ECONOMY

Greek dependency on oil to stay; poor hit hardest

The percentage of lower-income Greeks severely affected by the steep rise in the price of oil (a state described as «energy poverty») rose from 16 percent to 36 percent in 2006, according to a report by the Labor Institute (INE) of the General Confederation of Greek Labor (GSEE), citing Athens University data. The study concludes that the price of oil will most likely settle around $60 per barrel mark in the midterm – and concludes that the scenario of a return to much lower levels, even $40 per barrel from the present $70, is very unlikely. The price level will directly depend on supply and the possibility of reducing demand by substituting with alternative energy sources. Therefore, the study continues, even though international organizations rule out a shortage of oil by the end of the decade, it is particularly important to study developments in the refining sector. The authors consider that meeting demand will continue (for the next three decades, at least) being largely dependent on non-renewable energy sources, particularly hydrocarbons (at least 59 percent). In the 20 years between 1983 and 2003, world demand for oil went up by one-third, and it is projected to rise by between 45 percent and 70 percent by 2030, the report says. Nevertheless, under such conditions, and «despite the fact that the phenomena of interruption in the supply of oil have not yet been observed, prices reflect, to a greater extent, the projections of stock markets than the long-term marginal cost of production.» The study notes the historically high levels of capacity utilization in refineries (86.3 percent in 2005) and registered new investment plans show an increase in global refining capacity of 26 million barrels annually. Specialist organizations estimate that the proven oil deposits will suffice for between 36 and 44 years, it says. By contrast, the Association for the Study of Peak Oil & Gas (ASPO) believes that world production of oil will reach its peak within the next decade. Within the context of peak theory, put forward by Shell geologist Dr Marion Hubbert, peak oil is the date when the peak of the world’s conventional petroleum (crude oil) production rate is reached. After this date, the rate of production is predicted to enter terminal decline, following the bell-shaped curve predicted by the theory. According to another optimistic scenario put forward mostly by economists, the peak will be reached sometime between 2030 and 2040. An alternate, pessimistic scenario, supported mainly by geologists and geophysicists, states that the renewal of deposits stopped in 1985 and estimates that 17 of the 50 most important oil producing nations have already exceeded their peak oil point. In 1990, there were only two nations to have exceeded this critical point. Cooperation with Russia A second study, prepared by INE, predicts that the Greek fuel market will have a 1.6 deficit by 2016, given the present refining capacity and planned investment. According to the author, presented by Grigoris Stergioulis, Greece must intensify cooperation in energy with Russian in order to secure access to low-sulfur crude. It must also boost efforts for joint exploration and production with foreign operators, as well as the production of alternative fuels. «It is obvious that Greece will remain dependent on oil and the efforts for control of deposits will increase,» concludes the study.