Petroleum politics have been an increasingly important aspect of
diplomacy
Diplomacy comprises spoken or written communication by representatives of states (such as leaders and diplomats) intended to influence events in the international system.Ronald Peter Barston, ''Modern diplomacy'', Pearson Education, 2006, p. 1 ...
since the rise of the
petroleum industry
The petroleum industry, also known as the oil industry or the oil patch, includes the global processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines), and marketing of petroleum products. The larges ...
in the
Middle East
The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabian Peninsula, Arabia (including the Arabian Peninsula and Bahrain), Anatolia, Asia Minor (Asian part of Turkey except Hatay Pro ...
in the early 20th century. As competition continues for a vital resource, the strategic calculations of major and minor countries alike place prominent emphasis on the pumping, refining, transport, sale and use of petroleum products.
Quota agreements
The
Achnacarry Agreement or "As-Is Agreement" was an early attempt to restrict petroleum production, signed in
Scotland
Scotland (, ) is a country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a border with England to the southeast and is otherwise surrounded by the Atlantic Ocean to the ...
on 17 September 1928. The discovery of the
East Texas Oil Field
The East Texas Oil Field is a large oil and gas field in east Texas. Covering and parts of five counties, and having 30,340 historic and active oil wells, it is the second-largest oil field in the United States outside Alaska, and first in tot ...
in the 1930s led to a boom in production that caused prices to fall, leading the
Railroad Commission of Texas
The Railroad Commission of Texas (RRC; also sometimes called the Texas Railroad Commission, TRC) is the state agency that regulates the oil industry, oil and gas industry, gas utilities, pipeline safety, safety in the liquefied petroleum gas indus ...
to control production. The Commission retained ''de facto'' control of the market until the rise of
OPEC
The Organization of the Petroleum Exporting Countries (OPEC, ) is a cartel of countries. Founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), it has, since 1965, been headquart ...
in the 1970s.
The
Anglo-American Petroleum Agreement
The Anglo-American Petroleum Agreement or Washington Agreement (August 8, 1944) was a failed attempt by the British and American governments to establish a lasting agreement to manage international petroleum supply and demand. The agreement would ...
of 1944 tried to extend these restrictions internationally but was opposed by the industry in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
and so
Franklin Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
withdrew from the deal.
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
was the first country to move towards the establishment of OPEC by approaching
Iran
Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...
,
Gabon
Gabon (; ; snq, Ngabu), officially the Gabonese Republic (french: République gabonaise), is a country on the west coast of Central Africa. Located on the equator, it is bordered by Equatorial Guinea to the northwest, Cameroon to the north ...
,
Libya
Libya (; ar, ليبيا, Lībiyā), officially the State of Libya ( ar, دولة ليبيا, Dawlat Lībiyā), is a country in the Maghreb region in North Africa. It is bordered by the Mediterranean Sea to the north, Egypt to Egypt–Libya bo ...
,
Kuwait
Kuwait (; ar, الكويت ', or ), officially the State of Kuwait ( ar, دولة الكويت '), is a country in Western Asia. It is situated in the northern edge of Eastern Arabia at the tip of the Persian Gulf, bordering Iraq to the nort ...
and
Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the A ...
in 1949, but OPEC was not set up until 1960, when the United States forced import quotas on Venezuelan and
Persian Gulf
The Persian Gulf ( fa, خلیج فارس, translit=xalij-e fârs, lit=Gulf of Persis, Fars, ), sometimes called the ( ar, اَلْخَلِيْجُ ٱلْعَرَبِيُّ, Al-Khalīj al-ˁArabī), is a Mediterranean sea (oceanography), me ...
oil in order to support the Canadian and Mexican oil industries. OPEC first wielded its power with the
1973 oil embargo against the United States and
Western Europe
Western Europe is the western region of Europe. The region's countries and territories vary depending on context.
The concept of "the West" appeared in Europe in juxtaposition to "the East" and originally applied to the ancient Mediterranean ...
.
Oil and international conflict
The term "petro-aggression" has been used to describe the tendency of oil-rich states to instigate international conflicts. There are many examples including: Iraq's invasion of Iran and Kuwait; Libya's repeated incursions into Chad in the 1970s and 1980s; Iran's long-standing suspicion of Western powers. Some scholars have also suggested that oil-rich states are frequently the targets of "resource wars."
Cullen Hendrix, author of the academic article "Oil Prices and Interstate Conflict", focuses on creating a more sound measurement of and index, building off of Colgan and Weeks indices respectfully. Hendrix findings are such that as the price in oil goes up the more confrontational a petro-state becomes. This may be due to the fact that these countries can now invest more heavily in their military. When people feel secure, they tend to give a higher approval rating to the leader. A petro-state GDP will grow, offering the opportunity for a more diverse industry, which in turn gives more bargaining chips in terms of global negotiations.
Peak oil
In 1956, a Shell geophysicist named
M. King Hubbert accurately predicted that U.S. oil production would peak in 1970.
In 1970, production
effectively peaked in the United States.
In June 2006, former U.S. president
Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
said in a speech,
"We may be at a point of peak oil production. You may see $100 a barrel oil in the next two or three years, but what still is driving this globalization is the idea that is you cannot possibly get rich, stay rich and get richer if you don’t release more greenhouse gases into the atmosphere. That was true in the industrial era; it is simply factually not true. What is true is that the old energy economy is well organized, financed and connected politically."
In a 1999 speech,
Dick Cheney
Richard Bruce Cheney ( ; born January 30, 1941) is an American politician and businessman who served as the 46th vice president of the United States from 2001 to 2009 under President George W. Bush. He is currently the oldest living former U ...
, the US vice president and former CEO of
Halliburton
Halliburton Company is an American multinational corporation responsible for most of the world's hydraulic fracturing operations. In 2009, it was the world's second largest oil field service company. It has operations in more than 70 countries ...
(one of the world's largest energy services corporations), said,
"By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?....While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."
Cheney went on to argue that the oil industry should become more active in politics:
"Oil is the only large industry whose leverage has not been all that effective in the political arena. Textiles, electronics, agriculture all seem often to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and specialty steel producers in Pennsylvania. I am struck that this industry is so strong technically and financially yet not as politically successful or influential as are often smaller industries. We need to earn credibility to have our views heard."
Pipeline diplomacy in the Caspian Sea area
![Baku pipelines](https://upload.wikimedia.org/wikipedia/commons/a/a1/Baku_pipelines.svg)
The
Baku–Tbilisi–Ceyhan pipeline
The Baku–Tbilisi–Ceyhan (BTC) pipeline is a long crude oil pipeline from the Azeri–Chirag–Gunashli oil field in the Caspian Sea to the Mediterranean Sea. It connects Baku, the capital of Azerbaijan and Ceyhan, a port on the south-easter ...
was built to transport crude oil and the
Baku-Tbilisi-Erzurum pipeline was built to transport natural gas from the western side (
Azerbaijani sector) of the
Caspian Sea
The Caspian Sea is the world's largest inland body of water, often described as the world's largest lake or a full-fledged sea. An endorheic basin, it lies between Europe and Asia; east of the Caucasus, west of the broad steppe of Central Asia ...
to the
Mediterranean Sea
The Mediterranean Sea is a sea connected to the Atlantic Ocean, surrounded by the Mediterranean Basin and almost completely enclosed by land: on the north by Western and Southern Europe and Anatolia, on the south by North Africa, and on the ea ...
bypassing Russian pipelines and thus Russian control. Following the construction of the pipelines, the United States and the
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
proposed extending them by means of the proposed
Trans-Caspian Oil Pipeline
The Trans-Caspian Oil Transport System is a proposed project to transport oil through the Caspian Sea from Kazakhstani Caspian oilfields to Baku in Azerbaijan for the further transportation to the Mediterranean Sea, Mediterranean or Black Sea coas ...
and the
Trans-Caspian Gas Pipeline
The Trans-Caspian Gas Pipeline ( az, Transxəzər boru xətti, tk, Transhazar turbaly geçiriji) is a proposed subsea pipeline between Türkmenbaşy in Turkmenistan, and Baku in Azerbaijan. According to some proposals it would also include a c ...
under the Caspian Sea to oil and gas fields on the eastern side (
Kazakhstan
Kazakhstan, officially the Republic of Kazakhstan, is a transcontinental country located mainly in Central Asia and partly in Eastern Europe. It borders Russia to the north and west, China to the east, Kyrgyzstan to the southeast, Uzbeki ...
and
Turkmenistan
Turkmenistan ( or ; tk, Türkmenistan / Түркменистан, ) is a country located in Central Asia, bordered by Kazakhstan to the northwest, Uzbekistan to the north, east and northeast, Afghanistan to the southeast, Iran to the sout ...
sectors) of the Caspian Sea. In 2007, Russia signed agreements with Turkmenistan and Kazakhstan to connect their oil and gas fields to the Russian pipeline system effectively killing the undersea route.
China has completed the
Kazakhstan–China oil pipeline
The Kazakhstan–China oil pipeline is China's first direct oil import pipeline allowing oil import from Central Asia. It runs from Kazakhstan's Caspian shore to Xinjiang in China. The pipeline is owned by the China National Petroleum Corporati ...
from the Kazakhstan oil fields to the Chinese
Alashankou-Dushanzi Crude Oil Pipeline in China. China is also working on the
Kazakhstan-China gas pipeline from the Kazakhstan gas fields to the Chinese
West-East Gas Pipeline in China.
Politics of oil nationalization
Several countries have nationalised foreign-run oil businesses, often failing to compensate investors.
Enrique Mosconi
Enrique Carlos Alberto Mosconi (21 February 1877 – 4 June 1940) was an Argentine military engineer, who is best known as the pioneer and organizer of petroleum exploration and extraction in Argentina.
Early life
Mosconi was born in Buenos ...
, the director of the Argentine state owned oil company ''
Yacimientos Petrolíferos Fiscales
YPF S.A. (, formerly ; English: "Fiscal Oilfields") is a vertically integrated, majority state-owned Argentine energy company, engaged in oil and gas exploration and production, and the transportation, refining, and marketing of gas and petr ...
'' (YPF, which was the first state owned oil company in the world, preceding the French ''Compagnie française des pétroles'' (CFP, French Company of Petroleums, today
TotalEnergies
TotalEnergies SE is a French Multinational corporation, multinational integrated energy and List of oil exploration and production companies, petroleum company founded in 1924 and one of the seven Big Oil, supermajor oil companies. Its businesses ...
), created in 1924 by the conservative
Raymond Poincaré
Raymond Nicolas Landry Poincaré (, ; 20 August 1860 – 15 October 1934) was a French statesman who served as President of France from 1913 to 1920, and three times as Prime Minister of France.
Trained in law, Poincaré was elected deputy in 1 ...
), advocated oil nationalization in the late 1920s among Latin American countries. The latter was achieved in Mexico during
Lázaro Cárdenas
Lázaro Cárdenas del Río (; 21 May 1895 – 19 October 1970) was a Mexican army officer and politician who served as president of Mexico from 1934 to 1940.
Born in Jiquilpan, Michoacán, to a working-class family, Cárdenas joined the M ...
's rule, with the ''
Expropiación petrolera
The Mexican oil expropriation ( es, expropiación petrolera) was the nationalization of all petroleum reserves, facilities, and foreign oil companies in Mexico on March 18, 1938. In accordance with Article 27 of the Constitution of 1917, Presi ...
''.
Similarly Venezuela nationalized its oil industry in 1976.
Politics of alternative fuels
Vinod Khosla
Vinod Khosla (born 28 January 1955) is an Indian-American businessman and venture capitalist. He is a co-founder of Sun Microsystems and the founder of Khosla Ventures. Khosla made his wealth from early venture capital investments in areas suc ...
(a well known investor in IT firms and alternative energy) has argued that the political interests of environmental advocates, agricultural businesses, energy security advocates (such as ex-CIA director James Woolsey) and automakers, are all aligned for the increased production of ethanol. He pointed out that from 2003 to 2006,
ethanol fuel in Brazil
Brazil is the world's second largest producer of ethanol fuel. Brazil and the United States have led the industrial production of ethanol fuel for several years, together accounting for 85 percent of the world's production in 2017. Brazil produc ...
replaced 40% of its gasoline consumption while flex fuel vehicles went from 3% of car sales to 70%. Brazilian ethanol, which is produced using sugarcane, reduces greenhouse gases by 60-80% (20% for corn-produced ethanol). Khosla also said that ethanol was about 10% cheaper per given distance. There are currently ethanol subsidies in the United States but they are all blender's credits, meaning the oil refineries receive the subsidies rather than the farmers. There are indirect subsidies due to subsidising farmers to produce corn. Vinod says after one of his presentations in
Davos
, neighboring_municipalities= Arosa, Bergün/Bravuogn, Klosters-Serneus, Langwies, S-chanf, Susch
, twintowns =
}
Davos (, ; or ; rm, ; archaic it, Tavate) is an Alpine resort town and a municipality in the Prättigau/Davos R ...
, a senior Saudi oil official came up to him and threatened: "If biofuels start to take off, we will drop the price of oil." Since then, Vinod has come up with a new recommendation that oil should be taxed if it drops below $40.00/barrel in order to counter price manipulation.
Ex-CIA director
James Woolsey
Robert James Woolsey Jr. (born September 21, 1941) is an American political appointee who has served in various senior positions. He headed the Central Intelligence Agency as Director of Central Intelligence from February 5, 1993, until January 1 ...
and U.S. Senator
Richard Lugar are also vocal proponents of ethanol.
In 2005, Sweden announced plans to end its dependence on fossil fuels by the year 2020.
It is argued that international
climate policy
The politics of climate change results from different perspectives on how to respond to climate change. Global warming is driven largely by the emissions of greenhouse gases due to human economic activity, especially the burning of fossil fuel ...
and
unconventional oil and gas developments may change the balance of power between petroleum exporting and importing countries with major negative implications expected for the exporting states.
From around 2015 onwards, there was increasing discussion about whether the geopolitics of oil and gas would be replaced by the geopolitics of renewable energy resources and critical materials for renewable energy technologies.
Some authors argue that compared to the geopolitics of fossil fuels, renewable energy may cause more small-scale conflicts but reduce the risk of large inter-state conflicts.
The
anti-nuclear movement
The anti-nuclear movement is a social movement that opposes various nuclear technologies. Some direct action groups, environmental movements, and professional organisations have identified themselves with the movement at the local, natio ...
received some funding early on from fossil fuel companies, including petroleum interests. Even in the 21st century there are continuing efforts by fossil fuel companies to paint nuclear energy in a negative light and to position fossil gas and oil as a "perfect partner for renewables". While there is the potential for geopolitical conflict over
uranium deposits, the possibility of extracting uranium from
seawater
Seawater, or salt water, is water from a sea or ocean. On average, seawater in the world's oceans has a salinity of about 3.5% (35 g/L, 35 ppt, 600 mM). This means that every kilogram (roughly one liter by volume) of seawater has appro ...
and the ability to store huge amounts of energy in small amounts of fuel due to the high
energy density
In physics, energy density is the amount of energy stored in a given system or region of space per unit volume. It is sometimes confused with energy per unit mass which is properly called specific energy or .
Often only the ''useful'' or extract ...
of uranium make such conflicts less likely.
Geopolitics of oil money
Multibillion-dollar inflows and outflows of petroleum money have worldwide
macroeconomic
Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole.
For example, using interest rates, taxes, and ...
consequences, and major oil exporters can gain substantial influence from their
petrodollar recycling
Petrodollar recycling is the international spending or investment of a country's revenues from petroleum exports ("petrodollars"). It generally refers to the phenomenon of major petroleum-exporting states, mainly the OPEC members plus Russia ...
activities.
Key oil producing countries
Canada
As development in the
Alberta oil sands,
deep sea drilling in the North Atlantic and the prospects of
arctic oil continue to grow Canada increasingly grows as a global oil exporter. There are currently three major pipelines under proposal that would ship oil to the pacific, atlantic and gulf ports. These projects have stirred internal controversy, receiving fierce opposition from First Nations groups and environmentalists.
Iran
Discovery of oil in 1908 at
Masjed Soleiman
Masjed Soleyman ( fa, مسجدسلیمان, also Romanized as Masjedsoleimān, Masjed-e Soleymān, Masjed Soleiman, and Masjid-i-Sulaiman) is a city and capital of Masjed Soleyman County, Khuzestan Province, Iran. At the 2006 census, its populat ...
in
Iran
Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...
initiated the quest for oil in the Middle East. The
Anglo-Iranian Oil Company (AIOC) was founded in 1909.
In 1951, Iran nationalized its oil fields initiating the
Abadan Crisis
The Abadan Crisis ( ''Bohrân Nafti Irân'', "Iran Oil Crisis") occurred from 1951 to 1954, after Iran nationalised the Iranian assets of the BP controlled Anglo-Iranian Oil Company (AIOC) and expelled Western companies from oil refineries in t ...
. The United States of America and Great Britain thus punished Iran by arranging coup against its democratically elected prime minister, Mosaddeq, and brought the former Shah's son, a dictator, to power. In 1953 the US and GB arranged the arrest of the Prime Minister Mosaddeq.
Iran exports oil to China and Russia.
Iraq
![US Navy 030402-N-5362A-004 U](https://upload.wikimedia.org/wikipedia/commons/f/fc/US_Navy_030402-N-5362A-004_U.S._Army_Sgt._Mark_Phiffer_stands_guard_duty_near_a_burning_oil_well_in_the_Rumaylah_Oil_Fields_in_Southern_Iraq.jpg)
Iraq holds the world's second-largest
proven oil reserves, with increasing exploration expected to enlarge them beyond of "high-grade
crude, extraordinarily cheap to produce."
Organizations such as the
Global Policy Forum The Global Policy Forum (GPF) is an international non-governmental organization founded in December 1993 and based in New York and Bonn (Global Policy Forum Europe). The aim of the Global Policy Forum is to critically accompany and analyze devel ...
(GPF) have asserted that Iraq's oil is "the central feature of the political landscape" there, and that as a result of the
2003 invasion,"'friendly' companies expect to gain most of the lucrative oil deals that will be worth hundreds of billions of dollars in profits in the coming decades." According to GPF, U.S. influence over the 2005
Constitution of Iraq
The Constitution of the Republic of Iraq ( ar, دستور جمهورية العراق Kurdish: دەستووری عێراق) is the fundamental law of Iraq. The first constitution came into force in 1925. The current constitution was adopted on Se ...
has made sure it "contains language that guarantees a major role for foreign companies."
Mexico
Mexico has a largely oil-based economy, being the seventh largest producer of petroleum. Though Mexico has gradually explored different types of electricity, oil is still crucial, recently generating 10% of revenue.
Before 1938, all petroleum companies in Mexico were foreign based, often from the United States or Europe. The petroleum industry was
nationalized
Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to p ...
in the late 1930s to early 1940s by then-president
Lázaro Cárdenas
Lázaro Cárdenas del Río (; 21 May 1895 – 19 October 1970) was a Mexican army officer and politician who served as president of Mexico from 1934 to 1940.
Born in Jiquilpan, Michoacán, to a working-class family, Cárdenas joined the M ...
, creating
PEMEX
Pemex (a portmanteau of Petróleos Mexicanos, which translates to ''Mexican Petroleum'' in English; ) is the Mexican state-owned petroleum company managed and operated by the Mexican government. It was formed in 1938 by nationalization and expr ...
. Mexico's oil industry still remains heavily nationalized. Though oil production has fallen in recent years, Mexico still remains in seventh place.
Norway
Although Norway relies heavily on natural gas and oil for export income, the country consumes almost none of the petroleum resources that they produce. In 2017, Norway was ranked 3rd behind Russia and Qatar as the world's largest natural gas exporter. Norway was also the 8th largest exporter of crude oil in the world. These industries are a vital part of Norway's economy, making up nearly 50% of the country's total export value and accounts for 17% of its GDP.
Norway however, runs on 98% renewable energy with a heavy emphasis on hydroelectric power. Their development of renewable energy allows Norway to export their non-renewable energy to turn a profit. “Nearly all oil and gas produced on the Norwegian shelf is exported, and combined, oil and gas equals about half of the total value of Norwegian exports of goods. This makes oil and gas the most important export commodities in the Norwegian economy."
This has positioned Norway in a very unique spot as they aspire to be the world's leading climate change combatant while still drilling/fracking in the North Sea, Norwegian Sea, and the Barents Sea.
Several Norwegian environmental groups, such as Greenpeace Norway and Young Friends of the Earth Norway, have sued the Norwegian government for the opening of new oil and natural gas plants in the Arctic. As Norway continues to pursue a green future, the Norwegian government pursues different avenues of justifying that petroleum has a place in a low-carbon future. Norway's government is continuing to pass measures to bolster their oil and natural gas sectors, while simultaneously passing legislation to further their environmental agenda. Continued dependence on oil production has strong support in the government: ”...the petroleum policy in Norway has been supported by the largest political parties across the left-right cleavage in Norwegian politics. Although there have been tensions on certain issues, the Labour Party, the Conservative Party, and the Progress Party make up the majority of support for the current petroleum policy in Parliament.”
Norway has avoided the “oil curse” or “dutch disease”
Dutch disease
In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agricultur ...
that many oil producing countries have experienced, in part because it began to harvest petroleum resources at a time when the government regulation was well developed and already in an economically strong position: “Norway had the advantage of entering its oil era with a mature, open democracy as well as bureaucratic institutions with experience regulating other natural resource industries (hydropower generation, fishing, and mining for example)”.
\As Norway began to exploit their petroleum resources, the government took steps to ensure that the natural resource industry idid not deplete other industries in Norway by funneling profits from the state owned operations into a pension fund known as the Government Pension Fund Global (GPFG). The GPFG is the world's largest sovereign wealth fund and was established for the purpose of investing in the surplus revenues of the petroleum sector in Norway. “The Norwegian government receives these funds from their market shares within oil industries, such as their two-thirds share of Statoil, and allocates it through their government-controlled domestic economy.”
Nigeria
Petroleum in Nigeria
Nigeria is the second largest oil and gas producer in Africa. Crude oil from the Niger delta basin comes in two types: light, and comparatively heavy – the lighter has around 36 gravity while the heavier has 20–25 gravity. Both types are ...
was discovered in 1955 at
Oloibiri Oloibiri is a small community in Ogbia LGA located in Bayelsa State, in the eastern Niger Delta region of Nigeria
Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal ...
in the Niger Delta. High oil prices were the driving force behind
Nigeria
Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf o ...
’s economic growth. This has made the Nigerian economy to become the largest in Africa surpassing both Egypt and South Africa, also making it the 24th largest in the world.
The Nigerian economy is heavily dependent on the oil sector, which accounts for 98% percent of export earnings and 83% of federal government revenues as well as generating 14% of its GDP.
Even with the substantial oil wealth, Nigeria ranks as one of the poorest countries in the world, with a $1,000 per capita income and more than 70 percent of the population living in poverty. In October 2005, the 15-member Paris Club announced that it would cancel 60 percent of the debt owed by Nigeria. However, Nigeria must still pay $12.4 billion in arrears amongst meeting other conditions. In March 2006, phase two of the Paris Club agreement will include an additional 34 percent
debt cancellation Debt relief or debt cancellation is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.
From antiquity through the 19th century, it refers to domestic debts, in particu ...
, while Nigeria will be responsible for paying back any remaining eligible debts to the lending nations. The International Monetary Fund (IMF), which recently praised the Nigerian government for adopting tighter fiscal policies, will be allowed to monitor Nigeria without having to disburse loans to the country.
Russia
![Russia and China sign major gas deal](https://upload.wikimedia.org/wikipedia/commons/3/3d/Russia_and_China_sign_major_gas_deal.jpeg)
High-priced oil allowed the
Soviet Union
The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen national ...
to subsidize the struggling economies of the
Soviet bloc
The Eastern Bloc, also known as the Communist Bloc and the Soviet Bloc, was the group of socialist states of Central and Eastern Europe, East Asia, Southeast Asia, Africa, and Latin America under the influence of the Soviet Union that existed du ...
for a time, and the loss of petrodollar income during the
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s energy crisis. The world price of oil had peaked in 1980 at over US$35 per barrel (equivalent to $ per barrel in dollars, when adjusted for inf ...
contributed to the bloc's collapse in 1989.
Saudi Arabia
In 1973, Saudi Arabia and other
Arab nations
The Arab world ( ar, اَلْعَالَمُ الْعَرَبِيُّ '), formally the Arab homeland ( '), also known as the Arab nation ( '), the Arabsphere, or the Arab states, refers to a vast group of countries, mainly located in Western As ...
imposed an
oil embargo An oil embargo is an economic situation wherein entities engage in an embargo to limit the transport of petroleum to or from an area, in order to exact some desired outcome. One commentator states, " oil embargo is not a common commercial practice; ...
against the United States, United Kingdom, Japan and other Western nations which supported
Israel
Israel (; he, יִשְׂרָאֵל, ; ar, إِسْرَائِيل, ), officially the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, label=none, translit=Medīnat Yīsrāʾēl; ), is a country in Western Asia. It is situated ...
in the
Yom Kippur War
The Yom Kippur War, also known as the Ramadan War, the October War, the 1973 Arab–Israeli War, or the Fourth Arab–Israeli War, was an armed conflict fought from October 6 to 25, 1973 between Israel and a coalition of Arab states led by Egy ...
of October 1973. The embargo caused an
oil crisis with many short- and long-term effects on global politics and the
global economy.
Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the A ...
is an oil-based economy with strong government controls over major economic activities. It possesses both the world's largest known oil reserves, which are 25% of the world's proven reserves, and produces the largest amount of the world's oil. As of 2005,
Ghawar field
Ghawar (Arabic: الغوار) is an oil field located in Al-Ahsa Governorate, Eastern Province, Saudi Arabia. Measuring (some ), it is by far the largest conventional oil field in the world, and accounts for roughly a third of the cumulative ...
accounts for about half of Saudi Arabia's total oil production capacity.
Saudi Arabia ranks as the largest exporter of petroleum, and plays a leading role in OPEC, its decisions to raise or cut production almost immediately impact world oil prices. It is perhaps the best example of a contemporary energy superpower, in terms of having power and influence on the global stage (due to its energy reserves and production of not just oil, but natural gas as well). Saudi Arabia is often referred to as the world's only "oil superpower".
It has been suggested that the
Iran–Saudi Arabia proxy conflict
{{Infobox military conflict
, conflict = Iran–Saudi Arabia proxy conflict
, width =
, partof = the Arab Winter
, image = Iran Saudi conflict 2022.png
, image_size = 300px
, caption ...
was a powerful influence in the Saudi decision to launch the
price war
A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...
in 2014, as was
Cold War
The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because the ...
rivalry between the United States and Russia.
Larry Elliott
Larry Elliott is an English journalist and author who focuses on economic issues. He is the economics editor at ''The Guardian'', and has published seven books on related issues, six of them in partnership with Dan Atkinson.
Early life
Elliott ...
argued that "with the help of its
Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with." Vice President of Russia's largest oil company,
Rosneft
PJSC Rosneft Oil Company ( stylized as ROSNEFT) is a Russian Vertical integration, integrated energy company headquartered in Moscow. Rosneft specializes in the exploration, Extraction of petroleum, extraction, production, refining, Petroleum t ...
, accused Saudi Arabia of conspiring against Russia.
United States
![President Trump at the G20 (48162361462)](https://upload.wikimedia.org/wikipedia/commons/f/f2/President_Trump_at_the_G20_%2848162361462%29.jpg)
In 1998, about 40% of the energy consumed by the United States came from oil. The United States is responsible for 25% of the world's oil consumption, while having only 3% of the world's proven oil reserves and less than 5% of the world's population. In January 1980,
President Jimmy Carter explicitly declared: "An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States."
Venezuela
According to the Oil and Gas Journal (OGJ),
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
has of proven conventional oil reserves, the largest of any country in the Western Hemisphere. In addition it has non-conventional oil deposits similar in size to Canada's - at approximately equal to the world's reserves of conventional oil. About of this may be producible at current prices using current technology. Venezuela's
Orinoco tar sands
The Orinoco Belt is a territory in the southern strip of the eastern Orinoco River Basin in Venezuela which overlies the world's largest deposits of petroleum. Its local Spanish language, Spanish name is ''Faja Petrolífera del Orinoco'' (Orinoco P ...
are less viscous than Canada's
Athabasca oil sands – meaning they can be produced by more conventional means, but are buried deeper – meaning they cannot be extracted by
surface mining
Surface mining, including strip mining, open-pit mining and mountaintop removal mining, is a broad category of mining in which soil and rock overlying the mineral deposit (the overburden) are removed, in contrast to underground mining, in which ...
. In an attempt to have these ''extra heavy'' oil reserves recognized by the international community, Venezuela has moved to add them to its conventional reserves to give nearly of total oil reserves. This would give it the largest oil reserves in the world, even ahead of Saudi Arabia.
Venezuela nationalized its oil industry in 1975–1976, creating
Petróleos de Venezuela S.A. (PdVSA), the country's state-run oil and natural gas company. Along with being Venezuela's largest employer, PdVSA accounts for about one-third of the country's GDP, 50 percent of the government's revenue and 80 percent of Venezuela's exports earnings. In recent years, under the influence of President Chavez, the Venezuelan government has reduced PdVSA's previous autonomy and amended the rules regulating the country's hydrocarbons sector.
![Oil Reserves](https://upload.wikimedia.org/wikipedia/commons/e/e3/Oil_Reserves.png)
In the 1990s, Venezuela opened its upstream oil sector to private investment. This collection of policies, called apertura, facilitated the creation of 32 operating service agreements (OSA) with 22 separate foreign oil companies, including international oil majors like Chevron, BP, Total, and Repsol-YPF.
Hugo Chávez
Hugo Rafael Chávez Frías (; 28 July 1954 – 5 March 2013) was a Venezuelan politician who was president of Venezuela from 1999 until his death in 2013, except for a brief period in 2002. Chávez was also leader of the Fifth Republ ...
, the
President of Venezuela
The president of Venezuela ( es, Presidente de Venezuela), officially known as the President of the Bolivarian Republic of Venezuela ( es, Presidente de la República Bolivariana de Venezuela), is the head of state and head of government in Ven ...
sharply diverged from previous administrations' economic policies. PDVSA is now used as a cash-cow and as an employer-of-last-resort; foreign oil businesses were nationalised and the government refused to pay compensation.
Estimates of Venezuelan oil production vary. Venezuela claims its oil production is over , but oil industry analysts and the U.S. Energy Information Administration believe it to be much lower. In addition to other reporting irregularities, much of its production is extra-heavy oil, which may or may not be included with conventional oil in the various production estimates. The U.S. Energy Information Agency estimated Venezuela's oil production in December 2006 was only , a 24% decline from its peak of 3.3 million in 1997.
Recently, Venezuela has pushed the creation of
regional oil initiatives for the Caribbean (Petrocaribe), the Andean region (Petroandino), and South America (Petrosur), and Latin America (Petroamerica). The initiatives include assistance for oil developments, investments in refining capacity, and preferential oil pricing. The most developed of these three is the Petrocaribe initiative, with 13 nations signing a preliminary agreement in 2005. Under Petrocaribe, Venezuela will offer crude oil and petroleum products to Caribbean nations under preferential terms and prices, with Jamaica as the first nation to sign on in August 2005.
See also
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Chronology of world oil market events
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Energy superpower
An energy superpower is a country that supplies large amounts of energy resources (crude oil, natural gas, coal, etc.) to a significant number of other countries, and therefore has the potential to influence world markets to gain a political or ec ...
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Fossil fuels lobby
The fossil fuels lobby includes paid representatives of corporations involved in the fossil fuel industry ( oil, gas, coal), as well as related industries like chemicals, plastics, aviation and other transportation. Because of their wealth and ...
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Geostrategy in Central Asia
Central Asia has long been a geostrategic location because of its proximity to the interests of several great powers and regional powers.
Strategic geography
Central Asia has had both the advantage and disadvantage of a central location between ...
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Antonia Juhasz
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The New Great Game
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Oil imperialism theories
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Oil reserves
An oil is any polarity (chemistry), nonpolar chemical substance that is composed primarily of Hydrocarbon, hydrocarbons and is hydrophobe, hydrophobic (does not mix with water) & lipophilicity, lipophilic (mixes with other oils). Oils are usu ...
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Oil Shockwave
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Shanghai Cooperation Organisation
The Shanghai Cooperation Organisation (SCO) is a Eurasian politics, political, economy, economic and security organization. It is the world's largest regional organization in terms of geography, geographic scope and world population, population, c ...
*
Society of Petroleum Engineers
The Society of Petroleum Engineers (SPE) is a 501(c)(3) not-for-profit professional organization whose stated mission is "to collect, disseminate, and exchange technical knowledge concerning the exploration, development and production of oil and ...
References
External links
Oil, Politics & BribesThe connection between VECO oil services company and Alaskan lawmakers
{{DEFAULTSORT:Petroleum Politics
Geopolitics