Free Policy Measures By Non OPEC Member States Essay Sample

Type of paper: Essay

Topic: Oil, Energy, Europe, European Union, Gas, World, Industry, Market

Pages: 7

Words: 1925

Published: 2021/01/08

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OPEC cartel has struck the oil fair for close to four decades. An unbalanced cartel signifying the welfares of the key oil exporting countries, OPEC has at intervals been operative in driving up the oil price and, thus, permitting the export states to obtain a noteworthy premium netted by national oil firms on behalf of their potentates. Regularly, this implies a transfer of prosperity from oil consuming states to oil-producing countries tallying hundreds of billions of money in terms of dollars compared to what the contending market price of oil would propose. Once the cartel has nosedived in its aims, the price imposed on oil has malformed, probably lower compared to the case where the market was not subjected to cartelization. The unpredictability of the cartel implies that the oil price has been greatly adjusted over time, thus it is challenging to predict the prospect direction of the prices of oil.
The worldwide oil market is basically not an open market due to the features touching the content of global agreements for the oil plus gas industry. In the initial days of the global oil trade, a minor number of oil firms, counting Standard Oil, energetically contended for the shares of the market. Those companies dominated both global trade in fuel and admission to reserves. Public policy discussions centered on the hazards of private dominations governing the market. Nowadays, customs for profit firms no longer govern the vast mainstream of the globe’s oil reserves. As a substitute, a universal cartel namely OPEC (the Organization of Petroleum Exporting Countries) has the capacity to affect the oil supply. The trick of domination remains, though the financial concerns regarding pricing are now associated with anxieties over the incentives of companies receptive to governments instead of investors (International Energy Agency, & Agence Internationale De L'energie 2013).

Factors Upsetting the Content of Global Agreements for the Gas and Oil Industry

Furthermore, the impacts of the Geneva dialogues between the global community and Iran may have a robust effect on the markets of oil. The six-month temporary treaty between five associates of the UN Security Council and Germany as well as Iran, which was agreed in October of the year 2013, is expected to come into potency soon and if effective, it expected to meaningfully surge Iran’s oil trades. It is worth noting that the oil manufacturers’ cartel will need to manage with new tests in the coming years. U.S. oil shale is expected to continue cutting into the share of OPEC in the international production of oil, which will echo primarily via the reduced distributes to the United States, plus extra plunging pressure on the prices of oil (International Energy Agency 2014).
Notably, surging the demand of oil will ensure that prices are kept at bay. The Energy Information Agency in U.S forecasted a 1.2 mb/d escalation in 2014 worldwide oil consumption, chiefly directed by China in addition to adding non-OECD nations. On the other hand, the Paris-based Global Energy Agency predicted a sturdier consumption development in the United States as well as Europe, which was expected to bring overall worldwide consumption to 92.4 mb/d by the year 2014. Therefore, sturdier demand will surely dismiss some of the descending pressures on the prices of oil, caused by predicted increases in international supply. However, the amplified outbound from OPEC as well as non-OPEC dealers will most probably bring prices marginally below compared to the levels that were evident in the year 2013 (El Mallakh 2014).

The Framework of the Energy Policies

Considering the fact that the EU is creating good advancement towards realizing its climate as well as energy objectives for 2020, an assimilated policy framework extending the period to 2030 is required to ensure supervisory conviction for investors besides a harmonized approach amongst Member States. The framework offered will drive sustained progress in achieving an economy that is low-carbon oriented. It purposes to build a reasonable and safe energy scheme that ensures inexpensive energy for all customers, rises the sanctuary of the energy supplies of the EU, lessens our reliance on energy importations and generates new chances for growth in addition to jobs (Roberts 2013).
The first framework of the energy policies is to ensure that emissions that result from greenhouse gas is reduced by not less than 40%. A center portion of the framework is the tying target to decrease EU local greenhouse gas releases by a minimum of 40% lower than the level witnessed in the year 1990 by the year 2030. This objective will guarantee that EU is positioned on the economical track in the direction of meeting its aim of lowering emissions by a minimum of 80% by the year 2050. By situating its climate ambition level for the year 2030, the EU is expected to participate vigorously in the dialogues on a new global climate treaty that is supposed to take effect by the year 2020. To realize the total 40% target, the segments sheltered by the (EU ETS) EU emissions trading system must lessen their emissions by approximately 43% as compared to the case in the year 2005. Emissions from regions external to the EU ETS would require to be mitigated by 30% further down the 2005 level. This will require to be interpreted into Member State objectives (International Energy Agency 2008).
Another framework would possibly be the increase of the share that targets renewable energy to approximately 27% or more. Renewable energy is anticipated to play a vital role in the change towards a viable, secure and maintainable energy system. The Commission projected an aim of aggregating the renewable energy share to at about 27% of the energy consumption of EU by the year 2030. The European Council sanctioned this objective which is adhered at the level of the EU. It is worth noting that another aim as far as the energy framework is in the question is the increase of energy effectiveness by more than 27%. The European Commission recommended a 30% energy reserves goal for 2030, after an appraisal of the Energy Proficiency Directive. The projected target shapes on the accomplishments already grasped which include new structures use half of the total energy they used back in the 1980s as well as industry is approximately 19% a lesser amount of energy concentrated compared to the year 2001. Furthermore, the European Council, still, sanctioned a revealing target of 27% that is supposed to be reviewed in 2020 bearing in mind a 30% goal (International Energy Agency 2008).
There also ought to be reform on the EU emissions in their trading system. The EU ETS is entitled to get changed and reinforced. A greenhouse gas decrease of about 43% goal in 2030 at the ETS decodes into a cap decreasing by 2.2% every twelve months from 2021 straight on, as an alternative of the percentage of 1.74% by the year 2020. In January of the year 2014 the Commission projected to institute a market constancy reserve from 2021 straight on. This was meant to discourse the emission allowances surplus in the EU ETS, which has put up in latest years and to recover the system's pliability to key shocks. This will certify that in the impending years the EU ETS will be extra robust and operational in endorsing low-carbon investment as well as be the key instrument to accomplish the reductions of greenhouse gas emanation. Finally, a new governance system will be enacted. The 2030 framework projected a new control framework founded on national strategies for competitive, safe and supportable energy in addition to a set of significant indicators to evaluate development over time. European Council approved that a dependable and transparent control system will be established to help certify that the EU realizes its energy strategy goals (Oakes 2014).

Key Global Challenges and Issues Facing the World Oil and Gas Industry

The first challenge is basically associated with technology. Oil firms must frequently seek to improve new technologies, for instance to improve recovery from developing oil fields as well as deep offshore sites. Technological expansions have already conveyed important modifications in the business in the past. Technological improvements also assure to blur the differences between conventional as well as non-conventional oils by ensuring that it is easier to extract plus refine tar shingles. The oil industry contains a history of invention, therefore we are assertive that this will carry on.
Another task facing the oil and gas industry is that of the increasing costs of schemes. It is estimated that drilling prices alone have amplified by 5% ever since 2003, with steel costs intensifying by 40% ever since 2004. A connected challenge that subsidizes to high increase projects is a basically labor shortage. This has funded to cumulative wages by approximately 15% in the year 2005 alone. In the past one year, the condition has worsened mostly due to the premature retirement of specialists. While the typical age of workers in the oil, plus gas segment is about 47 years, the typical retirement age is only 55. Undoubtedly, the industry must turn out to be more pre-emptive in recruiting in addition to training fresh engineers, technicians, geologists, not to forget managers (Market Segment Specialization Program (U.S.) 2012).
The environment discussion poses yet an additional challenge, one that the trade takes very earnestly. NOCs have been vigorous in fighting local pollution, for instance through enterprises that avert oil spills in addition to reducing gas flaring and tackling the greater subject of global warming. OPEC backs the expansion of technologies linked to Carbon Capture and Storage (CCS), which embrace great aptitude for the usage of fossil fuels which are extra environmentally welcoming. Another challenge faced by the industry relates to qualms of demand. Until lately, the subject of energy safety has been observed principally from the viewpoint of the necessity to secure constant as well as profuse supplies of reasonably priced energy for customers. The oil production is beginning to comprehend that energy safety requires a far more inclusive approach, one that similarly recognizes producing countries’ need for sanctuary of demand (Oakes 2014).
In conclusion, the paper has discussed diverse policy procedures that non OPEC member countries can take to alleviate the influence of OPEC's present trend as a global oil producer cartel. Consuming nations are sending diverse signals on forthcoming demand. Nevertheless, there is a demand for security when it comes to supply based on prospects that the global economy will keep on growing and that superior quantities of oil will be wanted. Many nations are recurrently taking actions to move further from the fossil fuels. While such are the choices that sovereign states are fully eligible to make, it is substantial prompting that OPEC Member Nations have, up to date, consumed large amounts of money to offer a sufficient supply for at the present and for the forthcoming years. Nevertheless, in the daintiest of these doubts and out of apprehension that upstream reserves might lessen, OPEC Member Nations might need to evaluate their future dimensions expansion strategies. Basically, it would be senseless for them to station funds into amenities that might stay idle, particularly in developing nations where these assets compete with the delivery of basic facilities to citizens.

Reference List

El Mallakh, R. 2014. OPEC: twenty years and beyond. Boulder, Colo, Westview Press.
International Energy Agency, & Agence Internationale De l'energie. 2013. Energy policies of IEA countries. Paris, OECD/IEA.
International Energy Agency, Organisation For Economic Co-Operation And Development, & Sourceoecd (Online Service). 2008. IEA energy policies review: the European Union (2008). Paris, OECD/IEA.
International Energy Agency.2014. Energy policies of IEA countries: Luxembourg 2000 review. Paris, OECD.
Market Segment Specialization Program (U.S.). (2012). Oil and gas industry. [Washington, D.C.?], Dept. of the Treasury, Internal Revenue Service.
Oakes, C. M. (2014). Standard oil and gas forms; a comprehensive list of the forms now in common use by the oil and gas industry. St. Louis, Thomas Law Book Co.
Pratt, J. A., & Hale, W. E. (2013). Exxon: transforming energy, 1973-2005.
Roberts, J. 2013. OPEC and non-OPEC relations. Boulder, Colo, International Research Center for Energy and Economic Development.

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