Abstract
It is contended that the role of three classic models of energy—Hubbert’s curve, Hotelling’s rule and Chevalier’s turning point—explains the current paradigm of international energy development based on non-renewable energy resource exploitation and use. Different facets of this paradigm are examined, such as the permanent movement in an upward-right direction of the peak of Hubbert’s curve and the transformation of resources into reserves available for exploitation under four groups of limitations (geology, technology, economics and politics). Revolutionary and evolutionary technological advances and their role, together with natural factors and changes in exploration and production costs, are investigated, and the role of state in providing for scientific and technical progress is highlighted. Three types of pricing mechanisms for non-renewable energy resources that utilize and monetise Ricardian and Hotelling rents are highlighted. The conversion mechanism of unconventional resources into conventional ones is also examined.
The chapter aims to understand why the changes in the current energy paradigm are possible, in terms of both supply and demand. On the supply side, the phenomenon of US shale gas revolution has prolonged the occurrence of peak supply, and a new type of investment cycle in shale development and its consequences for the oil market have been significant. On the demand side, the influence of the accumulated effect of four historical stages on the ‘departure from oil’ developments since the 1970s and the Paris Agreement is considered.
Finally, the author investigates the possible implications of the new paradigm of international energy development on international energy governance and examines new challenges for international energy investment.
Note on transliteration: for transliterating the Russian language bibliographical material, the Board on Geographic Names (BGN) and the Permanent Committee on Geographical Names for British Official Use (PCGN) 1947 system are used (BGN/PCGN 1947).
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Notes
- 1.
Some considered it to be said in 1973 (Matt Frei. Washington diary: Oil addiction // BBC News, Washington, http://news.bbc.co.uk/2/hi/americas/7486705.stm), others much later.
- 2.
On the evolution of contractual structures, pricing mechanisms, and so on, see, in particular: А.Конопляник. Эволюция рынков нефти и газа: закономерности движения от рынков физической к рынкам бумажной энергии (с.163–178). – в сб.: Седьмые Мелентьевские чтения. Сборник научных трудов / под ред. А.А.Макарова. – М.: ИНЭИ РАН, 2013. – 214 с.
- 3.
Among key pieces of international law , the following two should be mentioned: (i) UN General Assembly Resolution 1803 (XVII) of 14 December 1962, ‘Permanent Sovereignty over Natural Resources’; and (ii) Article 18 ‘Sovereignty over Energy Resources’ of the Energy Charter Treaty 1994 (came in force in 1998).
- 4.
Though it might have been more proper to call such policies as rationalization (redistribution) of resource rent collection which means extraction by the sovereign state-owner of the non-renewable natural/energy resources of windfall profits originating from oil price increase and not from entrepreneurial efforts of oil/energy companies.
- 5.
The author’s economic examination of US shale gas revolution and its international “domino effects” is presented in Konoplyanik (2016: 65–106).
- 6.
This sub-paragraph is partly based on Dickel et al. (2007) and especially on its paragraph 1 “Theoretical Aspects” (pp. 41–52) of Chapter 2 “Explaining Oil and Gas Pricing Mechanisms: Theoretical and Historical Aspects”.
- 7.
As it, for instance, happens to be with Soviet/Russian gas supplies to the EU in which case the delivery points were historically located at the political border between West and East (at the external border of the former EU-12/15).
- 8.
The linkage of oil—namely, residual fuel oil—price to the price of competing fuel, namely, to coal price in electricity generation in post-WWII Western Europe, as a mechanism of competitive battle between the two energies, was described by this author, inter alia, in his chapter 2.2.4. “Pricing mechanism on petroleum products basket: another marketing phenomenon of International Oil Cartel” in Bushuyev et al. (2013: 128–131).
- 9.
See for more details, Dickel et al. (2007: 146–152).
- 10.
Net back pricing—replacement value of gas minus the costs of bringing it from the net back point (this is a contractual delivery point if it is located in the middle of the gas value chain) to the customer with the off-take characteristics the customer requires (Dickel et al. 2007).
- 11.
In this author’s view, the role of George Mitchell in facilitating transition to the new paradigm of international energy development (in bringing “peak supply” much beyond “peak demand”) might be considered in line (at the equal footing) with the role of the “classics” of the current paradigm of international energy development, namely, with above-mentioned M.K. Hubbert, H. Hotelling and J.-M. Chevalier.
- 12.
- 13.
See reference and illustration in Konoplyanik (2016).
- 14.
It is well demonstrated in a number of BP publications and presentations, including their regular BP Statistical Review of the World Energy available from the company’s website.
- 15.
Abbreviations
- bbl:
-
oil barrel
- CAPEX:
-
Capital Expenditure
- LTGEC:
-
Long-Term Gas Export Contracts
- NBRV:
-
(Net Back) Replacement Value
- OPEX:
-
Operational Expenditure
- PSA:
-
Production-Sharing Agreements
- RDD:
-
Research, Demonstration and Development
- STP:
-
Scientific and Technical Progress
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Konoplyanik, A.A. (2018). The (New) Political Economy of Oil and Gas: The Implications of the Changing Dominant Paradigm of International Energy Development. In: Raszewski, S. (eds) The International Political Economy of Oil and Gas. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-62557-7_16
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