The integration of petroleum markets was stimulated by desires to safeguard the supply of oil from manipulation by political actors in the wake of Organization of Petroleum Exporting Countries embargoes in the 1970s (Yergin, 2006). A consequence of this integration was that by the 2000s the petroleum system had become so complex and interconnected that, as one study concluded, “a disruption in one part of the infrastructure can easily cause severe discontinuities elsewhere in the system” (International Institute for Strategic Studies, 2011:21). Furthermore, the sensitivity of the system has increased because of a rapid growth in global petroleum consumption that has not been matched by a corresponding increase in production. The result has been an extremely tight market, with petroleum supplies not significantly greater than demand (Gupta, 2008). This “demand shock” (Yergin, 2006), led by the emerging economies in China and India, has left global markets volatile and very sensitive to disruptions in supply (Patrick, 2007; Gupta, 2008; International Institute for Strategic Studies, 2011).
In this tight, sensitive market, climate events that disrupt the production or distribution of oil could lead to price spikes across the global energy market. Several types of climate events could cause such disruptions. Tropical storms and the increased storm surges that result from sea level rise and, in some cases, land subsidence, can disrupt production, refining, and transport of petroleum. For example, one-third of U.S. petroleum refining and processing facilities are located in coastal areas vulnerable to storms and flooding (Schaeffer et al., 2012). Similar infrastructure vulnerabilities exist in Europe and China as well (International Institute for Strategic Studies, 2011). In addition, because offshore oil and gas platforms are generally not designed to accommodate a permanent rise in mean sea level, climate-related sea level rise would disrupt production (Burkett, 2011). The effects of Hurricanes Katrina and Rita in 2005 illustrate this potential. The storms disrupted oil and gas production from offshore rigs, refining at facilities in the coastal zone, and transportation via port facilities and pipelines, causing a spike in global prices (U.S. Department of Energy, 2005; Yergin, 2006; Schaeffer et al., 2012). The pattern repeated, although with a smaller magnitude, when Hurricanes Gustav and Ike hit the Gulf Coast region in 2008, destroying drilling rigs and disrupting refineries (Paskal, 2010).
Other climate events could also affect the global oil market. Oil refining requires large amounts of water for cooling purposes; hence, reduced water availability during a drought would reduce refining capacity. If drought is accompanied by increased temperatures, refineries will require more cooling water to operate, potentially exacerbating the situation (Schaeffer et al., 2012). Also, Arctic energy infrastructure (pipelines and drilling operations) is vulnerable to damage from subsidence caused by melting permafrost (Paskal, 2010; International Institute for Strategic Studies, 2011).
Climate change thus entails some increased likelihood of petroleum