Enquiry question 2: What are the consequences for people and the environment of increasing demand for energy?

ANSWERS Lesson – Energy Players

Syllabus Link: Today’s Learning aim

6.4. Energy security c. Energy Players (P: role of TNCs, The Organisation of the Petroleum Exporting Countries (OPEC), consumers,
is a key goal for governments) have different roles in securing pathways and energy supplies.
countries, most
relying on fossil
fuels.

Key words: Energy player, Energy pathway, OPEC, SOE, TNC, consumers, governments, greenwashing, corruption, militia

ENERGY PLAYERS: TNC, OPEC, government (SOE – what does this stand for? )
OPEC, consumer
Energy players: those involved in the extraction, production, transport, selling, regulating and consuming of energy.
Energy pathway is the flow of energy between producer and consumer. Methods include pipelines, transmission lines, shipping
routes (oil tankers and LNG liquid natural gas ships), road and rail. These are obviously necessary to solve the mismatch between
location of physical reserves and points of consumption.
IDEA 1 – OPEC PLAYER Task 1 – Spread out your cards and try to organise them into any categories that help you make sense
of the information. Use digby p 70 also.
Introduce OPEC (write down
any extra background info that is
see digby also
not above)
under energy player OPEC
p 70
Advantages for the OPEC
producers (i.e. members of
OPEC) see digby also under
‘role’ p70
Disadvantages for the
OPEC producers (i.e.
members of OPEC)
Advantages for consumers
(USA/Europe/China etc) see
digby also under ‘role’ p70
Disadvantages for
consumers
(USA/Europe/China etc)
Cards 1,3, 5, 7, 13:
Organisation of Petroleum Exporting Countries; an IGO
Founded 1960 by 5 members (Iran, Iraq, Kuwait, Saudi, Venezuela; became 15 (full list
on card 1)
Aims: protect interests of oil-producing countries; stabilise prices globally. “To co-
ordinate petroleum policies amongst its members, to ensure fair and stable prices for
producers, an efficient, economic and regular supply to consumer nations, and a fair return
on capital for those investing in the industry).
Card 6, 10, 16, 14, 11:
High tax revenue – major export, so vital for socio-economic wellbeing
Prior to 1960s, OPEC countries exploited by western TNCs, who paid what they saw fit.
Now have control over own income; profits remain in country
In 1960s, TNCs dropped what they paid for oil because of glut (surplus)
Medium term: a stable income, as OPEC countries own 79% of global oil reserves (2018)
Card 9:
The rise of the unconventional energy (e.g. tar sands) especially in the USA allowed North
America to reduce reliance on OPEC. Many think OPEC have driven down prices (by
increasing supply) to make unconventionals unprofitable and discourage further North
American investment in them. This has created tensions with OPEC. Saudi can afford this,
while smaller & poorer states cannot (e.g. Venezuela).
Card 2:
OPEC’s oil is finite; and there is an accelerating global shift to renewables; Glasgow
(COP 26) agreement committed all countries to a 1.5 degree temperature increase limit.
Many countries have pledged to go carbon zero sometime between 2030 and 2070,
leaving OPEC potentially without a significant market for its fossil fuels. They have little
else to rely on.
Card 4:
“Fair and stable prices for consumers” (though not always successful)
Cards 12 & 17:
OPEC sets oil production quotas for member countries in response to economic growth
rates and demand-and-supply conditions: this stabilises price. If demand suddenly rises,
OPEC can increase oil production to stabilise it.
Cards 8 & 15:
OPEC is a cartel, which allows it to control prices & monopolise production for the
benefit of its members, even if that means consumers suffer. (Illegal for businesses.)
Extra - Can drive down prices which makes unconventionals unprofitable

IDEA 2 – TNC Players Digby page 70

Energy TNC – Role Examples distinguish between the old and new players
definition
An energy Explore, exploit and distribute energy Old: BP (UK), Shell (UK-NL), Exxon/Mobil (USA)
company that Own supply lines and invest in distribution New: Petrobras (Brazil); PetroChina corp (China); Reliance
operates in & processing, electricity production & (India); Rosneft, Luckoil, Gazprom (Russia)
multiple transmission
countries and Respond to market conditions to secure
often multiple profits for shareholders
stages of the
energy pathways

i) Look at figure 9 on page 70 Digby. Which energy TNCs have the largest output and fastest growth?

Aramco (Saudi) is biggest, and growing fast; Gazprom 2nd biggest but contracting; Rosneft smallest but growing fastest

ii) Which of the TNCs we have learnt about are state owned enterprises (SOEs)?

Gazprom (Russia), Aramco (Saudi), Iranian Oil, Rosneft (Russia)

 iii) How do you think their motives differ from a privately owned TNC?

While profit is the sole motive for TNCs, governments are motivated by political considerations (e.g. energy security,
political leverage).

A case study of environmental consequences – Shell (energy TNC) and The Niger Delta – where the role of TNCS has led
to problems and energy insecurity:

Although a current case study, this sadly, is a hotspot of continuing oil spill that shows no sign of relenting and therefore a future
concern of TNC being involved with oil extraction and minimal government intervention. This however, is extreme example and
many TNCs operate safely all over the world and respect environmental and national laws.

http://www.theguardian.com/global-development/video/2013/oct/07/niger-delta-nigeria-oil-spill-cost-crude-video watch just 0-

630 mins.

What are the environmental consequences in this mangrove/swamp region in coastal Nigeria?

Bunkering (stealing) of oil from pipes causing mass devastation to mangrove swamp. 20% of oil in Niger delta is
being lost in this way. Shell (TNC) have done little to help the local people.
Consequences: local indigenous people (Ogoni people) cannot fish; livelihoods are ruined. Shell have long blamed
local people and will not pay compensation for leaks BUT locals refute this and say they lack the resources to do so.
Example of TNC behaving in an exploitative way; not protecting pipelines as it should.

What does John Vidal suggest is the role of the Nigerian authorities?

Guards/military is in collusion with those stealing the oil. Local corruption by local government

A case study of Shell and green plans:

https://www.theguardian.com/business/2017/nov/28/shell-doubles-green-spending-vows-halve-carbon-footprint

List examples of what Shell have promised they will do as part of the current and future green plans:

- Large investment progress in electric car charging points around the UK with the aim of cutting Shell’s
carbon footprint by half by 2050 (Shell Recharge)
- Recently bought 2 x electric car firms, e.g. New Motion
- Also invested in wind and biofuels
HOWEVER, many accuse Shell and BP (with their ‘Beyond Petroleum’ rebrand) as ‘greenwashing’, which means
giving a false impression of the extent to which you are protecting the environment.

IDEA 3 – National Government Players (Digby, page 71 – EDF/China General Nuclear/EU. See also Nigeria example, above.)

Role Examples
Providing power for country Nigerian gov with Shell in Niger Delta.
Regulating private companies operating energy sector
Environmental commitments.
Planning permission e.g. Key Stone Pipeline

ASSESSMENT – can be corrupt/complicit with criminal

groups, e.g. Shell/Nigeria.

- Energy decisions can be swayed by financial backers,

 e.g. Republicans and USA energy sectors; so can be
biased.
- Not enforcing environmental regulations (again eg.
Nigeria)
- Not subsiding energy bills for poor – allows for
energy poverty e.g. UK (private companies not
regulated enough, arguably)

IDEA 4– Consumer Players

Role

Purchasing choices and consumption patterns shape demand and influence TNCs
Press for improvements in environmental impacts of petroleum companies
Influence political decisions over energy mix, e.g. nuclear

Exam questions:
To what extent is the role of _______ (e.g. TNCs or OPEC or Governments or Consumers) important in securing energy pathways
and energy supplies.

From what we have learnt today – comment on how powerful you think their role is. Has this power
changed? Who seems the most powerful?
TNCs Traditionally, very powerful, especially “old” TNCs (Exxon, Shell, BP). Remain relatively so as supply
energy and building infrastructure in predominantly fossil-driven world economy.
However, OPEC challenged their power in 1960s, then eme3rging countries’ SOEs and TNCs, with newer,
more competitive streams (e.g. Petrobras, Brazil)
SOEs: Continue to be very important – Aramaco, Gazprom – major reserves of oil . Could argue sometimes held
back by political decisions e.g. Russia /Ukraine conflict & Gazrom.

OPEC: Increasingly important in the 1960s/1970s. Power player and historical cause of conflict (e.g. 1973).
Some competition against them as more unconventionals came on stream, e.g. Canada tar sands.
ALSO – energy transition to renewables means we will rely less on fossil fuels. Post COVID, gov. economic
reconstruction is likely to be investing in green energy.
Nuclear playing increasingly important role to provide base load (e.g. Hinkley Point and Sizewell C)
Government: Final say in regulation, planning permission – very powerful.
HOWEVER, voted in so also have to ensure consumers are happy. Easily lose power.

Consumers: Can influence TNCs and gov. through purchasing/boycotting and voting.

Green Helped to spur major shift in public attitudes. Influential in Paris Climate change agreement, COP26. Famous
movement: personalities helping to get message across (Al Gore, Gretha Thunberg, David Attenborough...)
Backed by science - IPCC
Younger generation in have particularly strong views on green issues.