Oil at the turn of the twenty first century

This paper focuses on the interplay of market forces and politics in the world oil market to the year 2010. It argues that world oil demand will increase considerably, with Asian demand growing the fastest. Given that the growth of non-OPEC oil supply will be trivial, the call on OPEC oil will increase substantially. Yet, given the declining per capita oil revenue of OPEC, member countries may not be able to make timely investments in required upstream projects. If this happens, the supply constraint will lead to higher prices and intensified international competition for the Persian Gulf oil. Thus, foreign investment will be increasingly needed in the OPEC countries if prices are to remain stable and international competition manageable. Yet, there are geopolitical and institutional barriers to foreign investment in many OPEC countries. Therefore, it is imperative that major players in the world oil market cooperate to reduce such barriers in time to ensure a supply situation that will correspond to the rising demand.