Dubai International Academy Model United Nations 2018| 10th Annual Session Forum: League of Arab States Issue: The question of the shift in the focus of energy production due to depleting oil resources. Student Officer: Michael Leo Position: Deputy President of League of Arab States Introduction The dependence of global commercial trade upon the oil industry has risen to near inconceivable levels; an opinion which is only reinforced by the juxtaposition of the current state of the international community’s reliance on fossil fuels [petroleum, in particular] and its state in the mid-19th century. Copious reserves of oil make up the base of contemporary trade economies, but the facility to retain and develop global supply is causing growing disquiet. Some analysts predict a peak in the immediate future, followed by a terminal waning in global oil production; others draw attention to the recent growth in ‘tight oil’ production and the possibility of developing unconventional fuels.i Total world oil production in 2016 averaged 92,150,000 barrels per day [bbl/day]. A region of southwest Asia, commonly known as the ‘Middle East’ accounts for 31,789,000 bbl/day, a striking 34.5% of the world’s aggregate production.ii Nearly every country situated within the Middle East finds itself particularly dependent on oil to fuel economic progress. This heavy reliance on oil and petroleum has developed because of the frequency of ample reserves, ease of access due to technological advances, and the need for efficacy and dexterity in today’s world. Oil economies around the world, those in the Middle East in particular, have undergone overwhelming boosts of national growth due to their oil exportation practices. This enormous success has blinded them from the shortcomings of having a solitary energy production commodity, which includes a lack of damage control options, as well as the price instability of the fossil fuel energy sector. When the oil shock hit the economy in 2014, several Middle Eastern countries were left to depend on funds reserved for other purposes to sustain their rapidly weakening economies, having experienced a fiscal deficit for the first time in almost twenty years. These efforts to stabilize economies are ongoing as most countries have yet to find and implement viable energy solutions. The 2014 oil supply shock has resulted in a consistent drop in oil prices, exacerbated by events including the ‘Arab Spring’, the dominance of US shale producers, and the lack of coordination between Research Report | Page 1 of 17 Dubai International Academy Model United Nations 2018| 10th Annual Session oil producing nations. The turbulent state of global affairs has shaken the largely dependable political and economic nature of the Arab states that are solely reliant on their petroleum revenue streams. Low prices and high supply has proven to be a disastrous combination for countries experiencing high levels of unemployment in the public and private sectors, and exceptionally low levels of public satisfaction. Governments are gradually running out of budget surpluses, with several in debt, which has led to revolts and violent responses from the citizens of the affected countries. Oil is the élan vital of modern civilization. It fuels every mode of transportation, and more; armed forces, agricultural production, all depend on oil. Oil by-products supply us with several of the day-to-day commodities modern lifestyles require. But the purpose of the agenda is to deal with the looming international deficiency of conventional oil -- an incident that has the capacity to wreak havoc and hardship on the economies of every country in the global community. The earth’s allotment of oil is restricted, and demand for oil and oil consumption continues to increase with time. Accordingly, geologists have predicted that at some future date, conventional oil supply will no longer be capable of satisfying world demand. The agenda is centered on the recollection and implementation of strategies that have, and will continue to have substantial effects on the Arab Nations’ unyielding reliance on oil and petroleum. It will explore the possibilities that have been overshadowed by the relative monopoly held by the oil industry. Consequently, it is the duty of the major oil producers of the world to begin shifting focus in energy production, so as to incite a revolution in the world’s primary energy consumption. Definition of Key Terms Energy Transition Defined by the World Energy Council as a “long-term structural change in energy systems,” an energy transition is a particularly significant set of changes to the patterns of energy use in a society; or in this case, the world. Energy transitions have occurred in the past, and continue to occur worldwide. A contemporary energy transition is being brought about by the transformation of the economics of oil, caused by energy disruption and geopolitical change. The primary energy mix is shifting towards lower carbon sources, driven by technology advances and growing environmental concerns. Peak Oil Marion King Hubbert, an American geologist, was the originator of the Hubbert curve and peak theory. Peak oil is an occurrence centered on Hubbert’s theory; it is the point in time when the rate of extraction of petroleum within a certain area has been maximized, after which it is projected to enter an Research Report | Page 2 of 17 Dubai International Academy Model United Nations 2018| 10th Annual Session irreversible drop. Peak oil is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. It is often confused with oil depletion; however, peak oil is the point of maximum production, while depletion refers to a period of falling reserves and supply.iii Benchmark [Crude Oil] There are several different varieties and blends of crude oil, with a continual spread due to differing volatility, sulfur content and transportation cost. A benchmark is a particular crude oil that serves as a convenient reference price for buyers and sellers of crude oil. West Texas Intermediate [WTI], Brent Blend, and Dubai Crude are the three primary international crude oil benchmarks. The OPEC Reference Basket [used by OPEC], another well-known benchmark, is a weighted average of prices for petroleum blends produced by OPEC members. OPEC utilizes the OPEC Basket to make decisions regarding production. This makes the measure important for market analysts, and to the world oil market price as a whole. Oil Glut An oil glut is a market situation where the supply of crude oil far exceeds its demand, typically causing in a significant drop in its price. Oil Boom A sudden increase in the oil producing sector of a country’s economy. In most cases, the duration of these “booms” is short; the increase may initially stimulate economic growth, in terms of an augmented GDP. But, as demonstrated in several cases, these increases might later lead to scarcity in the face of high demand and low supply; or conversely, lead to gluts, due to high supply and low demand. Macroeconomics The section of economic study that focuses on international economic events on a large scale, with special importance given to the functioning and logistics of regional and global economies, and to factors such as growth rate, inflation, average income, and GDP- The study of macroeconomics is crucial to the understanding of this agenda, in order to fully appreciate the effects a shift in energy production, or lack thereof, will entail. Primary Energy Primary energy comprises commercially traded fuels, including modern renewables used to generate electricity. Based on the analysis of international energy experts, world primary energy consumption increased by approximately 1% in 2016. Oil remains the world’s dominant fuel, making up Research Report | Page 3 of 17 Dubai International Academy Model United Nations 2018| 10th Annual Session roughly a third of all primary energy consumed. Renewables in power generation accounted for a record 3.2% of global primary energy consumption, and are set to gradually replace conventional fuels at a steady rate over the next few decades. Renewable Energy Energy collected from resources that are naturally replenished on a human timescale is known as renewable energy. Some key terms involved in the primary sources of renewable energy are listed below: Hydrogen Economy The hydrogen economy is a proposed system of delivering energy using hydrogen. The term was created by John Bockris, a professor of electrochemistry. Advocates of a hydrogen economy backs hydrogen as a potential fuel for most power generation and energy storage needs. Hydrogen that is to be used as fuel can be generated by methods such as water electrolysis and reformation of hydrocarbons. However, this source of renewable energy faces many issues, given fundamentally low conversion efficiencies and competition from other sources. Geothermal Power Geothermal power is electricity generated by the heat generate and stored by the Earth. Dry steam and flash steam power stations are the primary technologies used for this purpose. Geothermal electricity generation is currently used in 24 countries, while geothermal heating is in use in 70 countries.iv Photovoltaics Photovoltaics [often abbreviated to PV] is a term which covers the conversion of light into electricity using semiconducting materials that exhibit the photovoltaic effect; that is, the creation of voltage and electric current in a material upon exposure to light. A conventional photovoltaic system utilizes solar panels, each containing a number of solar cells, which generate electrical power. Economic Diversification According to the United Nations, ‘economic diversification’ is generally taken as the process in which a growing range of economic outputs is produced. It can also be used to define the diversification Research Report | Page 4 of 17 Dubai International Academy Model United Nations 2018| 10th Annual Session of income sources separate from domestic economic activities, for example, income from oil exportation with the aim of diffusing risks by moving focus away from a single energy production sector.