Two major summits are being held this week, each representing an apparently distinct, geopolitical chess game.

The first, in Abu Dhabi, is the meeting of OPEC (Organisation of Petroleum Exporting Countries), the oil-producers club. At this gathering, OPEC countries will negotiate among themselves whether, and by how much, to increase oil output. With the oil price reaching near-record highs recently (albeit dipping this week), this game is being anxiously watched by major oil-importing nations, such as the US, European countries, and China.

The second summit, in Bali, is the meeting between the world’s governments to discuss climate change (these talks will likely be dominated by the big economic powers – that is, mostly oil-importing nations). The goal here is to try to come to an agreement on limiting global greenhouse gas emissions in the period after the Kyoto protocol expires in 2012. This is likely to be difficult given the multiple players and interests at stake.

The connection

But, so far little remarked, an opportunity for the major oil importers lie in exploiting the linkages between the two issues: for if they succeed in striking a new climate deal at Bali or even just signalling a clear commitment to do so, they may gain powerful extra leverage over the long-term oil-market approach of OPEC countries – and this in turn could provide extra glue for agreement between themselves over climate change.

Whatever happens to the oil price over the next few months and even if, as some expect, the OPEC meeting in Abu Dhabi agrees a modest increase in output, the global oil supply situation over the next decade or so looks alarming – and one of the main solutions to this lies in persuading OPEC to commit to bigger increases in its long-term production capacity.

Global demand for oil is expected to rise by more than 30 per cent by 2030, yet many major oil fields outside OPEC are in decline. This means that OPEC, sitting on some three-quarters of the world’s proven reserves, will need to supply much of the extra oil. Yet if it is to do so, it will need to invest tens of billions of dollars more each year in supply capacity. Some such investments are now underway.

So what exactly is the extra leverage over OPEC which the oil-importing countries can gain from an agreement at Bali to move ahead with post-2012 greenhouse gas limits? It is the signal that there is now the political will to bring about major internationally – agreed reductions in the use of fossil fuels (the main source of greenhouse gases) – and as part of this, potentially to put a big dampener on future oil demand. This is no small bargaining chip: most OPEC economies, and the governments or regimes which run them, would be seriously shaken if their main source of revenue were to be squeezed in this way.

quid-pro-quo

This casts helpful light on the overall quid-pro-quo which the importing countries, if united at Bali, could offer OPEC: while we are now committed to deeper cuts in greenhouse gas emissions beyond 2012, such an offer could go: “We will work jointly with you to safeguard your revenues from oil in the coming decades (such as through joint investment in carbon sequestration) – but provided you work with us to substantially boost your oil supply capacity in this period.”

In turn, the attraction for the oil importing nations of being able to present such a common front to OPEC should provide at least some help to them in finding common ground at Bali. These countries will need to overcome a set of fierce disagreements over the details of any climate deal – for example, between industrialised countries such as the US, and fast-growing nations, such as China, over how to divide the burden of cutting emissions. But all such countries have a powerful economic interest in seeing a lower oil price and securer supplies of energy in coming decades.

And coming to an agreement at Bali will put them in a better position to demand that of OPEC. In general, the oil importing countries need to be sensitive to OPEC nations’ own legitimate desire for economic security. At the same time progress at the Bali meeting presents them with opportunity not just to help stabilise the world’s overheating climate but to gain more control over its overheating oil market. They would be foolish not to seize it.

––The Guardian