The Devils Tears from the Tournament of Shadows: Oil Supply, Markets and Unstable Producers

Oil is the driving force for the modern economy as a cheap energy source and its reliable supply of oil is therefore a crucial element of economic growth. Oil resources however, are unevenly distributed and concentrated into only a few, on average, emerging economies. Inefficient and ineffective resource management can jeopardize the secure flow of oil. Especially since these supplying countries are prone to geopolitical and commercial instability. The status of oil suppliers is derived from an endogenous web of relationships. However, most supply security studies focus mainly on the demand side, and the condition of oil suppliers is assumed to be exogenous. This paper attempts to quantify the security of oil supply from a supply side perspective through a composite indicator-based index. The subsequent composite index analysis combines the indicator results and shows that OPEC is the (relatively) riskiest producer group, followed by the Caspian and Non-OPEC countries. The implications from the analysis are that oil suppliers face not only different degrees of relative risks that vary from one petro-economy to another, but they also provide insights into ways and policies to reduce the relative risk levels of the selected oil suppliers.