Why the Oil Industry is Running Into Major Trouble

http://www.alternet.org/economy/why-oil-industry-running-major-trouble



Over the last year, some deep truths about oil and the oil industry have begun to bubble to the surface. Not necessarily that they were ever hard to see, but they were easy to obscure and maybe more importantly, without too much effort, ignore. No longer. Spread across the oil companies' quarterly reports and the pronouncements of government agencies from the U.S. Energy Information Agency to the International Energy Agency are the hard facts that the era of cheap oil is over. It's impacting the U.S. and global economies and forcing a fundamental rethinking and restructuring of our economic activities and thinking.

Four decades ago, it was abruptly brought to the world's attention oil was a limited resource. This was of greatest concern for the United States, who at that point had built an economic infrastructure completely oil dependent. With only 5% of the global population, the U.S. consumed over 25% of the world's oil, a model neither sustainable or exportable to the vast majority of earth's population.

Nonetheless, little was done to change these circumstances and most amazingly U.S. oil based development was adopted by other parts of the world, most notably China, whose oil consumption in the last three decades has quintupled, becoming the second biggest oil consumer in the world. Simultaneously, the greatest action taken by the U.S. was spending trillions of dollars “securing” much of the remaining conventional oil sources around the Persian Gulf, doing little to nothing to cut demand.

However, during this time, there's been significant change in the industry itself. For most of oil's history, the global industry was run by a handful of private companies in the U.S. and Europe. Today, the five biggest – Total, BP, Exxon, Chevron, and Shell – account for only 13% of global oil, while national companies including Saudi Aramco, Russia's Rosneft, and China National Petroleum Company control over 75%.