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A Discussion of Major Current Challenges Facing Oil and Gas Producing States in Latin America

Monika U. Ehrman, International Mining and Oil & Gas Law, Development, and Investment

Like much of the oil and gas producing world, Latin America has been deeply affected by the sudden and sharp decline of commodity prices. After peaking at US $110 per barrel, the Brent price for crude oil decreased almost fifty percent to its current position, hovering just under US $60.1 Both political scientists and pundits alike theorized on the cause of the precipitous fall. These theories range from basic supply and demand to geopolitical maneuvering. For example, some believe that the Organization of Petroleum Exporting Countries (“OPEC”) wants to quash American shale petroleum producers and restore the OPEC cartel to its original dominance.2 After all, the United States' recent energy renaissance has catapulted it to its current position as the top oil and gas producer.3 This renaissance is due to prolific shale hydrocarbon exploitation, achieved primarily using hydraulic fracturing. Still, others postulate that Saudi Arabia and/or the United States are using oil prices to effectuate change in an increasingly volatile Iran and Russia and curb those spheres of influence.4 Using oil prices to affect geopolitics would not be a first. The “oil weapon” is a familiar tool and well-described in Daniel Yergin's “The Prize.”5

Whatever the reason, one truth is certain--revenue streams from oil and gas exports are in decline and energy exporters are suffering. For many