Ecosoc BG Guide

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THE ECONOMIC AND

SOCIAL COUNCIL

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Table of Contents
Sl. no. Title Page No.
1 History and Principals of ECOSOC 1

2 Introduction 6

3 Reducing The Impact of Embargoes 8

4 How Embargoes are Used in Geopolitics 9


5 Volatility of Prices and Effects on Common People 10

6 Managing a Group of Oil Producers 11


7 Free and Fair Trade 12
8 Strategic Stockpiling 14

9 Development of New Technologies and Energy Sources 15


10 Improving Interstate Social Relations 16

11 Future of Petroleum Market 18

12 Case Study 1 19
13 Case Study 2 22
14 Case Study 3 24
15 OPEC 26

16 Conclusion 30

17 Questions a Resolution must answer 31

18 Position Paper 32
19 Further Readings 34

20 Bibliography 35

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INTRODUCTION TO THE COMMITTEE

The UNITED NATIONS ECONOMIC AND SOCIAL COUNCIL OR ECOSOC is one of


the six principal organs of the United Nations. ECOSOC was established by the UN Charter
(1945), which was amended in 1965 and 1974 to increase the number of members from 18 to 54.

• Membership: ECOSOC membership is based on geographic representation: 14 seats are


allocated to Africa, 11 to Asia, 6 to eastern Europe, 10 to Latin America and the
Caribbean, and 13 to western Europe and other areas.
• Members are elected for three-year terms by the General Assembly. Four of the five
permanent members of the Security Council have been continuously reelected because
they provide funding for most of ECOSOC’s budget, which is the largest of any UN
subsidiary body.
• Sessions: ECOSOC holds one four week session each year in July where the state
members can raise any international topic they deem fit to be discussed by the committee.
Since 1998 it was considered necessary to also hold an annual meeting April with finance
ministers of heading key committees of the World Bank and International Monetary
Fund(IMF). Additionally, the High-Level Political Forum (HLPF), which reviews the
implementation of the 2030 Agenda for Sustainable Development, is convened under the
auspices of the Council every July.
ECOSOC operates at the center of the UN system’s work on all three pillars of sustainable
development—economic, social and environmental. It is the unifying platform for integration,
action on sustainable development and follow-up and review.
Recently NGOS haven been consultative status in the committee. A consultative status grants the
NGOS not only access to all ECOSOC records but also many of its subsidiary bodies. ECOSOC
remains the only main UN body with a formal framework for NGO participation.

In 1946, 41 NGOs were granted consultative status by the council; by 1992 more
than 700 NGOs had attained consultative status and the number has been steadily
increasing ever since to more than 3,400 organizations today. This gives NGOs the
ability to contribute to greater decisions share expertise and engage with member
states.

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NGOs contribute to a number of activities including information dissemination, awareness
raising ,development education, policy advocacy, joint operational projects, participation in
intergovernmental processes and in the contribution of services and technical expertise.

CORE AIMS AND RESPONSIBILITIES OF ECOSOC-


• Sustainable development is the international community’s most urgent priority, and the
core aim of the 2030 Development Agenda for sustainable development which was
adopted in 2015 by all existing UN members.
• A vital committee of the UN that acts as a link between diverse body of agencies,
conventions and organizations within the UN. Considered a gateway for UN partnership
and participation by the rest of the world
• The council also oversees regional commissions for Europe, Asia and the Pacific,
Western Asia, Latin America, and Africa. ECOSOC is empowered by UN to grant
consultative status to non governmental organizations or NGOs.
• ECOSOC conducts studies, formulates policies, and makes recommendations on
international economic, social, cultural, educational, health-related, and related matters.
These recommendations are intended to guide member states and other UN entities in
their actions.
• Promoting sustainable development – ECOSOC is the unifying platform for integration,
action on sustainable development and follow-up and review.
• Development Cooperation Forum – The Forum reviews the latest trends and progress in
international development cooperation and promotes coordination across diverse actors
and activities.
• Guiding operational activities for development -
1. ECOSOC supports capacity-building efforts and provides technical assistance to
countries, particularly developing nations, to help them overcome economic and
social challenges. This includes promoting international cooperation in areas such
as education, healthcare, and technology transfer. Partnership forum is an
example of this.

• ECOSOC facilitates international cooperation by providing a platform for dialogue and


negotiation among member states, NGOs, and other stakeholders. It convenes high-level
meetings, forums, and conferences to address pressing global challenges.
ECOSOC oversees a complex ecosystem of subsidiary bodies, composed of regional
commissions, functional commissions and expert bodies, standing committees and ad hoc bodies.
The Council is entrusted to guide and coordinate the work of its subsidiary and related bodies. It
thus has an influence on a wide remit of the work of the UN system on development.

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• ECOSOC Special Meeting on International Cooperation in Tax Matters provides an
opportunity to address emerging issues of tax policy and administration.
• Special meetings to address global development emergencies or crises, to raise awareness
and to serve as a high level policy platform for coordination of actors working on a
specific situation.
• ECOSOC has many functional commissions such COMMISION ON HUMAN RIGHTS
(CHR), COMMISSION ON NARCOTIC DRUGS and many more.
The main aim of the Economic and Social Council (ECOSOC) is to promote international
economic and social cooperation, facilitate sustainable development, and address global
challenges through policy formulation, coordination, and recommendations to member states.

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Introduction to The Agenda

Oligopoly
In simple terms, oligopoly is an extension of monopolies. Oligopoly refers to a market structure
dominated by a small number of influential firms or entities that hold significant control over the
production, pricing, and distribution of goods or services within a particular industry. Unlike
traditional monopolies where its one company or group controlling most of the assets in that
sector, in an oligopoly there are multiple powerful market leaders that wield considerable
influence.

Issues of Oligopolies
At its core, the concentration of power and money in the hands of a few is always detrimental to
market stability. It goes against the idea of a free and fair market and leads to both political and
economic imbalances that funnel money into the pockets of the wealthy few and exploit poor
countries.
All of the world’s trade, economy and industry depends directly or indirectly upon the oil sector.
The oligopoly in the oil sector can have drastic effects not only upon its own sector but all of
international trade and industry. Petroleum is one of the most important commodities in the
world, in fact a necessity in almost all sectors and hence any sanctions or embargoes on it have a
drastic effect on the world economy. The unfair structure of the petroleum sector, including its
dependence on a few market leaders and lack of major competitors have a negative effect on
every single aspect of trade.
The firms that maintain an oligopoly have the ability to fix prices and affect prices, manipulate
supply levels, and influence market dynamics through their actions and decisions. Characteristics
of oligopolistic markets include high barriers to entry for new competitors, interdependence
among the major players, and the potential for strategic interactions such as price-fixing,
collusion, or non-price competition.
This is a disadvantage not only to other competitors, but also to consumers who bear the brunt of
oligopolistic behavior; including hiking of gas prices, limited choices and worse quality
products.

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Oligopoly in the Petroleum market:

The global petroleum market is characterized by an oligopoly. The sector is dominated by a few
major competitors that control the price, availability and quality of petroleum which is a
commodity used not only by industries but also by the general public.
OPEC (Organization of the Petroleum Exporting Countries) stands as a key example of this
oligopolistic structure. OPEC collectively controls a substantial portion of the world's crude oil
reserves and production. It composes of 13 of the worlds biggest oil producing nations;

• Algeria
• Angola
• Republic of the Congo
• Equatorial Guinea
• Gabon
• Iran
• Iraq
• Kuwait
• Libya
• Nigeria
• Saudi Arabia
• United Arab Emirates
• Venezuela

The oligopoly in the oil sector comprises not only of OPEC but also other major oil producing
nations like Russia, USA, Canada, and Oman and also Companies like Shell, Exxonmobil, BP
and Chevron

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Reducing the Impact of Embargoes
1. Encouraging Diplomatic Dialogues:
- Implementing Track II Diplomacy: Engage in informal, non-governmental discussions to
facilitate dialogue between conflicting parties, laying the groundwork for formal negotiations.
- Utilizing Neutral Mediators: Engage respected international organizations, such as the UN, to
act as neutral mediators. Develop a skilled pool of mediators to assist parties in finding common
ground and resolving disputes.

2. Research and Development of Diverse Energy Sources:


- Increased Investment in Renewable Energy: Global commitment to diversifying energy
sources is evident, with over $300 billion invested in renewable energy in 2021, as per the
International Energy Agency (IEA).
- Advancements in Energy Storage: Research in energy storage technologies, especially
batteries, is crucial for optimizing the efficiency of intermittent renewable sources like solar and
wind.

3. Policies to Promote Renewable Energy:


- Feed-in Tariffs and Renewable Portfolio Standards: Implement policies like feed-in tariffs
and renewable portfolio standards to create a conducive environment for renewable energy
adoption, ensuring market access and setting clean energy targets.
- Incentives for Energy Efficiency: According to the International Renewable Energy Agency
(IRENA), policies promoting energy efficiency significantly contribute to transitioning to
renewable energy by reducing overall energy demand.

4. Incentives and Subsidies for Private Sector Involvement:


- Investment Tax Credits: Stimulate private sector involvement by providing tax credits for
investments in renewable energy projects. The U.S. has successfully used investment tax credits
to promote solar energy adoption.

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- Public-Private Partnerships: Facilitate partnerships between governments and private entities
to leverage financial and technical resources for alternative energy initiatives.

5. Promoting Information Sharing and Coordination:


- International Energy Agency (IEA): Actively encourage participation in organizations like
the IEA for information sharing and coordination on energy policies, preventing unilateral
decisions that could escalate tensions.
- Establishing Regional Energy Cooperation Platforms: Create regional platforms to serve as
forums for countries to discuss energy-related issues, share information, and coordinate efforts to
ensure energy security.

6. Strategic Stockpiling/Energy Response Mechanisms:


- Diversification of Energy Sources: Maintain strategic stockpiles of various energy sources,
including renewable technologies, to reduce vulnerability to disruptions in specific sectors.
- Implementing Energy Security Plans: Establish comprehensive energy security plans that
include measures for a quick response to disruptions, diversification strategies, and cooperation
with neighboring countries, mitigating the impact of sudden energy crises.

How are Embargoes used in Geopolitics

I. Economic Impact on the Targeted Country:

- Revenue Loss: Embargoes severely restrict the


targeted country's ability to sell petroleum
products globally, resulting in a substantial loss
of revenue that can cripple its economy.

- Economic Contractions: Decreased oil exports


can lead to economic contractions, affecting not
only the petroleum sector but also other
industries heavily dependent on oil revenue,
causing widespread economic downturns.

- Trade Imbalances: Embargoes disrupt trade balances, causing deficits and impacting the overall
economic stability of the targeted nation. This imbalance can lead to increased debt, further
exacerbating economic challenges.

II. Form of Political Pressure:


Impact on Negotiations: Embargoes can serve as a powerful lever to bring about diplomatic
negotiations and agreements, emphasizing the ability of economic tools to shape geopolitical
outcomes.

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III. Employed to Gain Diplomatic Leverage:
- Example - U.S.-Cuba Relations (1960s-2015): Comprehensive embargoes on Cuba were
strategically used to gain diplomatic leverage and influence its political system. Over time,
discussions led to a gradual easing of tensions and diplomatic re-engagement in 2015,
demonstrating the long-term impact of embargoes on diplomatic relations.

- Shift in Alliances: Embargoes can prompt a shift in diplomatic alliances as the targeted nation
seeks alternative partners, altering the geopolitical landscape.

IV. Power Play:


- Impact on Regional Dynamics: Embargoes can reshape regional power dynamics, influencing
the relationships between nations and contributing to shifts in geopolitical alignments.

This expanded analysis underscores the multifaceted nature of embargoes within the
international petroleum markets, showcasing their economic, political, diplomatic, and strategic
dimensions in addressing oligopolistic structures. The use of embargoes is a complex
geopolitical strategy with far-reaching implications that extend beyond economic considerations,
influencing the very fabric of global relations.

Volatility of Prices and Effects on Common


People

The main issue with a few organizations controlling the supply of oil is that they have the power
to also control the prices in domestic and international markets. While this could be beneficial to
some countries, like the price of oil being quite low in the middle east, their ability to control the
price of petroleum means that the people most affected by these organizations are the citizens of
a country.
What could cause volatility in prices? The rapid fluctuations in oil prices could be due to a
variety of factors including but not limited to: geopolitical tensions, supply-demand control,
currency fluctuations and natural disasters. However, whatever the reason may be, its effect on
the public are drastic.
1. Fuel Prices: the most obvious reason; fluctuations in oil prices directly influence the cost
of gasoline and diesel. Higher oil prices typically translate into increased fuel costs,
affecting household budgets and expenses for transportation, especially for those heavily
reliant on personal vehicles or commuting long distances.

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2. Inflation and Cost of Living: Oil price fluctuations can have a cascading effect on the
economy, leading to higher transportation costs for goods and services. This increase in
production and transportation expenses can contribute to inflationary pressures, affecting
the overall cost of living for consumers.
3. Business Costs: Many industries rely on oil as an input cost for production, whether it's
in manufacturing, transportation, or agriculture. Volatility in oil prices can lead to
increased operational costs for businesses, impacting pricing strategies and potentially
leading to reduced profits or increased consumer prices.
4. Global Economic Stability: Oil price fluctuations can have significant implications for
global economic stability. Sudden spikes in oil prices can strain economies heavily reliant
on oil imports, affecting trade balances and potentially leading to slower economic
growth or recessions in oil-importing countries.
The committee should focus on finding ways to either mitigate the effects of price volatility on
the public or find a way to reduce these fluctuations from happening. Efforts to mitigate this
volatility may involve strategic reserves, diversification of energy sources, and implementing
policies to promote energy efficiency and renewable alternatives. For individuals, adapting to
these fluctuations might involve adjusting budgets, considering more fuel-efficient transportation
options, and being mindful of consumption patterns during periods of heightened oil price
volatility.

Managing a Dominant Group of Oil


Producers

The impact of the oligopoly problem in the


international petroleum markets,
particularly in managing a dominant group
of oil producers, is significant. The
influence of dominant oil producers,
especially in an oligopolistic setting, can
have far-reaching implications for global
energy prices and market stability.
Therefore, managing the actions of these
dominant oil producers is crucial for
ensuring a competitive and stable global oil
market.

Fig: Oil producers by share in market

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1. Managing a dominant group of oil producers presents unique challenges due to the
significant impact these producers can have on global energy markets, geopolitics, and
economic stability.
2. Strategic Decision-Making: A dominant group of oil producers, especially if they
operate in a coordinated manner, can make strategic decisions that have geopolitical
implications. This may include using oil as a political tool, influencing global energy
policies, or leveraging their collective power to achieve geopolitical goals.
3. Socio-political issues: The issue in making a common managing body for oil producers
is their great social and political diversity. Countries and organisations have different
ideas in how to manage resources and forming a body that can regulate prices poses a
unique challenge.
If the committee is to make a governing body for these petroleum producers then a variety of
factors have to be considered and a way has to be found to solve any issues or fights between
two organisations.

To conclude, In managing a dominant group of oil producers within the context of an oligopoly,
it becomes crucial for policymakers, international organisations, and market participants to
navigate the complex interplay of economic, geopolitical, and environmental factors. Strategies
that promote fair competition, energy diversification, and sustainable practices are essential for
mitigating the negative impacts associated with the concentration of power in the international
petroleum markets.

Disruption of Free and Fair Trade

The very concept of free trade, the core ideas of that practice, is to create an open and equitable
environment for commerce. While a completely free market is an idealistic venture, the
committee strives to create an environment that is as free and fair as possible. The practice of an
oligopoly goes against that very definition of free trade, as most of the assets and power is
concentrated in the hand of a few.
For there to be fair trade, there needs to be free competition. It is not possible to create an
equitable market without having fair competition, whether it be for local markets, price control
or quality. Without the existence of any competition with a market, quality of service and
products can’t be assured to the general public. Let’s go through the principles of a free and fair
market and discuss how the oligopoly in the Oil sector goes against it;
1. Non-economic Discrimination: all countries, regardless of size or economic power,
should have equal access to trade opportunities.

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While this works in theory, large countries that have a significantly higher quota of oil
production can control all the aspects of its trade. Smaller countries are often the ones
who are most hurt by these oligopolistic practices.
2. Transparency: Trade policies and regulations should be clear, predictable, and easily
accessible.
The trade of petroleum is controlled by a few powerful organizations that don’t have a
governing board to answer to regarding their policies. What this means is that they are
not required to be transparent about their practices to each other or the public.
3. Competitive Practices: Fair trade practices discourage anti-competitive behaviors such
as monopolistic practices, dumping (selling goods at unfairly low prices) or subsidies that
distort markets.
An oligopolistic market structure all but ensures that this principle is not true.
4. Environmental and Labor Standards: Fair trade practices include considerations for
environmental sustainability and adherence to decent labor standards. These principles
ensure that trade doesn't compromise workers' rights or harm the environment.
As has been discussed, the oil mining industry actively harms the environment and there
are few labour laws in the countries that actually conduct these operations, including the
middle east and south Africa.
5. Dispute Resolution: Mechanisms for resolving trade disputes should be in place to
ensure fair and timely resolutions when conflicts arise between trading partners.
It’s the responsibility of the committee to find ways in order to mitigate these disputes
and be the mediating body when two countries don’t agree on a policy.
6. Threat to Consumerism: The existence of an Oligopoly is detrimental to consumerism,
as consumers aren’t offered a choice and leads to bad quality or high prices which are not
healthy for the economy or to society.
The commission should find solutions such that they benefit the common people and not
only the stakeholders.

STRATEGIC STOCKPILING
Strategic stockpiling refers to the intentional accumulation and storage of essential resources,
goods, or materials by governments or organizations to ensure a stable and secure supply in
times of need, particularly during emergencies, crises, or disruptions. In the petroleum industry ,
the stockpiles accumulated by a country are known as strategic petroleum reserve (SPR) . the
largest SPR publicly known is of the United Stated department of energy (DOE).
There are 2 types of stockpiles.

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Critical resources stockpile – These are
stockpiles of vital goods which is crucial for
the survival of a country like:
Basic Commodities: Food, water, and other
essential consumables.
Energy Resources: Fuel, oil, and other
energy sources.
Medical Supplies: Pharmaceuticals,
vaccines, and medical equipment.

Defense stockpiles – These are stockpiles used by the military for defensive or offensive
purposes like guns , missiles , rockets , ammunitions , military vehicles etc.

A notable example of strategic stockpiling being effective was in the 1974 oil crisis where the
members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by King
Faisal of Saudi Arabia, proclaimed an oil embargo targeted at nations that had supported Israel
during the Yom Kippur War.

Stockpiling is currently the subject of serious policy discussion. In the ever-changing landscape
of global challenges, the ongoing importance of strategic stockpiling cannot be overstated in its
role in maintaining national resilience and security. Strategic stockpiles serve as a foundational
pillar that safeguards a nation against a spectrum of uncertainties, ranging from geopolitical
tensions to natural disasters. Emphasizing the continued significance of strategic stockpiling is
crucial for fostering a robust and resilient national framework.

Development of New Technologies and


Energy Sources-

Introduction to the issue-


• In the early 20th century, just as electric grids were starting to transform daily life, an
unlikely advocate for renewable energy voiced his concerns about burning fossil fuels.
Thomas Edison expressed dismay over using combustion instead of renewable resources
in a 1910 interview for Elbert Hubbard’s anthology, “Little Journeys to the Homes of the
Great.” “This scheme of combustion to get power makes me sick to think of — it is so
wasteful,” Edison said. “You see, we should utilize natural forces and thus get all of our

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power. Sunshine is a form of energy, and the winds and the tides are manifestations of
energy. Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front
fence for fuel.”
• Over a century later, roughly 80 percent of global energy consumption still comes from
burning fossil fuels. As the impact of climate change on the environment becomes
increasingly drastic, there is a mounting sense of urgency for researchers and engineers to
develop scalable renewable energy solutions.
• There is no single alternative to fossil fuels. We have to look at different solutions that
may vary with geography and availability of resources.

VIABLE OPTIONS-
1. Harnessing energy from waves- When it comes to renewable energy, waves have
other resources beat in two respects. First, unlike solar, waves offer a consistent
energy source regardless of time of day. Second, waves provide much greater energy
density than wind due to water’s heavier mass.

2. Accelerating the discovery of photovoltaics-


The amount of solar energy that reaches the
Earth’s surface offers a tantalizing prospect in the
quest for renewable energy. Every hour, an
estimated 430 quintillion joules of energy is
delivered to Earth from the sun. That’s the
equivalent of one year’s worth of global energy
consumption by humans. . For solar energy to have
a meaningful impact, researchers need to develop
solar cell materials that are efficient, scalable, cost-
effective, and reliable.

3. Solving the storage problem- There is a push to develop more robust energy
storage systems for renewable technologies. Storing energy for later use when
resources aren’t supplying a consistent stream of energy — for example, when the
sun is covered by clouds, or there is little-to-no wind — will be crucial for the
adoption of renewable energy on the grid. To solve this problem, researchers are
developing new storage technologies. Ideally, we want to create a battery that can
match the irregular supply of solar or wind energy that peak at different times without
degrading, as today’s batteries do such as lithium batteries. If we can get and store
hydrogen sustainably, we can basically electrify our economy using renewables like
wind, wave, or solar.
Emerging technologies are transforming the renewable energy landscape, making clean
and sustainable energy sources more accessible, efficient, and cost-effective. It is clear
that we need to rapidly step up the pace of the global switch to renewables if we are to
meet international climate and development goals

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Improving Interstate Social Relations

Improving interstate social relations in the context of an oligopoly in the petroleum industry can
be a complex task as it involves addressing economic, political, and social dynamics among
different countries.

Potential Strategies To Contribute

1.Dialogue and Cooperation: Encouraging open lines of


communication and fostering cooperative relationships
among countries can help build trust and understanding.
Establishing platforms for dialogue, such as international
conferences or forums, where representatives from
petroleum-producing and consuming countries can discuss
common challenges and opportunities, can be beneficial.

2.Regulatory Frameworks and Transparency:


Implementing transparent and fair regulatory frameworks can promote trust and reduce
suspicions among countries. Clear and consistent regulations can help ensure fair competition,
prevent market manipulation, and promote a level of playing field. Transparent reporting of
production, reserves, and pricing data can also enhance trust and reduce information asymmetry.

3.Collaborative Research and Development: Encouraging collaborative research and


development initiatives among countries can lead to technological advancements and innovation
in the petroleum industry. Joint research projects focused on sustainable practices, carbon
capture and storage, and alternative energy resources can foster cooperation and mutual benefits.

4.Energy Diplomacy: Engaging in energy diplomacy can help address geopolitical tensions
related to petroleum industry Diplomatic efforts can focus on fostering understanding, resolving
disputes, and promoting cooperation through negotiations, treaties, and agreements

5.Resource Sharing and Assistance: Petroleum-producing countries with abundant resources


can consider sharing expertise, technologies, and resources with other nations. This assistance
can be in the form of capacity building, technology transferred, infrastructure development, or

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investment partnerships. Such collaborations can foster independence and enhance social
relations.

6.Sustainable Development Initiatives: Promoting sustainable development practices and


environmental stewardship can be shared goals among petroleum-producing and consuming
countries. Collaborative efforts to reduce carbon emissions, invest in renewable energy sources,
and promote energy efficiency can contribute to a common agenda and foster positive social
relations.

It is thus very important to recognize that improving interstate social relations in an oligopoly
requires long-term commitment, trust-building, and cooperations among nations. It may involve
addressing not only economic interests but also political dynamics and historical tensions.

Future of petroleum market


Petroleum is an essential raw element that is being
used by people all over the world to make plastics,
heat, light, and transportation. It plays a crucial role in
development due to its massive contributions to
various sectors . Although it is simple to extract, this
energy source has a finite supply and is not renewable.

With 2.3 mbpd (mbpd-1000 barrels per day) growth expected in 2023, the world's oil demand is
expected to surpass 100 mbpd for the first time in history. The industry is expected to have a
solid start in 2024 due in part to its strong financial position and high oil prices.

However, the oil and gas industry are faced with a number of challenges which are due to a
combination of economic,
technological, and environmental
factors. These challenges include
increased volatility and uncertainty,
environmental regulations, transition
to low- carbon fuel, cybersecurity and
talent shortage. Because petroleum
has so many applications, the
petroleum industry has a wide-ranging
and significant impact on the

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environment. Natural gas and crude oil are the main sources of energy and raw materials that
support many facets of contemporary life and the global market. The steps of oil and gas
extraction, processing, and transportation produce significant amounts of waste, both toxic and
non-toxic.

The world’s energy systems are undergoing rapid transitions triggered by simultaneous shifts in
technological development, regulations, consumer preferences, and investor sentiment. There are
four scenarios for how the energy transition could unfold:

1. The Reference Case is a forward-leaning “continuation of existing trends” outlook. This


scenario reflects expectations of how current technologies will evolve and incorporates
current policies and an extrapolation of key policy trends.
2. The Accelerated Transition scenario shows the impact ten conceivable shifts such as
faster renewables cost decline or EV uptake could have on the overall energy system.
3. The McKinsey 1.5°C Pathway offers a view on the shifts required to limit emissions to
a level linked to preventing global warming beyond 1.5°C.
4. The Delayed Transition case mirrors the Accelerated Transition case and assumes that at
a global scale, stakeholder acceptance proves lacking or COVID-19 recovery measures
fail to go hand-in-hand with green policies to stimulate the energy transition.

In summary, the global community faces both opportunities and challenges as the oil markets
enter a critical phase. Understanding the critical role petroleum plays in driving industrial
development, technological advancement, and economic growth is essential but the revolutionary
path to a sustainable future requires our shared dedication to reducing environmental effects,
promoting equitable economic growth, and welcoming innovative solutions.

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CASE STUDY I
Venezuela : The Perils of being a Petrostate

Venezuela, home to the world's largest oil reserves, one of the most prominent petrostates in the
world, once described as "The Jewel of Latin America", was plunged into extreme poverty due to
political turmoil and economic mismanagement . Due to the nation's excessive dependancy on
oil revenue, it is extremely vulnerable to the decisions from the oil Oligopolies such as Saudi
Arabia.

- Since 2006, the United States has implemented a range of sanctions against Venezuela. These
measures primarily focus on limiting the Venezuelan government's access to the U.S. financial
system, and blocking oil imports from PDVSA (Petróleos de Venezuela, S.A), the state-owned
oil and gas company. In 2019 the Trump administration, placed further more aggressive
sanctions which led to a 35% contraction in Venezuela's GDP. These sanctions accelerated the
migration crisis, increased mortality rates and shattered the already frail Venezuelan economy.

-As of November 2023, OFAC has temporarily suspended sanctions that have applied to oil and
gas sector operations in Venezuela, including transactions involving Petróleos de Venezuela S.A.
(“PdVSA”), a Venezuelan state-owned oil and natural gas company, and any of its 50%-or-
greater owned entities (GL 44). However the U.S. government only intends to renew GL 44 if
the representatives of Maduro follow through with their commitments and take continued
concrete steps toward a democratic election by the end of 2024.

Production Decline:
- The decline in oil production, a key facet of the
sanctions' impact, is evidenced by data from OPEC. In
2015, Venezuela produced over 2.7 million barrels per
day, while in 2022, production languished at
approximately 0.5 million barrels per day.
- The lack of investment, technology, and maintenance
aggravated the fall in production, leading to aging
infrastructure and operational challenges.
Role of Petroleum in Venezuela's Economy:
- Primary Revenue Source:
- The World Bank's data showcases the overwhelming
dominance of oil in Venezuela's revenue structure, constituting 98% of export earnings in 2018
and responsible for over half of the governments income.
- The economic downturn, coupled with falling oil prices and the sanctions, led to a
contraction of the economy[GDP] from 372.59b US$ in 2012 to 43.79b US$ in 2020 (88.25%
decrease)
- Dutch Disease
The economic phenomenon characterized by over-dependancy on one sector (such as natural
resources), which leads to neglect of other sectors (such as agriculture/manufacturing)

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- Decline in Non-Oil Industries:
The neglect of non-oil sectors is evident in the decline of industries such as agriculture and
manufacturing. According to World Bank data, the contribution of agriculture to Venezuela's
GDP has steadily decreased over the years, from an already low 10% in the early 1990s to
around 3% in recent years.
- Volatility in Government Revenue:
Venezuela's fiscal health is highly dependent on oil prices. When oil prices plummeted in the late
2010s, the government faced severe revenue shortages. In 2015, when oil prices fell sharply,
Venezuela experienced a fiscal deficit of about 20% of GDP, exacerbating economic challenges.
- Foreign Exchange Reserve Depletion:
The heavy reliance on oil exports for foreign exchange earnings has led to a depletion of
Venezuela's foreign exchange reserves. According to data from the Central Bank of Venezuela,
foreign exchange reserves plummeted from
over $30 billion in 2008 to around $7 billion
in 2021, indicating the strain on the
country's external financial position.
- Governance Challenges and Corruption /
Income Inequality:
Due to insufficient oversight of resource
revenues, a small elite may capture a
significant portion of the wealth leading to
an immense disparity. The Gini Coefficient
[0(Perfect Equality)-100 (Perfect
Inequality)] increased from 39 in 2011 to 60
in 2022.
Employment and Infrastructure:
- Direct employment in the oil sector witnessed a decline, impacting the livelihoods of
thousands. The lack of funds from diminished oil revenues hindered economic diversification
efforts.
- Social programs for the country's poor, once funded by oil revenues, faced neglect,
contributing to a broader economic decline.
- Poverty levels increased exponentially, while the minimum wage fell from 480 US$/month
in 2012 to just 2.4 US$/month in 2021. [The UN threshold for extreme poverty is 57 US$/month]
Diplomatic Relations and Regional Impact:
- Regional Tensions:
- Tensions with neighboring regions such as Colombia intensified, especially in border
regions, as migration and security concerns became focal points.
- The Organization of American States (OAS) saw heated debates over the legitimacy of the
Venezuelan government.
- Despite regional tensions, Venezuela found diplomatic and economic support from nations
like Russia, China, and Turkey, illustrating the complex geopolitical dynamics surrounding the
sanctions.

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CASE STUDY II
RUSSO-UKRAINE WAR
The invasion of Ukraine by Russia has had a significant impact on the oil and gas industry
globally, particularly in Europe, which remains the main market for Russian oil and gas. The war
has disrupted supply chains, industries, and economies, leading to a global disruption in oil and
gas supply that has affected the prices of these commodities and every economic activity reliant
on hydrocarbons. Some of the key effects of the war on the oil and gas industry include:

1. Sanctions: The United Kingdom and the European Union have imposed sanctions
on Russia, including bans on seaborne oil imports from Russia and price caps on
Russian oil. The EU ban on seaborne imports of Russian crude oil entered into
force on December 5, 2022, followed by the embargo on refined oil products on
February 5, 2023.

FIG(A). RUSSIAN FOSSIL FUEL BUYERS: EVEN THOUGH SANCTIONS HAVE BEEN PUT UP ON
BUYING RUSSIAN FOSSIL FUELS. EUROPEAN COUNTRIES HAVE STILL BEEN BUYING FUEL
FROM RUSSIA, THIS SHOWS THE IMPORTANCE OF RUSSIA IN THE PETROLEUM MARKET.

2. Redirection of Oil Supplies: Russia had already redirected much of its oil supply
before the EU embargo and the G7 price cap entered into force. The sanctions have led to
a notable drop in Russia's seaborne exports of crude oil, with volumes recovering since
then. Exports to India, China, and Turkey also declined when the new sanctions entered
into force, although these countries did not join the oil price cap mechanism.

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3. Impact on European Oil Imports: Europe used to rely heavily on Russia for refined
oil products, such as diesel. The sanctions have forced Europe to look for alternative
suppliers, such as India and China.

FIG (B). DEPENDENCY OF CRUDE OIL: THE GRAPH SHOWS THAT CRUDE OIL IS ESSENTIAL
FOR MANY COUNTRIES MAJORITY OF THEM BEING EUROPEAN.

4. Price Impact: The demand for hydrocarbons has increased as economies reopen and
enter recovery phases, leading to a significant increase in oil prices. However, the oil
market has fully absorbed the impact of Russia's invasion of Ukraine and the
sanctions imposed in response by the United States, the European Union, and their
allies in Asia.

FIG(C). PRICE IMPACT DUE TO THE RUSSO-UKRAINE WAR

In conclusion, the Russo-Ukraine war has had a significant impact on the oil and gas
industry, leading to a global disruption in oil and gas supply that has affected the prices
of these commodities and every economic activity reliant on hydrocarbons. The industry
has experienced sanctions, redirection of oil supplies, and a shift in European oil imports.

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The oil market has fully absorbed the impact of Russia's invasion of Ukraine and the
sanctions imposed in response by the United States, the European Union, and their allies
in Asia.

Case Study III


The American Market
Dynamics and influencing global energy markets. The
U.S. oil and petroleum industry traces its origins to the
early 19th century, marked by Edwin Drake's
groundbreaking oil discovery in Pennsylvania in 1859.
The industry has since evolved through several key
milestones, including the rise of Standard Oil, the
breakup of the Standard Oil Trust, and the shale
revolution of the 21st century. The industry's growth has
been shaped by technological advancements, global
crises, and antitrust actions, ultimately shaping economic
landscapes and energy policies. However, this dynamic
sector is not without challenges.
According to the US Energy Information Administration,
the US crude oil production initially peaked in 1970 at 9.64 million barrels per day (bpd).
However, the US has experienced a significant increase in oil production in recent years, with
crude oil production more than doubling between 2011 and 2023. In 2022, oil production in the
United States reached 17.8 million barrels per day, the highest value within the period of
consideration. The petroleum industry in the US is facing several challenges, including the need
to produce more energy at lower cost with fewer emissions, demonstrate differential and durable
cash flows, and adapt to increasing environmental regulations, transition to low-carbon fuels,
cybersecurity risks, and talent shortages.

Market Volatility:
Market volatility is a persistent challenge for the petroleum industry, impacting financial stability
and strategic planning. The volatility of the U.S. oil and gas market is influenced by various
factors, including the low responsiveness of both supply and demand to price changes,
geopolitical events, and market participation.
• declining market participation has led to significant price swings, with oil prices moving
around $25 per barrel for every 1 million barrel-per-day variation in supply.
• The oil market's vulnerability is further exacerbated by factors such as excess supply,
supply disruptions, and geopolitical uncertainties.

Shift from importer to net exporter:


United States has undergone a remarkable and transformative shift from being a net importer to
becoming a net exporter of petroleum. According to the U.S. Energy Information
Administration, the U.S. became the world's largest crude oil producer in 2018, surpassing
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Russia and Saudi Arabia, and began having large economic and livelihood implications. The
U.S. now plays a pivotal role in influencing global oil supply and demand, challenging the
traditional dominance of OPEC nations with a prominent case being venezuela. The United
States had implemented multiple sanctions against Venezuela which primarily focused on
limiting the Venezuelan government's access.
• The country's petroleum exports have been growing, with sales of U.S. crude to other
nations reaching a record 3.4 million barrels per day (bpd) in 2022, and exports of about
3 million bpd of refined products like gasoline and diesel fuel.
• The shift to net exports is the result of an unprecedented boom in American oil
production, with thousands of wells pumping from the Permian region of Texas and New
Mexico to the Bakken.

Governance Challenges and Corruption / Income Inequality:


interests exert undue influence on regulatory Industry bodies. This can lead to policies and
regulations that may not adequately protect the public interest, the environment, or ensure fair
competition within the petroleum sector.
• Due to insufficient resources, disparity, revenue and unequal distribution of workforce,
the wage growth has seen a significant decline over the last decade.
• The rate of inflation exceeded the growth of wages
for the first time in recent years in April 2021. In October 2023, inflation amounted to
3.2 percent, while wages grew by 5.2 percent.
The high rates of inflation in 2022 meant that the real terms value of American wages
took a hit.
• Despite the level of wage growth reaching
6.7 percent in the summer of 2022, it has not been
enough to curb the impact of even higher inflation
rates resulting in the increase of the poverty rate
among all people living in the Unites States
displaying a shift within the last 15 years.

OPEC’s influence:
The shale revolution in the U.S., driven by
hydraulic fracturing and horizontal drilling,
has been influenced by OPEC's actions. The
organization controls nearly 40% of the
world's oil and when OPEC increases
production, it can lead to a glut in the market,
putting pressure on U.S. shale producers,
who often have higher production costs.
Conversely, OPEC's production cuts can
provide relief to U.S. producers.
• When OPEC increases production, it
can lead to oversupply in the global market, putting downward pressure on oil prices.

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Lower prices can impact the profitability of U.S. oil producers, influencing investment
decisions and production levels.
• OPEC's actions often prompt the U.S. government to reassess its energy policies.

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OPEC

Saudi Arabia
Population: 34.79 million
Saudi Arabia is OPEC's largest and most influential member,
accounting for approximately one-third of the organization's Value of Petroleum
overall crude oil production. Saudi Arabia plays a crucial role Exports: 326,289 million
in shaping OPEC's policies and decisions. Saudi Arabia's oil
production and pricing policies have a significant impact on Crude Oil Production:
the global oil market, and the kingdom's decisions often 10,951,000 b/d
influence OPEC's overall strategy and direction.

The United Arab Emirates (UAE):


Population: 9.11 million
The UAE is a key member of OPEC, with a significant role
in shaping the organization's policies and duties. As an oil- Value of Petroleum
exporting nation, the UAE's primary duty within OPEC is to Exports: 94,677 million
coordinate and unify petroleum policies with other member
countries to ensure fair and stable prices for petroleum Crude Oil Production:
producers. The UAE's oil production and pricing policies are 3,064,000 b/d
guided by OPEC's objectives.

Algeria
Algeria, a member of the Organization of the Petroleum Population: 45 million
Exporting Countries (OPEC) since 1969, plays a
significant role in the oil market. The country has fully Value of Petroleum
adjusted its oil production to support market stability, as Exports: 32,513 million
per the voluntary adjustment agreement reached in April.
Algeria's oil and gas sector is vital to its economy, and it
Crude Oil Production:
is the largest OPEC member territorially and the largest 1,200,000 b/d
country in Africa.

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Venezuela: Population: 33.11 million
Venezuela, a prominent player in the global oil industry, Value of Petroleum
holds some of the world's largest proven oil reserves. As a
founding member of OPEC since 1960, Venezuela has been
Exports: 15,379 million
an active participant in the organization's decision-making Crude Oil Production:
processes, leveraging its substantial oil wealth
for economic development and diplomatic influence. 716,000 b/d

Kuwait:
Kuwait, having been an OPEC member since its inception in
1960, has consistently played a pivotal role in OPEC Population: 4.39 million
negotiations and is a major player in the international oil
Value of Petroleum
scene. With substantial oil reserves and a stable production
capacity, Kuwait has been a reliable contributor to OPEC's Exports: 95,352 million
efforts to stabilize global oil markets by demonstrating a
willingness to adjust its oil production in line with OPEC's
Crude Oil Production:
agreements. 2,707,000 b/d

Iran:
Iran, a founding member of OPEC, has been a key player in
the global oil market, utilizing its substantial oil reserves to Population: 85.69 million
influence economic and geopolitical dynamics. Iran's ability to
Value of Petroleum
fully participate in OPEC agreements has been constrained,
and the country has sought relief from sanctions to regain its Exports: 42,619 million
position in the global oil market.
Crude Oil Production:
2,554,000 b/d

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Population: 42.25 million
Iraq:
Iraq, another OPEC member with extensive oil reserves, has Value of Petroleum
played a vital role in the organization since its inception, Exports: 120,571 million
contributing to global energy markets. However, internal
conflicts, infrastructure limitations, and geopolitical Crude Oil Production:
uncertainties have posed challenges to reaching production 4,453,000 b/d
targets and have hampered their ability to fully comply with
OPEC agreements.

Population: 5.98 million


Republic of Congo: Value of Petroleum
Congo, a significant player in Central Africa's oil industry, Exports: 8,297 million
boasts a growing oil production sector. Rich in natural
resources, the country has strategically developed its oil Crude Oil Production:
reserves, contributing to its economic development and global 262,000 b/d
energy markets.

Angola:
Angola is the largest oil producer in Sub-Saharan Africa after
Population: 33.09 million
Nigeria, with a daily output of 1.16 million barrels per day and Value of Petroleum
over 9 billion barrels of proven oil reserves. Its oil is of
Exports: 41,241 million
excellent quality, and almost 70% is exported to the United
States. Crude Oil Production:
1,137,000 b/d

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Nigeria:
Nigeria, despite being overtaken by Angola, still maintains Population: 221.6 million
significant oil production. It is one of the top oil-rich African
countries, with the largest oil reserves in Africa. Nigeria led Value of Petroleum
the gains in oil production among OPEC African members, Exports: 53,457 million
with a steady output and substantial proven oil reserves.
Crude Oil Production:
1,138,000 b/d

Population: 2.16 million


Gabon:
Gabon's oil production has decreased to 195,000 barrels per Value of Petroleum
day, attributed to aging oilfields. However, the country is Exports: 6,812 million
committed to expanding exploration and increasing
production. Gabon is one of the Central African countries Crude Oil Production:
making modest gains in oil production. 191,000 b/d

Equatorial Guinea: Population: 1.5 million


Equatorial Guinea is also making modest gains in oil
production. The country has been increasing its output and as a Value of Petroleum
member of OPEC, is contributing to the steady oil production Exports: 3,111 million
from African members.
Crude Oil Production:
81,000 b/d

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Conclusion

Oligopoly in the petroleum industry, characterized by a concentration of power among a few


dominant corporations, negatively impacts market stability, fairness, and global economic
balance. Embargoes exacerbate these issues, affecting the world economy due to the crucial role
petroleum plays across various sectors. The oligopolistic structure leads to price control by a
select few, impacting consumers and causing drastic economic effects. Mitigating price volatility
is crucial, involving strategies such as strategic reserves, energy diversification, and policies
promoting efficiency and renewables.
To address the oligopoly problem, the focus should be on fostering fair competition, sustainable
practices, and energy diversification. Free trade principles require a balance that oligopolies
disrupt, hindering fair competition and product quality assurance. Strategic stockpiling is vital
for national resilience amid global challenges. Improving interstate relations amidst oligopoly
complexities involves addressing economic, political, and social dynamics. In conclusion,
resolving the oligopoly issue is key to mitigating embargo effects in the petroleum market.
Collaborative efforts among governments, businesses, and international organizations are
necessary to discourage monopolistic practices, encourage openness, and promote alternative
energy sources. By fostering a diversified and competitive market, vulnerability to embargoes
can be reduced, creating a more resilient global energy ecosystem.

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QUESTIONS A RESOLUTION
SHOULD ANSWER

1.What steps have been taken to mitigate the environment impact of oil extraction and drilling
activities
2.How will governments implement measures to regulate oligopolistic behavior and foster
equitable competition?
3.What measures are in place to anticipate and address any unintended consequences that may
arise from the resolution?
4.What measures can be taken at the international level to mitigate the economic impact of oil
market volatility, particularly for developing nations heavily reliant on oil exports?
5.Are there provisions for implementing or reinforcing conflict resolution mechanisms to address
the root causes of the issues leading to embargoes?
6.What are some solutions or strategies to mitigate negative impacts and promote economic
growth in these nations?
7.Do the resolutions include provisions to safeguard human rights, labor rights, and the welfare
of workers impacted by economic shifts arising from changes in the dynamics of the petroleum
market?

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POSITION PAPER GUIDELINES

Font: Times New Roman


Font Size: 12
Position Paper Page Limit: One page (excluding bibliography)

Page One

Delegate Name: ____________


Country: ____________
Institution: ____________
Topic:_____________

‘A quote is preferred, not compulsory’

Paragraph one:
Introduction to the topic and steps taken by the UN on the topic at hand.

Paragraph two:
Elaboration on the country's laws and policies regarding the topic and how it is affected by
the topic at hand, and measures incorporated by the country to combat the problem.
Statistical Data is preferred.

Paragraph three:
Unique solutions suggested by the delegate to combat the problem.

Page one ends

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Page two

Bibliography

Page two ends

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FURTHER READINGS
1) https://www.jstor.org/stable/2706759 2)
2) https://www.cambridge.org/core/journals/internationalorganization/article/abs/managing-an-
oligopoly-of-wouldbe-sovereigns-the-dynamics-of-joint-control-and-selfcontrol-in-the-
international-oil-industry-past-present-and-future/A3277F53C866A62CAC26825462F70FFD
3) https://www.lexisnexis.com/en-gb/glossary/trade-embargo
https://www.investopedia.com/terms/e/embargo.asp https://www.thoughtco.com/what-is-an-
embargo-definition-examples-4584158
4) https://www.reed.edu/economics/parker/f10/201/cases/oil_effects.html
5) https://history.state.gov/milestones/1969-1976/oil-embargo
6) https://www.visionofhumanity.org/impact-of-embargoes-on-trade-in-small-arms-light-weapons/
https://www.tutorchase.com/answers/a-level/economics/how-can-trade-embargoes-impact-a-
country-s-economy
7) https://www.sciencedirect.com/science/article/abs/pii/030142159490067

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BIBLIOGRAPHY

https://www.mckinsey.com
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0an%20oil%20supply,of%20the%20oil%20supply%20shock.

https://worldoil.com/news/2023/11/2/opec-oil-production-steady-with-african-members-making-modest-
gains/

https://www.ifri.org/sites/default/files/atoms/files/auge_oil_production_subsaharan_africa_2021.pdf
https://www.laohamutuk.org/OilWeb/Bground/Africa/Africa.html
https://www.statista.com/statistics/1178147/crude-oil-reserves-in-africa-by-country/
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www.opec.org
https://www.britannica.com/topic/PetroCaribe
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wcm92aWRlciI6Imdvb2dsZSJ9&seq=10#page_scan_tab_contents
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relations-between
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venezuelan-oil-gas-for-6-months
https://www.cfr.org/in-brief/do-us-sanctions-venezuela-work
https://www.voanews.com/a/venezuelas-oil-wealth-powers-social-programs-drives-divisions-
100077894/123381.html
https://www.reuters.com/business/energy/venezuelas-october-oil-exports-fall-19-despite-us-easing-sanctions-2023-
11-02/
https://www.ceicdata.com/en/indicator/venezuela/crude-oil-exports
https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/VEN

Written By:
Aman Jinose Neil Madavi
Anina Vinod Mohammed Ayaan
Anshuman Soni Rayan P Nair
Avinash Shaji
Ashman Singh
Atharv Dehedkar
Devnath Kavintarikath

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