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OAPEC April 77

VIEWPOINT


Producer and Consumer Responsibility Towards teh World Comunity


by
Mahmud S. Amin OAPEC Assistant Secretary General


It has recently become fashionable, whenever the world economy faces a crisis or the rate of uneployment rises, to single out the oil producers generally and the Arabs particularly for blame, charging them with dis-regading their obligations as members of the international community. This makes one question the validity of allegations flung at the oil-producing countries and that of the industrialized countries degree of commitment towards the world community.


The oil-producing countries, with their huge share of world energy reserves, are undoubtedly able to produce the great quantities of oil needed to satidfy the world demand. But a cursory glance at a map of world energy distribution reweals that the North American and European countries possess tremendous reserves, too. moreover, these reserve - coal, shale oil and uranium - have far greater potential in terms of energy content than does oil. Furthermore, the industrialized countries are also capable of developing the technology to exploit these and other resouces, such as solar and nuclear energy, but a sense of complacency reated by the continued flow of oil has cooled their interest in th development of alternatives. As a result, the share of oil and gas in world energy consumption is now 75 %, although the proportion of proven reserves of oil and gas to those of other energy resources is less than 27 %, as shown by the following table :


Proven Reserves of Different Energy Resources
(million terrajoules) D.C. Ton, Petroleum Availability of World Energy Resources, London : Graham & Trotlan Ltd. , 1975.


Fossil fuel
Oil
Natural gas
Uranium


15.112
3.957
1.933
0.824
21.826


Rate

69.4 %
18 %
8.8 %
3.8 %
100 %

26.8 %


Science is not at fault for the heavy dependence on, oil in the industrialized countries. The blame rests with the exaggerated dependence of consumers on cheap oil.


Thus, it is apparent yhat if had not been an adjustment in the price of oil in 1974, the industrialized countries would have gone still further in depleting reserves of oil, while paying little attention to other sources of energy available to them. A United States Federal Energy Administration report well summarizes this problem in he Following : Federal Energy Administration. 1976 National Energy Outlook : Executive Summary, Washington, 1976. p.2.


The vast reserves of coal in the United States amount to three times the energy contained in the Middle East’s oil reserves, and currently account for more than 90 % of U.S. proved energy reserves.


Yet, over the last 75 years, the U.S. has switched from using coal for over 90 % of its energy needs to depending on oil and gas for 75 % of its energy.


Thus, the Nation depends upon its least abundant energy resources to provide most of its energy needs.


The result has been a prowing dependence on imported energy, the availability and price of which are controlled by a few Middle East countries.


Our task between now and 1985 is to find and develop more oil and gas and stimulate conservation to offset currently dwindling production of these fuels, as our economy is converted to the more abundant resources, such as coal and nuclear power.


In the posy-1985 period, our task is to develop new technologies that can dramatically expand our economically usable reserves of shale oil and uranium, and to make greater use of non-depletable resources, such as solar and geothermal energy.


Not only have the industrialized countries failed to develop their own energy resources, but they have also consistently develop patterns of wasteful energy consumption.


Energy conservation is now being urged by the IEA, Wish is trying to prod its members into conserving energy. A recent report OECD. Energy Conservation in the International Energy Agency : 1976 Review. Paris, 1976. contrasts the progress of nomber countries which have maintaines high rates of consumption.


The table compares energy consumption rates for each GNP unit in 1973 and 1975 :



Country


1973


1975



Belgium

Norway

Luxembourg

Denmark

Britain

Sweden

Ireland

Austria

Holland

Turkey

Germany

Italy

Japon

New Zealand

Canada

Spain

U.S.A

Switzerland


1.52
1.49
3.92
1.15
1.67
1.36
1.58
1.39
1.72
1.65
1.27
1.28
1.32
1.39
1.92
1.48
1.54
1.00


1.36
1.36
3.58
1.05
1.54
1.26
1.47
1.30
1.62
1.56
1.20
1.23
1.27
1.35
1.95
1.48
1.54
1.03


The policy of the consuming countries appears to be to preserve their own huge energy resouces while consuming available resources at high rates. This could lead the world to the brink of an energy crisis, unless these countries meet their responsibilities towards the international community.


Commitment of oil Producers to the World Community : The following table shows the comitment of the oil producers to their world responsibility over the last three years.



Daily production
Annual revenues
Annuel savings
 % savings to revenues


30,729
$ 102
$ 65
63 %


27,192
$ 97
$ 32
33 %


30,461 m/bl PIW, Jan. 31, 1976
112 bil./yr World Fnancial Markets, Sept. 1976.
33 billion
29 %


The figures indicate that the producers could easly sustain a one-third cut in production while still deriving sufficient revenues - yet they continue to produce quantities in excess of their development needs which aventually get changed into dollar savings which then undergo constant erosion by world inflation. A cut in production, however, would have been the Arab producers policy had they pursued their economic interests at the expense of their obligations towards the international community.


Thus, it is the responsibility of the industrialized states to develop their own vast and idle energy resources and to develop the economies of the oil-producing countries in a manner that would permit them to make the best use of their financial resources while also continuing to meet the world’s oil requirements.

REPORT


major Developments in the Kuwaiti
Financial Markets in 1976


by
Hikmat Sh. Nashashibi Manager of Kuwait International Investment company, and former Investment Manager of Arab Fund for Econocic and Social Development.


A major development in the Kuwaiti financial markets during 1976 was the growth in the number and value of internationel bonds denominated in Kuwaiti Dinars. By th end of the year the total float reached a one billion dollars equivalent, wich compares favorably indeed with ectivity in the Eurobond market (now with a total value of 40 billion US dollars), especialy if one considers that the size of the market for Eurobonds dnominated in currencies other than the US dollar stands at a 13-billion US dollar equivalent. Furthemore, statistics show a fast increase in the yearly figures, with annual issues rising from KD 15 million in 1974, to KD 52.5 million in 1975, and KD 80 million in 1976.


Obviously, there are various types of activity which the Kuwaiti financial markets can perform with varying degrees of efficiency and success. However, the most natural of these activities for the market in its comitment to extend medium and long term international lending denominated in Kuwaiti Dinnars, due to the simple fact that there exists a relative local incapability to utilise fully the financial possibilities that are made availeble. We do not choose here to go into these incapabilities, their manifestations and results. To covince ourselves of this fact, it is enough to quote some figures for investment in the banking sector which will show us that a considerable part of foreign assets is invested outside Kuwait and denominated in currencies other than the kuwaiti Dinar . Quite naturally this stems from the dearth of investment outlets in the local market and the narrow demand for local loans, besides the financing requirements of foreign trade.


The result of all this was that on september 30, 1976, the net foreign assets of the Kuwaiti banking system (foreign assets less foreign obligations) amounted to KD 459.6 million, whereaas total capital and reserves were KD 81.8 million. This meant that the capital base of the system covered a mere 17 % of the banks foreign currencies risk exposure.

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