Сергій Кабуд ( Кий ) (xyu) wrote,
Сергій Кабуд ( Кий )

opec, russia, oil, finance

New economic balance of power

No doubt perpetual high oil prices will shift the economic balance between OPEC and the West in the direction of those who own the precious commodity. As Robert Zubrin points out in his book Energy Victory, in 1972 the U.S. spent $4 billion on oil imports, an amount that equaled to 1.2% of our defense budget. In 2006, it paid $260 billion which equals to half of our defense budget. In 2008, it is likely to pay over $500 billion which is equivalent to our full defense budget.

Over the same period, Saudi oil revenues grew from $2.7 billion to roughly $400 billion and with it their ability to fund radical Islam. In the years to come this economic imbalance will grow by leaps and bounds. To understand the degree of the forces in play it is instructive to visualize the scale of OPEC’s wealth in comparison to the consuming countries. The value of OPEC’s proven oil and gas resources using today's prices is $137 trillion.

This is roughly equivalent to the world’s total financial assets—stocks, bonds, other equities, government and corporate debt securities, and bank deposits—or almost three times the market capitalization of all the companies traded in the world’s top 27 stock markets. Saudi Arabia’s oil and gas alone is worth $36 trillion, 10 times the total value of all the companies traded in the London Stock Exchange.

If one adds the additional oil and gas reserves that have not yet been discovered, OPEC’s wealth more than doubles. If oil prices climb to $200, as OPEC’s president Chakib Khelil recently warned, the wealth nearly doubles again.

In an economic system of $200 barrel oil we can expect the value of financial institutions to shrink while the transfer of wealth to the oil producing countries increases in velocity. Such monumental wealth potential will enable buying power of the oil countries that far exceeds that of the West. For demonstration sake,

at $200 oil OPEC could potentially buy Bank of America in one month worth of production, Apple Computers in a week and General Motors in just 3 days. It would take less than two years of production for OPEC to own a 20 percent stake (which essentially ensures a voting block in most corporations) in every S&P 500 company. Of course, takeovers of such magnitude are unlikely, but $200 oil and additional trillions of dollars in search of a parking spot are very likely. What is clear about the new economic reality is that while the economic power of America and its allies is constantly eroding, OPEC’s ‘share’ price is on a solid upward trajectory and with it an ever-growing foreign ownership over our economy.

There are currently four OPEC members in waiting to accede to the WTO --Algeria, Iran, Iraq, and Libya. Oil producing countries with growing SWF like Russia, Kazakhstan and Azerbaijan are also on the waiting list.

increase in the price of oil by a delta of over $100 per barrel in just six years which has enabled Russia and OPEC members to accumulate unprecedented wealth and elevate themselves to the position of supreme economic powers.

Oil-rich countries of OPEC and Russia have more than quadrupled their revenues, raking some $1.2 trillion in revenues last year alone. At $125 a barrel oil they are expected to earn close to $2 trillion dollars in 2008.
Tags: finance, oil, opec, russia
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