRIES. Journal of Applied Economics, 14(1), pp.101-117.

Kavand, H. and Shahmoradi, A. (2011). Oil price changes and total productivity fluctuations in an oil-exporting country. OPEC Energy Review, 35(2), pp.157-173.

Mann, Y. (2012). Saudi Arabia's Policy Toward non-OPEC Countries. Diplomacy & Statecraft, 23(2), pp.381-391.

Merino, A. and Ortiz, A. (2005). Explaining the so-called "price premium" in oil markets.OPEC Review, 29(2), pp.133-152.

Websites

Blog.euromonitor.com, (2015). How Does the Sharp Decline in Oil Prices Impact Oil Exporters? - Analyst Insight from Euromonitor International. [online] Available at: https://blog.euromonitor.com/2015/01/how-does-the-sharp-decline-in-oil-prices-impact-oil-exporters.html [Accessed 23 Mar. 2015].

Ec.europa.eu, (2015). European Commission | Choose your language | Choisir une langue | Wählen Sie eine Sprache. [online] Available at: https://ec.europa.eu/ [Accessed 23 Mar. 2015].

Forbes, (2015). The Economic Impact Of Falling Oil Prices: 'Expansionary Disinflation'. [online] Available at: https://www.forbes.com/sites/jonhartley/2015/01/12/the-economic-impact-of-declining-oil-prices-expansionary-disinflation/ [Accessed 23 Mar. 2015].

Globaleconomicanalysis.blogspot.in, (2014). Mish's Global Economic Trend Analysis: OPEC Blames Speculators, Non-OPEC Countries, US Frackers for Oil Price Crash. [online] Available at: https://globaleconomicanalysis.blogspot.in/2014/12/opec-blames-speculators-non-opec.html [Accessed 23 Mar. 2015].

Peak Oil Barrel, (2015). Non-OPEC Charts - Peak Oil Barrel. [online] Available at: https://peakoilbarrel.com/non-opec-charts/ [Accessed 23 Mar. 2015].

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