Global energy needs are likely to grow steadily for years to come. The International Energy Agency (IEA) reported that if the world continues with the current energy-related policies, its energy needs would be more than 50 percent higher in 2030 than now. Over 60 percent of that increase would be in the form of oil and natural gas, and much of this demand would be centered on gasoline and distillates.
Despite this everrising demand, the global refining capacity has been steadily shrinking. The capacity has decreased in large percentage of total oil demand. Prime reasons for this trend are traditionally low profit margins and stiff regulations.
The soaring demand and the resulting spiraling higher prices of oil products prompt for huge investments in the area. A global investment of US$ 3 trillion has been projected by the IEA during 2001-2030, mostly to maintain current production levels.
However, this will not be easy, especially for the oil consuming countries, without the availability of sizable markets, secure ports to market the products, and the availability of guarantees to protect investments. But, if the world’s refining problem, it truly a global issue, and of importance to the people around the world, then it needs a “global response” that a fragmented industry, on its own, cannot provide.
Therefore, an “initiative” to build new refineries needs strategic planning, partnerships, commitment, and mobilization of adequate capital. While all nations will suffer from higher prices and shortages, only a “cooperative” system will prevent the even more extreme economic and geopolitical crises that would otherwise evolve. Hence, an urgent need for establishing a “Global Cooperative Refining Fund” (GCRF).
The GCRF is proposed to be comprised of world’s leading oil companies and relevant institutions of international repute. Its “mission” will be to address the oil product needs of the world, through the building and operating of refineries, as well as monitoring production of oil products worldwide.
Without the proposed GCRF, the oil companies may individually enjoy record revenues from refining for some time. But they will be smeared for profiting from the misery of the societies. Meanwhile, they will be hampered in their operations by the destabilization of national economies resulting from skyrocketing oil prices.
Being an institutional body, the GCRF will attain reliability that would order out what otherwise would be a chaotic situation in the oil industry and market. The oil companies would accept this arrangement, recognizing that a stable economic environment is more important to them in the long run than the opportunity to make momentary windfall profits.
Bringing the proposed GCRF into being could be an uphill task. But, times have changed and the urgent need to expand the refining capacity is the main and most important request these days in global oil production.
If nothing is done, the best that could happen is that consumers will have to pay a much higher price to live, and yet continue to maintain their lifestyles. The worst that could happen is a world of higher prices, supply shortages, global economic chaos, extreme geopolitical tensions, rising specters of wars, revolutions, terrorism, and even famine.
The prospects for the GCRF will have far-reaching implications for the “global economy” and “peace”. The governments and key stakeholders of producing and consuming nations alike have a “mutual interest” in addressing the highlighted concerns. Information and analysis presented in a preliminary proposal may provide a solid framework for understanding the challenges, deepening the dialogue between producers and consumers, and devising appropriate policy responses and sustaining world economic growth decades ahead.
The concept was discussed with two energy high-ranking government officials, one from the gulf region and the other from a western country. Both thought the concept is worth further study.
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