The New Oil Cartel Threatening OPEC

Authored by Irina Slav via OilPrice.com,

When reports emerged that India and China are in talks about forming an oil buyers’ club, OPEC was probably too busy with its upcoming June 22 meeting to concern itself with that dangerous alliance. Now, it may be time for it to start worrying.

“The timing is right. The boom in U.S. oil and gas production gives us greater leverage against OPEC,” the Times of India quoted an Indian official as saying last month after the formal start of said talks. The two countries, after all, account for a combined 17 percent of global oil consumption and they are the ones that would be the hardest hit if prices rise as a result of OPEC’s actions.

What’s more, they might not be alone in this attempt to curb OPEC’s clout on the global oil market. According to Bloomberg’s Carl Pope, Europe and Japan, previously reluctant to take part in any anti-OPEC projects, may now join in. The reason they are likely to join in is that unlike in previous oil price cycles, now there are alternatives to fossil fuels. Electrification is where OPEC may have to face off with a future oil buyers’ cartel.

India, China, and Europe are all very big on EV adoption. Japan is a leader in battery manufacturing.

If they set their minds to it, these four players could upend the oil market and effectively cripple OPEC. Of course, this is a best-case scenario of the kind that rarely unfolds in reality.

Let’s take India, for example. A recent survey suggested that as many as 90 percent of Indian drivers were willing to switch to EVs if the government built the necessary charging infrastructure, reduced road taxes, and increased subsidies. Another survey identified price and range as additional roadblocks towards the mass adoption of EVs in India. Because of these challenges, New Delhi recently amended its ambitious goal of having an all-EV fleet on the roads of the country by 2030 to having 30 percent of the fleet electric.

China, for its part, is the undisputed leader in global EV adoption: the country accounted for more than 50 percent of global EV sales last year in case you were thinking, “Wait, wasn’t that Norway?” However, this was in large part made possible by generous government subsidies for EV manufacturing. These subsidies are due to be wound downto 0 by 2020, and carmakers are already beginning to brace for a future without the support of the state. It’s safe to say it remains uncertain if the EV boom will continue after 2020.

This precarious situation with EVs is reason enough for China and India to seek more clout on international oil markets dominated by OPEC and would justify the formation of a “buyers’ club.”

Europe, for its part, is, as a whole, a top performer in EV adoption and it is also very big on environmentalism. At the same time, it still imports crude and quite a lot of it, so it cares about oil prices as a large buyer.

China and India are facing challenges in EV adoption. Europe could help and benefit from it. After all, taken together, Europe, China, India, and Japan account for the manufacturing of as much as 65 percent of the world’s cars, and a lot of these are manufactured in Europe. These four also consume 35 percent of the world’s crude oil and would like to reduce this number.

According to Pope, if they get together, they would be able to negotiate either a more gradual or a faster shift to EVs. It would all depend on whether OPEC would agree to maintain lower prices or not.

A more skeptical view would note the challenges in EV adoption such as subsidies and infrastructure. These would take time to be overcome even if everyone played together. Yet long-term, an oil buyers’ alliance could be a force to be reckoned with by the oil producers, and the latter need to start paying attention now.

Comments

Ghost who Walks Thu, 07/05/2018 - 05:06 Permalink

This is part on the transition to Electric vehicles and eventually electricity generated at the end-users location. The article did not mention the large number of electric scooters and bicycles used in China. These are used for short commutes.

The challenge for OPEC is trying to price their hydrocarbons where they make a profit when ROE invested is falling and yet not make other alternatives financially viable.

Randall C. Mills and his company Brilliant Light Power are potential hydrocarbon industry disruptors. https://brilliantlightpower.com/

 

shortonoil Four Star Thu, 07/05/2018 - 08:08 Permalink

If electrification could work as a substitute for oil it would have taken place 150 years ago. Some one is dreaming. Oil is unique because its energy content is 140,000 BTU/ gallon; or 5.7 Kwhr/ lb, or about 20 times the energy density of the best battery known. The situation is that the oil age is ending, and our modern industrialized economy will end with it. The world is now finding less than 1 barrel of oil for every 9 it burns, and there is no substitute for it! The ongoing collapse of the emerging markets is the result of the cannibalization of existing assets to keep the petroleum industry functioning. That is being accomplished through the control of crude prices, and central bank monetary policies. Capital outflows from the emerging markets has now reached over $4 trillion per year, and that will only increase as the energy cost to extract, process, and distribute petroleum and its products increases. Wealth is now being extracted from the peripheral economies to keep the core economies alive, and India will be hit particularity hard because it must import 87% of its crude. There is really no other option, and the wealth transfer will continue until there is nothing remaining to be transferred. The developed economies may have a decade remaining before they implode; then again, maybe not!
http://www.thehillsgroup.org/

In reply to by Four Star

Arnold shortonoil Thu, 07/05/2018 - 08:36 Permalink

"Because of these challenges, New Delhi recently amended its ambitious goal of having an all-EV fleet on the roads of the country by 2030 to having 30 percent of the fleet electric."

Battery change out at end of lifetime is gonna be a bitch.

Like the rest of the sales pitch, the can squarely lands in generation Z laps.
Millennials neatly sidestep having responsibility for anything.

In reply to by shortonoil

Ghost who Walks Manipuflation Thu, 07/05/2018 - 05:22 Permalink

I'm out of Myanmar now. The place where I lived used steel fencing wire as electrical conductors from post to post. The resistance was high enough that only limited power was available in village housing. New systems were going into other villages with Copper wire.

Lost power for weeks when a severe storm took out some the major HT power towers.

 

In reply to by Manipuflation

SoDamnMad Thu, 07/05/2018 - 05:21 Permalink

This article is 10 years too early and Musk's 5,000 cars a week too short.  Heaven help any country that would try to break OPEC today.  Russia can swing with or away from OPEC and today or very soon will be a direct supplier to China.

So tell me, what today will supply the EV charging grid? Solar power. wind?

WTFUD Thu, 07/05/2018 - 05:21 Permalink

India & China forming an Alliance, can't have that. sarc

Throw in Russia and that's one hell of a Cartel who could readily fuck-up the Anglo-Zio-Nazi Banker Regime.

DingleBarryObummer nmewn Thu, 07/05/2018 - 06:28 Permalink

The thing people are missing about Trump's first strike on Syria is that it was not about Syria at all.  It was about Xi at Maralago, leaving unscheduled and early the next morning.

That was a tremendous loss of face for him, and Trump made an enemy that day.  If you think Xi will ever shake hands with Trump and honor some kind of deal, you are nuts.  He will smile and nod like a doofus for the photo-op, and turn around and go back to screwing us as hard as he possibly can.

The point is, Trump is not the only one who can feint in a deal and Xi is not going to cuck for the Trump World Order.  Emperor Xi will be around after Trump is out of politics (he's several years younger as well).  Even if the Chicoms actually open up their market a little, they will reverse everything as soon as Trump is out of office. That's why we need to implement the tariffs on China tommorow, as scheduled.  There is simply no way around it.

If Trump does cave (again, he already caved on May 20th and "put the trade war on hold") he will become "the boy who cried tariffs," and his threats will be rendered ineffective.  If you flipflop all the time on everything, then you make yourself predictable, not unpredictable. 

This is not one offshot deal where you can confuse someone and then move onto the next sucker.  He's stuck with the same handful of leaders and all his rhetoric is being recorded on the internet.  His negotiation tactics that have worked in the past for him are not going to apply here.
 

In reply to by nmewn

Long memory man Thu, 07/05/2018 - 05:34 Permalink

EV, what a load of rubbish, 300 miles? wow, draw a 150 mile circle around your home, that is your new cage without bars.

Great stuff for neocons, you are in prison and do not even know it.

 

JIMSJOE2 Long memory man Thu, 07/05/2018 - 06:31 Permalink

I remember decades ago T. Boone Pickens from Texas as heavily lobbying Congress to convert all vehicles to natural gas and move away from gas and diesel. Of course he said he got nowhere as the oil lobbyist were just too strong. This would have cut down on emission pollution greatly. Many cities now are using natural gas in buses and government vehicles. Unless the EVs can be charged using solar and wind turbines it doesn't make much difference because demand for electricity would increase greatly causing utilities to just increase their carbon footprint.

    I found it interesting that the EU lifted it future ban on diesel when it was brought to their attention the tax revenue collected at the pumps would drop off a cliff.

In reply to by Long memory man

roddy6667 JIMSJOE2 Thu, 07/05/2018 - 07:21 Permalink

I live in Qingdao, a second tier Chinese city. We have 6500 city buses in Greater Qingdao. About half are CNG. 99% of the taxis are CNG. About 25% of the buses are battery/electric and the remainder diesel. CNG is a good way to avoid polluting the air. It is old technology, and very inexpensive to make a vehicle that runs on it. Forklifts have used propane for 80 years. 

In Thailand last year, I saw that a lot of the 18 wheeler trailer trucks run on LNG. I also noticed LNG signs at filling stations. Other countries are moving ahead. What is sexy and new is not always the best choice.  

In reply to by JIMSJOE2

snblitz JIMSJOE2 Fri, 07/06/2018 - 00:14 Permalink

Unless the EVs can be charged using solar and wind turbines it doesn't make much difference because demand for electricity would increase greatly causing utilities to just increase their carbon footprint.

It makes a **big** difference.

EV's running on fossil fuels (oil, coal, natural gas) use twice as much fossil fuel per mile driven as do light duty diesel vehicles and the EV's pollute more.

The fossil fuel industry is laughing all the way to the bank.

https://www.finitespaces.com/2018/02/14/electric-cars-use-twice-as-much-oil-as-diesel-vehicles/

In reply to by JIMSJOE2

uniman Long memory man Thu, 07/05/2018 - 06:37 Permalink

Be sure to deduct range if you have any hills.  Also consider what happens to the people who only know how to follow navigation instructions from their phone.  No need to learn to read maps, know what "north" means, nor to have any general sense of WTF you are, just obey thy orders.  Next, since everybody uses their navigation software, just remove all the street signs.  They are a lot of work to maintain, the locals already know their neighborhood to a 25 m radius so they don't need signs, and strangers have software.  The auto-pilot in the car will only go to specific programmed destinations and there's no choice entitled "random burn ride."  Only electronic "money" will replenish the batteries and there's no choice entitled "fuck you Uncle Sam, I'm a tax resistor."  Finally, be sure to criminalize the collection of cartographic information in order to deter terrorism, eliminate hate and intolerance, and generally enhance the well being of children.  Be sure to twist up a fat one, top off your Brawndo supply, and good luck finding your way out of the urban labyrinth.  But don't let me get all negative on ya.  Look at the bright side... this is all going to consume and destroy most of the creators as well, so at least we eventually get some good karmic discharge.

In reply to by Long memory man

Ghost who Walks Long memory man Thu, 07/05/2018 - 07:54 Permalink

In Asia there are a lot of people, cities and facilities within 150 miles of most urban centres. What doesn't work in Kansas or West Texas shouldn't be denied to people who are more than happy with that range in Asia. China especially doesn't need cars with that range as they have a reasonable rail system. Same with Europe.

Western Australia is so big and unpopulated that it makes more sense to fly rather than drive for 2 or 3 days.

In reply to by Long memory man

BritBob Thu, 07/05/2018 - 05:40 Permalink

Falklands oil - worth a punt?

Oil Project Eyes Green Light This Year as Prices Rise -  11 Jan 2018

An oil project off the tip of South America is on track to get the go-ahead by the end of this year as the companies involved in the development work to secure $1.5 billion in financing. “The project of course is looking a lot better at $68 a barrel,” Tony Durrant, chief executive officer of Premier Oil, which holds 60 percent of Sea Lion, said in an interview on Thursday. “It’s a project that’s very sensitive to oil prices.” (Bloomberg 11 Jan 2018)

What about Argentina?   And what does the law say about the ownership of natural resources?

Argentina's Continental Shelf Claims and The UN CLCA Commission (1 page):-

https://www.academia.edu/33898951/Argentinas_Continental_Shelf_Claims_-The_UN_CLCS_Commission

 

RationalLuddite Thu, 07/05/2018 - 06:06 Permalink

Moronic, utterly clueless, ENERGY ILLITERATE  (yes!) nonesense article. Jesus h Christ western people are going to be confused with the world post-2030. Honestly I dont have the strength to parse out the ignorance in this vapid nonesense. 

HRH of Aquitaine 2.0 Thu, 07/05/2018 - 06:06 Permalink

What landfill is going to take all those EV and hybrid batteries?  The ecofreaks thought oil pollution was bad, they haven't seen anything once the toxic heavy metsls found in EV / hybrid batteries have to be buried in landfills.

 

This is the next big eco freak out and they created it!

africoman Thu, 07/05/2018 - 07:01 Permalink

 

OPEC and all hype of Orangejesus ordering Saudistan to double oil production are to block Iran from the market and punish those who allied or make business with Iran. India is one, EU countries are another.

Now Iran is warning to cut off Oil passage passing from the Gulf waterways, then increase oil price while the shortage burns some nation alive.

The bidding of Israhell/America to chock Iran in pressure of economic warfare thickening.

 

Then another wave of expectations went off when 'they' arrange/presumably Trump-Putin summit.

 

Then what under the subject is Iran and Syria, putting unwanted pressure on Russia/Putin about the fate of those nations under the western plot of eliminations.

Fucking pricks.

Then the Buffon in chief will demand unsuccessful subjugation of Iran/Syria or else tightens sanction blah blah until they get their WAR.

---------Watch the following and it will be clear who is pulling the string for what agenda--------------

Bibi Satanyahoo when visiting his boss the Rabbid Lubavitcher Rebbe: 1989/1990

https://www.youtube.com/watch?v=pi8HzpBIDaY

"Since we last met many things have progressed. What hasn't changed, however, is that Moshiach hasn't come. There are still a few hours left in the day, so try to bring him today!"

 

What could Bibi and America could do in the ME/World in order to hasten the coming of Moshiach's?

First w/c Moshia? 

Then, see the death and destruction they have sewing in Syria/ME..

The Antichrist w/c they seek 'now' hasn't come yet after all these messes, guess what they are willing to do more.

Get this.

The orange regime is up to its nake for MIGA 24/7

You Only Live Twice Thu, 07/05/2018 - 07:16 Permalink

This is part of longer term strategy to move away from the dollar. Since China is not an oil exporting country but still has huge reserves of USDs, it realized looking at what happened with Russia, what can happen if the US unleashes an economic war. China is vulnerable because of the peg between the Yuan and USD, and as an energy and food importer where the USD plays a major role.

Though the BRICS will eventually probably move to some form of gold standard and trade in national currencies, the issue of tariffs has sort of posed a sudden wall. Europe, which has banks still fairly strongly tied to the US is not wanting to join China - although the Rothschilds and other major banking families have been moving their money out of USTs and into Asia for a couple of years now.

The trade war is also about banking. China has a rule/law that Banks must be controlled at 51% by Chinese entities, not foreign ones, and although kept quiet, this is the major sticking point for the US. The idea is that the same people that have controlled the World for the last 300 years want to take control of the banking system in China to continue their power, but China is saying no since they have seen the outcome in the West, what happened to Russia after it paid off the debts and threw these people out, and they don't want the same thing.

The sanctions on Iran for the pleasure of Netanyahu via Kushner via then Trump are forcing the issue of the Petrodollar as they (India and China) want to keep their oil lifelines but not pay for it and be subject to secondary sanctions. If they can go at it in non-USD, they may indirectly force OPEC to abandon the USD as a default petrol currency.

The problem for the US going on the attack is that consequences of unforeseen blowback are immense. The trade deficits recycled in Treasuries help to keep the debt and inflation offshore, as does higher oil prices and the fact that Oil is traded in USDs. The more this ends, the more the dollars and debt attached will return home and at 21 trillion, the inflationary pressures will be massive.

not-me---it-wa… Thu, 07/05/2018 - 07:36 Permalink

writer of the article seems to have forgotten one important piece of the puzzle.....trump's adoration of bibi's cock.

pulling out of TPP, pulling out of the iran deal, demanding enemies and allies alike stop buying iranian oil on pain of sanctions, initiating tariffs on, again, both enemies and allies.....all will lead to more cooperation and resistance by those icky foreigners.

china and india can start by buying ALL of iran's and venezuala's production, paying with gold or barter or russian swift alternative, delivering defensive weapons systems, investing in oil and civil infrastructure.

winning?

oncemore1 Thu, 07/05/2018 - 07:44 Permalink

this Irina Slav seems to be a drunken like a sailor.

Pope tells the world about EV vehicles, what is for her a valuable news.

She did not talk  hybrids, just EVs.

Hybrid is very viable option beng extremly successfull, which will probably kill off Tesla 3.

She has done very bad, or no research on the subject.

Chief Joesph Thu, 07/05/2018 - 08:01 Permalink

In the meanwhile, the U.S. is still stuck on gas guzzling cars and EV cars are rarely seen on the American highways.  America could never make it past the Chevy Volt hybrids, at $33,000 a piece.  And, they have got production problems with Tesla, (not to mention, Tesla one of the more expensive cars around that no one can afford). On top of that, there is not much of an infrastructure set up to recharge EV vehicles anyway, like you have with gas stations. So, forget about driving cross country in an EV. And, America trashed its passenger service trains long ago.  So, there is no high speed electric rail service like you see in Japan and China.  Amtrak is the only cross-country rail service left, and it still uses diesels. 

If America prides itself on innovation, why is it still using automotive gas-cylinder engines from the Henry Ford days?  Seems like the truly innovative generation left America over 100 years ago.