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Norway’s labor dispute shows Mideast isn’t only vulnerable oil province International risk factors include bad weather, political unrest, guerrilla attacks, labor disputes, technical problems, maintenance and accidents Beth Gardiner Associated Press Writer
Violence in Saudi Arabia and Iraq have kept oil-importing nations’ worries focused on the Middle East, but a recently resolved labor dispute in Norway is a reminder that supplies elsewhere can be vulnerable too.
With OPEC production stretched and the world guzzling ever more oil, analysts say a significant disruption in often-volatile Venezuela or another big exporter could cause a big price spike.
Still, they’re mostly optimistic that such a scenario is unlikely, and say it would have to coincide with more Middle Eastern trouble — like a big decline in Saudi or Iraqi production — to cause a real crisis.
An unforeseen supply disruption “is an ever-present threat,” said David Fyfe, principle oil supply analyst at the Paris-based International Energy Agency.
Bad weather, political unrest, guerrilla attacks, labor disputes, technical problems, maintenance and accidents are always risk factors, Fyfe said.
“Random events can hold the potential to undermine non-OPEC supplies for a given year by anything up to 300,000 to 400,000 barrels a day,” he said. World oil production hovers around 81 million barrels daily. Norway orders binding arbitration On June 25, the government of Norway, the world’s third-largest oil exporter, ordered an end to an offshore oil workers’ labor dispute that had threatened to halt pumping.
Officials said they were ordering binding arbitration because a strike and lockout would have had serious consequences for the nation’s economy and reputation as a reliable supplier of petroleum.
Axel Busch, chief correspondent for industry newsletter Energy Intelligence, said Norway can be counted upon to settle oil disputes before they cause real trouble. Outcomes less certain elsewhere in world In other parts of the world, the outcomes are less certain.
In Venezuela, where a general strike paralyzed oil exports in late 2002 and early 2003, President Hugo Chavez has consolidated his control of the industry, reducing the chance of another damaging walkout, Fyfe said. But the South American nation, the world’s fifth-largest oil exporter and holder of the western hemisphere’s biggest reserves, remains unstable, and Chavez faces a planned recall vote in August.
Hints of labor unrest in Ecuador and guerrilla attacks on pipelines in Colombia make those nations potential trouble spots too, Fyfe said.
Ethnic violence in Nigeria’s volatile oil delta and the potential for labor trouble are ongoing issues, although they have not had a major impact on the country’s production in recent years, Fyfe said.
Busch, the energy newsletter correspondent, said the Caucasus and Caspian Sea are also potential trouble spots, though he predicted political tensions there would ease before interfering with oil production.
Oil prices spiked to record highs earlier this month, under the combined pressure of rising demand from fast-developing nations like China and fears about future production in the Middle East.
Sabotage and general instability are hurting oil production in Iraq. Saudi Arabia, the world’s biggest oil producer, is struggling with an upsurge of violence against Westerners and its oil industry. OPEC pumping close to maximum capacity With OPEC pumping at close to maximum capacity and other exporting countries already there, simultaneous problems in two or more oil nations could create a price shock, Busch said.
“For instance, if you totally stopped Iraq, no more exports out of Iraq for whatever reason ... and then you also have Venezuela imploding ... then it starts getting close to a crisis point,” he said.
“I would foresee the markets going mad and prices would ratchet up, but we wouldn’t go cold, the wheels of commerce wouldn’t grind to a halt, not for a long time,” he added.
Busch said OPEC nations could probably produce about 1.5 million additional barrels a day if they had to, and noted that big oil-consuming countries have large strategic reserves.
Beyond that, he said, “we are up against it,” and the world would have to start tapping new oil supplies, perhaps in west or north Africa or Russia.
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