This is what you won’t be reading from the official press release following next week’s OPEC meeting in Angola.
Member states are guzzling tons of their own oil and have less and less stuff to export to you. Fortunately, since oil prices are almost four times higher than they were a decade ago, those states can afford to export less because they get that much more for every barrel they do.
It’s a nice model if you’re Hugo Chavez. Not so nice if you’re a North American motorist.
OPEC, together with two non-cartel oil producers, Russia and Mexico, consumes 14.5 million barrels of oil per day. That’s nearly twice as much as China, in case anybody is keeping track. Oil demand among OPEC members has been growing at well over double the world average. And the more these countries consume their own oil, the less they have to export to you.
So what makes oil-producing countries so thirsty for their own fuel?
Well, if you’ve ever been to a gas station in Caracas you’ll have some sense of it. A taxi driver there is filling up for 25 cents a gallon with the same oil you thought Petróleos de Venezuela was going to be exporting to you for $70 per barrel.
And if you think Venezuelan motorists have a good deal, check out Ski Dubai. One day carving turns on the artificial snow there burns up the energy equivalent of what the average North American driver uses in gasoline in a month.
But the Middle East burns a lot more oil making water than making snow. Places like Saudi Arabia or Dubai consume anywhere from seven to fifteen times the water that is naturally replaced every year. And the biggest subsidy of all is for the power that drives all the desalination plants they need.
The Saudis burn oil at the equivalent of 7 cents a gallon to create the power to drive their desalination plants (50 per cent of all electric power in Saudi Arabia is oil-fired). And just like gasoline prices in Caracas, those rates don’t change, whether world oil prices are $20 per barrel or $147 per barrel.
Massively underpricing—hence massively over-consuming—your own resource isn’t unique to the oil industry, or to OPEC. Just ask Hydro-Québec when it plans to stop subsidizing power rates in La Belle Province—probably around the same time Saudi Arabia and Venezuela start charging their citizens world oil prices for the gasoline and oil-fired power they consume.
How OPEC countries burn their own oil is their business. But before driving away in a brand-new gas-guzzling SUV, consider where you will be getting your fuel in the future.
Chances are it won’t be coming from OPEC. And chances are it won’t be cheap.