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Petroleum politics

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Petroleum politics have been an increasingly important aspect of international diplomacy since the discovery of oil in the Middle East in the early 1900s. As competition grows for an increasingly scarce but vital resource, the strategic calculations of major and minor countries alike place more prominent emphasis on the pumping, refining, transport and use of petroleum products.

Contents

Peak Oil

In 1956, a Shell geophysicist named Marion King Hubbert accurately predicted that U.S. oil production would peak in 1970.http://www.guardian.co.uk/life/feature/story/0,13026,1464050,00.html

Matthew Simmons, an energy investment banker and a former adviser to president George W. Bush believes that oil production in Saudi Arabia will soon peak, meaning it will not be able to supply the world's growing energy needs.

In June of 2006, former U.S. president Bill Clinton said in a speechhttp://www.clintonfoundation.org/032806-sp-cf-gn-gl-gbr-sp-the-opportunity-for-private-citizens-to-effect-positive-change-in-an-increasingly-interdependent-world.htm,

"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, Richard Cheney, the US Vice President and former CEO of Halliburton (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."http://web.archive.org/web/20000414054656/http://www.petroleum.co.uk/speeches.htm

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 oftentimes to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and specially 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."

Strategic Baku in World War I

Armenians of Baku, Azerbaijan - Stephan Shahumyan and 3 Armenian brigades defended Baku for Russia and Allies during the 1918 against Turkey, Germany and their vassals - Caucasian Tartars (now days Azerbaijanians). The heroic defense of Baku by Armenians was a great support for Anti-German and Anti-Turkish powers and lead to the 1918 November capitulation of Central powers. As German general von Ludendorf said: Armenians were the only fighting nation in the East (from Erzurum to Baku). 8 months of Armenian struggle against the Ottoman Turkey in 1918 left the German Army without Baku oil.

Pipeline diplomacy

See also Baku-Tbilisi-Ceyhan Pipeline

Iran

Discovery of oil in 1908 at Masjed Soleiman in Iran initiated the quest for oil in the the Middle East. The Anglo-Iranian Oil Company (AIOC) was founded in 1909. In 1951, Iran nationalized it's oil fields initiating the Abadan Crisis. Iran exports oil to China and Russia. The United States is currently pressuring the United Nations to sanction Iran but there is speculation that China and Russia might veto such an action.

Saudi Arabia

Saudi Arabia is an oil-based economy with strong government controls over major economic activities. It possesses 25% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC.http://www.cia.gov/cia/publications/factbook/geos/sa.html

As of 2005, Ghawar field accounts for about half of Saudi Arabia's total oil production capacity.http://www.eia.doe.gov/emeu/cabs/saudi.html

Nigeria

Petroleum in Nigeria was discovered in 1956 at Oloibiri in the Niger Delta.http://www.mbendi.co.za/indy/oilg/ogus/af/ng/p0005.htm

U.S.

See: U.S. Oil Politics

In 1998, about 40% of the energy consumed by the United States came from Oil.http://energy.cr.usgs.gov/energy/stats_ctry/Stat1.html The United States, with about 5% of the world's population, is responsible for 25% of the world's oil consumption while only having 3% of the world's proven oil reserves. http://www.nrdc.org/air/energy/fensec.asp During the 1960s, the United States consumed about 6 billion barrels per year while finding 30-60 billion per year. Currently the U.S. consumes close to 30 billion barrels per year while finding less than 4 billion per year.http://www.lifeaftertheoilcrash.net/

The U.S. and Iran

See: Operation Ajax

The U.S. and Iraq

Ex-CIA director James Woolsey and U.S. Senator Richard Lugar wrote: "Energy is vital to a country's security and material well-being. A state unable to provide its people with adequate energy supplies or desiring added leverage over other people often resorts to force. Consider Saddam Hussein's 1990 invasion of Kuwait, driven by his desire to control more of the world's oil reserves, and the international response to this threat. The underlying goal of the U.N. force, which included 500,000 American troops, was to ensure continued and unfettered access to petroleum."

The U.S. and Saudi Arabia

As of 2005, Saudi Arabia has 25% of the worlds proven oil reserves (the world's largest oil reserves) and has the worlds fourth largest natural gas reserves.http://www.eia.doe.gov/emeu/cabs/saudi.html Saudi Oil accounted for about 15% of U.S. oil imports. According to page 231 of the 9/11 Commission Report, 15 of the 19 Organizers of the September 11, 2001 attacks were from Saudi Arabia.

Former U.S. ambassador to Saudi Arabia, Chas Freeman, said of Saudi Arabia, "One of the major things the Saudis have historically done, in part out of friendship with the United States, is to insist that oil continues to be priced in dollars. Therefore, the US Treasury can print money and buy oil, which is an advantage no other country has. With the emergence of other currencies and with strains in the relationship, I wonder whether there will not again be, as there have been in the past, people in Saudi Arabia who raise the question of why they should be so kind to the United States."http://www.mepc.org/forums_chcs/27.asphttp://observer.guardian.co.uk/business/story/0,6903,900867,00.html

The U.S. and the Soviet Union

Richard Heinberg, a professor from Santa Rosa, California argues that a newly declassified CIA document shows that the U.S. used oil prices as leverage against the economy of the Soviet Union:

"The Memorandum predicts an impending peak in Soviet oil production 'not later than the early 1980s' (the actual peak occurred in 1987 at 12.6 million barrels per day, following a preliminary peak in 1983 of 12.5 Mb/d). 'During the next decade,' the unnamed authors of the document conclude, 'the USSR may well find itself not only unable to supply oil to Eastern Europe and the West on the present scale, but also having to compete for OPEC oil for its own use.' The Memorandum predicts that the oil peak will have important economic impacts: 'When oil production stops growing, and perhaps even before, profound repercussions will be felt on the domestic economy of the USSR and on its international economic relations.'"

"...Soon after assuming office in 1981, the Reagan Administration abandoned the established policy of pursuing détente with the Soviet Union and instead instituted a massive arms buildup; it also fomented proxy wars in areas of Soviet influence, while denying the Soviets desperately needed oil equipment and technology. Then, in the mid-1980s, Washington persuaded Saudi Arabia to flood the world market with cheap oil. Throughout the last decade of its existence, the USSR pumped and sold its oil at the maximum possible rate in order to earn foreign exchange income with which to keep up in the arms race and prosecute its war in Afghanistan. Yet with markets awash with cheap Saudi oil, the Soviets were earning less even as they pumped more. Two years after their oil production peaked, the economy of the USSR crumbled and its government collapsed."http://www.museletter.com/archive/cia-oil.html

The Carter Administration

1973 energy crisis, Carter Doctrine

Domestic Oil Politics in the U.S.

U.S. Officials Who Have Worked for the Oil Industry

Venezuela

Main article:

Hugo Chávez, the President of Venezuela sharply diverged from previous administrations' economic policies, terminating their practice of extensively privatizing Venezuela's state-owned holdings, such as the oil sector.http://www.venezuelanalysis.com/articles.php?artno=1579 Chávez also worked to reduce Venezuelan oil extraction in the hopes of garnering elevated oil prices and, at least theoretically, elevated total oil revenues, thereby boosting Venezuela's severely deflated foreign exchange reserves. He extensively lobbied other OPEC countries to cut their production rates as well. As a result of these actions, Chávez became known as a "price hawk" in his dealings with the oil industry and OPEC. Chávez also attempted a comprehensive renegotiation of 60-year-old royalty payment agreements with oil giants Philips Petroleum and ExxonMobil.http://www.cooperativeresearch.org/entity.jsp?entity=hugo_chavez_frias These agreements had allowed the corporations to pay in taxes as little as 1% of the tens of billions of dollars in revenues they were earning from the Venezuelan oil they were extracting. Afterwards, a frustrated Chávez stated his intention to complete the nationalization of Venezuela's oil resources. Although unsuccessful in his attempts to renegotiate with the oil corporations, Chávez succeeded in improving both the fairness and efficiency of Venezuela's formerly lax tax collection and auditing system, especially for major corporations and landholders.

Politics of Alternative fuels

Vinod Khosla (a well known invester in IT firms and alternative energy) argueshttp://video.google.com/videoplay?docid=-570288889128950913 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 2003-2006 ethanol fuel in Brazil has replaced 40% of it's gasoline consumption while flex fuel vehicles went from 3% of car sales to 70%. Brazilian ethonol, which is produced using sugarcane, reduces green house gases by 60-80% (20% for corn produced ethanol). Khosla also says that ethanol is 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. Vinod says after one of his presentations in Davos, a Senior Saudi oil official came up to him and threatened: “If biofuels start to take off we will drop the price of oil.”http://www.economist.com/people/displaystory.cfm?story_id=5655161 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 and U.S. Senator Richard Lugar are also vocal proponents of ethanol.http://lugar.senate.gov/new_petroleum.html

In 2005, Sweden announced plans to end it's dependence on fossil fuels by the year 2020.http://www.sweden.gov.se/sb/d/3212/a/51058

References

See also

External Links

 

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