2 of 42

Tanuka

Rashmita

Debojyoti

Rohan

Sanjay

Team Members

3 of 42

Content

Fossil Fuel

Importance of Oil

OPEC – Oil Embargo

Cause

Effects

Implications on Oil prices

Oil Wars

Nord Stream

Reason behind US obstructing

Reason behind energy crisis in Europe

Europe’s alternative

Ukraine Crisis

Energy Crisis

4 of 42

Fossil Fuel

Decomposing plants and other organisms, buried beneath layers of sediment and rock, have taken millennia to become the carbon-rich deposits we now call fossil fuels.

These non-renewable fuels, which include coal, oil, and natural gas, supply about 80 percent of the world’s energy. They provide electricity, heat, and transportation, while also feeding the processes that make a huge range of products, from steel to plastics.

Major sources of Non-renewable energy

World Energy Consumption

Source : Enerdata.net

5 of 42

Importance of Oil

With growing economy and development around the world, there is a desperate demand of energy. Over the year crude oil has emerged as the major source of energy around the world. As the demand of crude begin to rise, the oil producing countries has started to realize their power of influence around the world.

The geopolitics of oil and gas can be viewed as resulting from the balance sheet from supply and demand, which affects the power dynamics between energy exporters and importers, energy security and military strength.

Source – Globalpetrolprice.com

Utility of Oil

6 of 42

1973 Oil Embargo

The 1^st emergence of Oil War in the world

Oil Production in World

7 of 42

OPEC – Oil Embargo�Organization of Petroleum Exporting Countries�

OPEC is a consortium of oil exporters which co-ordinates the petrol policies among its members in order to secure fair price for its producers. It has 13 countries as its member, formed in 1960s.

The Organization of the Petroleum Exporting Countries (OPEC) oil embargo was a decision to stop exporting oil to the United States. On Oct. 19, 1973, the 12 OPEC members agreed to the embargo. Over the next six months, oil prices quadrupled. Prices remained at higher levels even after the embargo ended in March 1974.

Saudi Arabia

32%

Others

19%

Iraq

14%

Iran

12%

Kuwait

UEA

Nigeria

Source – OPEC.org

Oil Production

8 of 42

Cause of this crisis

In 1971, President Richard Nixon prompted the embargo when he decided to take the United States off the gold standard. As a result, countries could no longer redeem U.S. dollars in their foreign exchange reserves for gold. This sudden unprecedented change resulted in a fall of dollar value. The plummeting value of the dollar impeded the OPEC supplies. As They depend on the petrodollar for their government revenues. Their oil contracts were priced in U.S. dollars.

Leaving the Gold Standard

9 of 42

Military Aid for Israel

On October 6, 1973, Egypt and Syria launched a surprise attack against Israel on the Jewish holy day of Yom Kippur. Egyptian and Syrian forces made early gains across the Suez Canal and Golan Heights, but Israel quickly turned the tide, and within a few weeks Israeli troops had pushed forward into Egyptian and Syrian territory. In an attempt to pressure Western countries to force Israel to withdraw from seized lands, Arab members of OPEC (Organization of the Petroleum Exporting Countries) announced sharp production cuts and then banned the sale of oil to the United States.

US munition supplies to Israel turned the tide against Egypt & Syria.

10 of 42

Israel with the help of US military aid fend off successfully against Egypt & Syria, which irked the Arabian countries resulting to the oil embargo.

11 of 42

Wage-price controls forced companies to keep wages high, which meant businesses laid off workers to reduce costs. At the same time, they couldn't lower prices to stimulate demand. It had fallen when people lost their jobs.

Lost Jobs

Effects of Oil Crisis

To make matters worse, the Fed raised and lowered interest rates so many times that businesses were unable to plan for the future. As a result, companies kept prices high which worsened inflation. They were afraid to hire new workers, worsening the recession.

Higher Prices

12 of 42

The oil embargo aggravated inflation by raising oil prices. It came at a vulnerable time for the U.S. economy. Domestic oil producers were running at full capacity. They were unable to produce more oil to make up the slack. Furthermore, non-OPEC oil production had declined as a percentage of world output. Higher gas prices meant consumers had less money to spend on other goods and services. This lowered demand. It also weakened consumer confidence. This lack of confidence made people spend less.

Lower consumer confidence

III

Rise in Oil prices in 1972-1974

1.82 $ to 11 $.

Fall in annual GDP

6.3% to -0.4%

Rise in unemployment rate

4.3% to 8.3%

Richard Nixon’s policies are found to be the reason for economic debacle. Nixon went down in history as the most malicious politician of US. He also became the 1^st president to ever resign from office.

13 of 42

How oil prices have changed since the crisis

The oil embargo gave OPEC new power to achieve its goal of managing the world's oil supply and keeping prices stable. By raising and lowering supply, OPEC tries to stabilize the price of oil. As of 2022, OPEC produces about 40% of the world's oil supply and controls 60% of oil exports. In 2018, OPEC countries retained 79.4% of the world's proven oil reserves.

A review of the history of oil prices reveals they've never been the same since the 1973 oil crisis. The chart below tracks both nominal and inflation-adjusted oil prices since 1946. During the OPEC oil embargo, inflation-adjusted oil prices went up from $27.17 per barrel in October 1973 to $60.81 per barrel in March 1974.

Oil Embargo

14 of 42

Energy Crisis

Europe

15 of 42

North Stream Gas Pipelines

located on the Russian coast of the Baltic sea.

It passes through the Baltic sea and reaches the German coast north stream.

It consists of two pipelines.

north stream 1 was completed in 2011 and runs from Vyborg in Leningrad Russia to lubmin near Greifswald Germany.

not stream 2 was completed in September 2021 it runs from ust-Luga in Leningrad Russia to lubmin Germany.

16 of 42

they provide energy in the form of natural gas to Europe through Germany
the twin pipelines together can transport up to a total of 110 billion cubic meters of gas in a year to European that too for an estimated period of at least 50 years.

17 of 42

These two pipeline passes through the exclusive economic zones.

Including – Russia, Finland, Sweden, Denmark and Germany.

These Two pipelines are owned And controlled by a Russian state controlled company, GazProm.

18 of 42

Last Month around Mid-June Russia reduced gas supplies to many European countries i.e. Germany, France, Netherlands, Poland, Bulgaria, Finland, Denmark, Czech republic, Austria, Slovakia.

19 of 42

In the First Week of march or so, The US had threatened Russia that they would put sanction on their north stream 2 pipeline

the united states was very careful with the sanction they did not say that they are going to put a ban on the entire pipeline number two.

the U.S said they would only put sanction on the Russian shipping company that takes care of the pipeline installation in the Baltic seabed.

20 of 42

Reason Behind U.S. Obstructing Nord Stream 2 Project-

Not To Provoke Russia but, Slightly.

Threatening Russia that Europe Will not purchase Gas from Pipeline No.2.

21 of 42

United states is supplying military equipment and aid continuously to Ukraine and prolonging this war instead of sitting down with Russia to negotiate.

22 of 42

united states is also creating more and more threat perceptions for Russia by extending NATO invitations to Sweden and Finland that means the west is clearly showing no signs of withdrawal.

similarly, Russia is also not showing any sign of backing off.

Russia has planned all of this in advance, now this Russia Ukraine conflict is going to extend till winter.

23 of 42

until winter when Europe starts to freeze while Russia turns off the gas supply.

the west thought that they would be able to bully Russia by putting sanctions on north stream two pipeline.

Russia kept on playing along and received numerous sanctions and threats this all will continue till winter and Russia has already started cutting the gas supply.

24 of 42

Germany is requesting Canada to immediately return the gas turbine which Germany gave to Canada for repair

power plant requires a gas turbine which compresses air and mixes it with fuel most commonly natural gas only then it will burn at an extremely high temperature which creates hot air this is called combustion the hot air and fuel mixture moves the blades in the turbine and makes them spin quickly due to the fast spinning of the turbine blade a drive shaft starts to rotate and that shaft drives a large magnet which is surrounded by coils of copper wire which creates a powerful magnetic field and that is how electricity is created.

25 of 42

Russia has given a gas turbine to Germany for using it on the north stream one gas pipeline and Germany gave it to Canada for repair it is being repaired by siemens energy company

Canada has also put many sanctions on Russia to show their support towards Ukraine, whatever the united states says Canada must follow.

Germany has asked Canada to return the Russian gas turbine as soon as possible basically Canada has to now issue a time limited and revocable permit in other words they're creating an exception and bending their sanction law for sending the Russian gas turbine to Germany why because Germany has requested them.

26 of 42

WHY? - because Europe is slowly heading towards an energy crisis

27 of 42

Russia has strictly said to Germany to return our gas turbine otherwise they will shut off the gas supply from the north stream one pipeline.

Gazprom the company that operates the north stream plant.

They came to know that there is an equipment that is missing, and Russia also knows the equipment is in Canada.

Russia knew that the gas turbine is sent to Canada, and it wanted back and obviously the west is not going to listen to Russia even if Russia asks politely.

So, Russia started reducing gas flow to Germany in mid of June.

28 of 42

German politicians are saying they say that the return of the equipment is not the reason behind Russia lowering the gas supply.

German politicians are saying that Russia is taking advantage of the situation and blackmailing Europe to push up prices.

29 of 42

WHY? – West is Expecting Mercy from Russia While they are putting Sanctions

30 of 42

the west is not able to gain leverage over the Russian economy, Russia has found a market in the east recently the bricks meeting happened.

the north-south corridor is almost ready few more kilometers of tracks need to be laid.

in fact, last month Russia sent first consignment to India through the north south corridor.

31 of 42

these gas pipelines from Russia to Europe will create an economic and political crisis in Europe in the coming winter

to run the European economy, they need electricity power and energy

32 of 42

natural gas is used by several high-end industries such as glass makers steel manufacturers who are already facing higher costs and they are slowing the European economy.

And Secondly Russia Knows How much they are supplying and how much Europe needs.

33 of 42

Europe's Alternative

either they will ask Norway to supply oil and gas, or they will go to middle eastern countries.

for Norway it will be a test the whole world is going to watch how environmentally friendly they claim themselves to be once they must pump out an extraordinary amount of oil and gas to meet Europe's demand

34 of 42

Iran China Qatar Saudi and a few central Asian countries they are waiting for that moment when Russia is going to switch off the valve.

and then the west will approach the middle east China and central Asian countries.

they are going to dictate terms and ask for higher prices.

35 of 42

Germany is also making a desperate attempt to restart their cold fire power plants basically now they are going back on their legislation.

so basically, the European climate policy and their focus on renewable energy are all going into drain.

36 of 42

this Russia Ukraine crisis is pushing their countries back into fossil fuel.

German vice chancellor Robert habek said, he asked his country to reduce gas consumption so that the country can fill its storage tank ahead of the winter you.

And The west is still prolonging Russia Ukraine War.

The West continuously supplying weapons and money, they are the ones who have put so many sanctions on Russia and literally put a dent in the Russian economy by using Ukraine

37 of 42

on the other side Russia is putting stress on Europe and extracting that economic loss

38 of 42

Ukraine is Gone

Ukraine is gone and won’t ever return even India from day one has been saying to Ukraine to engage in dialogue negotiation with the Russian federation but then we all know who is calling the shots it's the united states government and European leaders

39 of 42

main point to consider here is that if lights go out for Europe during winter, then the downside of that will be industrial cutbacks and shutdowns which will result in unemployment high inflation and possibly a global recession.

the situation in Europe will be very similar to a country that has been sanctioned because the goal of any sanction is to create an economic crisis.

and whenever there is an economic crisis, you can see it in history, and you can also see it anywhere in the world there has been regime change.

40 of 42

if western countries are trying to change the Russian regime by doing all of this.

this winter we are going to witness a lot of leadership changes in many European countries.

one of the reasons behind Boris Johnson's resignation is also an increase in the cost of living due to tax rise.

after the Russia Ukraine war we all have witnessed that there has been arise in oil prices and the cost of food has gone up almost every country is facing that pinch.

what Boris jones government did was they increased the tax by saying this money will be used to pay for health and social care.

41 of 42

immediately the opposition leader Kear stammer from the labour party took advantage and publicly said the government chooses to increase tax on working people if you see it, is atypical neo-communist move.

although there are other reasons as well but even tax rise and high cost of living is also a major reason behind Boris Johnson's resignation.

if this can happen to U.K. then it can very well happen to many European countries.

While trying to create pressure on Russia, Europe Bind itself into an Energy Crisis Trap.

And Now we must wait till the winter arrives to see loosen up sanctions and huge recession in Europe.

42 of 42

Thank

you

Staying

Out

Politics

POLITICAL