Oil, power politics and international relations

Introduction:
Oil is very important as it one of major sources of energy. Oil is vital to the world
economy and the world consumption of oil, driven by countries, is set to rise
significantly. Oil politics have been an increasingly important aspect of diplomacy
since the rise of the petroleum industry in the Middle East in the early 20th century.
Hydrocarbons these days, mainly in the form of crude oil, have developed the huge
potential to unsettle the world. The world has seen innumerable occasions when
these organic compounds were made to compound the miseries of common
masses. These liquids have created a new genre of oil wars or petro-dollar warfare.
These oil wars have been fought with all sorts of modern sophisticated weaponry.
There have been occasions when the oil has been preferred at the huge cost of
human blood. Oil has changed the rules of game. It has changed the idioms of
international politics. It has given twists and turns to water-tight ideologies. Oil has
turned friends into foes and foes into friends. Oil has become a compelling factor.
Oil has summed up in itself all the laws of the world politics. Modern-day knowledge
highways have been adjusted to make way for transnational oil pipelines.
Oil is increasingly used for power politics domestically and on the international
scale. Otherwise, oil compounds international conflicts. Only democratic and clean
government can limit the damage.
After World War I, a bitter struggle for control of world oil reserves erupted. The
British, Dutch, and French excluded American companies from purchasing oil fields
in territories under their control.
During World War II, the oil surpluses of the 1930s quickly disappeared. Six billion of
the seven billion barrels of petroleum used by the allies during the war came from
the United States. Public officials again began to worry that the United States was
running out of oil. It seemed imperative that the United States secure access to
foreign oil reserves. Increasingly, policy makers and the oil industry focused their
attention on the Middle East, particularly the Persian Gulf, which they believed
would become the center of postwar oil production. As early as the 1930s, Britain
had gained control over Iran's oil fields and the United States discovered oil

reserves in Kuwait and Saudi Arabia. After the war ended, Middle Eastern oil
production surged upward. Gradually, American dependence on Middle Eastern oil
increased.
During the 1950s, a combination of cheap fuel and a burgeoning consumer culture
led to an orgy of consumption. With only six percent of the world's population, the
United States accounted for one-third of global oil consumption. Foreign oil was so
cheap that coal-burning utilities made the expensive shift to oil and natural gas.
World oil prices were so low that Iran, Venezuela, and Arab oil producers banded
together in 1960 to form OPEC, the Organization of Petroleum Producing States, a
producers' cartel, to negotiate for higher oil prices.
By the early 1970s, the United States depended on the Middle East for a third of its
oil. Foreign oil producers were finally in a position to raise world oil prices. The oil
embargo of 1973 and 1974, during which oil prices quadrupled, and the oil crisis of
1978 and 1979, when oil prices doubled, graphically illustrated how vulnerable the
nation had become to foreign producers.
The oil crises of the 1970s had an unanticipated side-effect. Rising oil prices
stimulated conservation and exploration for new oil sources. The sharp slide in
world oil prices was one of the factors that led Iraq to invade neighboring Kuwait in
1990 in a bid to gain control over 40 percent of Middle Eastern oil reserves.
Todays risk of war and conflict are deeply intertwined with oil and energy affairs.
Therefore, oil, the fuel of globalization, might well be the force that could disrupt
global peace and prosperity-enhancing globalization.
Oil reserves: Based on data from OPEC at the beginning of 2011 the highest
proved oil reserves including non-conventional oil deposits are in Venezuela (20% of
global reserves), Saudi Arabia (18% of global reserves), Canada (13% of global
reserves), and Iran (9%).
Venezuela
According to the Oil and Gas Journal (OGJ), Venezuela has 77.2 billion barrels
(1.2271010 m3) 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 1,200 billion barrels (1.910 11 m3) approximately equal to the
world's reserves of conventional oil. About 267 billion barrels (4.2410 10 m3) of this
may be producible at current prices using current technology.
Venezuela has moved to add them to its conventional reserves to give nearly 350
billion barrels (5.61010 m3) 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 Petrleos 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
countrys GDP, 50 percent of the governments revenue and 80 percent of
Venezuelas exports earnings. In recent years, under the influence of President
Chavez, the Venezuelan government has reduced PdVSAs previous autonomy and
amended the rules regulating the countrys hydrocarbons sector.
Saudi Arabia
Saudi Arabia 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 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".
Iran
Discovery of oil in 1908 at Masjed Soleiman in Iran 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 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
Iraq holds the world's second-largest proven oil reserves, with increasing
exploration expected to enlarge them beyond 200 billion barrels (3.210 10 m3) of
"high-grade crude, extraordinarily cheap to produce." Organizations such as the
Global Policy Forum (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 has made sure it "contains language
that guarantees a major role for foreign companies."
United States
In 1998, about 40% of the energy consumed by the United States came from Oil.
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. As of 2004, the U.S. had 21 billion barrels (3.310 9 m3) of proven oil
reserves and consumes 20.6 million bpd.
Organization of Petroleum Exporting Countries (OPEC):
Organization of Petroleum Exporting Countries is a permanent, intergovernmental
Organization, created at the Baghdad Conference on September 1014, 1960, by
Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were
later joined by nine other Members: Qatar (1961); Indonesia (1962) suspended its
membership from January 2009; Libya (1962); United Arab Emirates (1967); Algeria
(1969); Nigeria (1971); Ecuador (1973) suspended its membership from December
1992-October 2007; Angola (2007) and Gabon (19751994). OPEC had its
headquarters in Geneva, Switzerland, in the first five years of its existence i.e. 1960
to 1965. This was moved to Vienna, Austria, on September 1, 1965. OPEC's
influence on the market has been widely criticized, since it became effective in

determining production and prices. Arab members of OPEC alarmed the developed
world when they used the oil weapon during the Yom Kippur War by implementing
oil embargoes and initiating the 1973 oil crisis. Although largely political
explanations for the timing and extent of the OPEC price increases are also valid,
from OPECs point of view these changes were triggered largely by previous
unilateral changes in the world financial system and the ensuing period of high
inflation in both the developed and developing world. This explanation encompasses
OPEC actions both before and after the outbreak of hostilities in October 1973, and
concludes that OPEC countries were only 'staying even' by dramatically raising the
dollar price of oil. OPEC has ability to control the price of oil.
The 1973 oil embargo happened in October following the United States' and
Western Europe's support of Israel against Arab nations in the Yom Kippur War of
1973. Saudi Arabia and Iran being chief among those angered by western support of
Israel. As a nation Iran stopped providing oil to the United States and Western
Europe. Also, King Feisal of Saudi Arabia imposed an oil embargo against the West.
In doing so, the oil pricing for the United States went from 3 dollars a barrel to 12
dollars a barrel, spurring gas rationing. U.S. stations put a limit both on the amount
of gas that could be dispensed, closed on Sundays, and limited the days it could be
purchased based on license plates. The Oil Embargo of 1973 had a lasting effect on
the United States. U.S. citizens began purchasing smaller cars that were more fuel
efficient. The embargo also forced America to reevaluate the cost and source of
energy which previously receive little consideration. One of the most lasting effects
of the Oil Embargo of 1973 was an economic recession throughout the world.
Although the embargo only lasted one year, oil prices had quadrupled and a new
era of international relations was opened. Arab nations discovered that their oil
could be used as both a political and economic weapon against other nations.
Oil industry and global politics:
Although the oil industry is the fuel of todays booming and ever integrating world
economy, and although it is the worlds biggest industry in value, it is paradoxically
the least globalized, in the sense of being driven by cross-border market forces.
Despite wide-ranging privatization and de-regulation in the world in the last 20
years, the oil industry is and remains largely state-controlled or under strong

political and government influence. Oil is increasingly used for power politics
domestically and on the international scale. Otherwise, oil compounds international
conflicts. Only democratic and clean government can limit the damage. For
structural physical and economic reasons, this fundamental oil problem is there to
stay. It might even worsen given growing scarcity. The only way out is: less reliance
on oil but it will be a real challenge for us.
Oil, power politics and international relations:
The Saudi Arabian case and the Middle East: Saudi Arabia is a long-time ally of
the United States. After the 9/11 attacks, Saudi Arabias political system and the
alliance with the US was seriously questioned, but it seems that worries from
Washington have toned down, or are at least no longer displayed officially.
Especially since violence in Palestine has surged again, since tensions with Iran
(another oil country) have escalated and since Iraq has proven to be a debacle of a
scale the wars staunchest critics and opponents themselves could not have
imagined. Iraq, is, of course, the holder of the worlds fourth largest oil reserves. In
these tense Middle Eastern times, the US needs an ally in the region.
The Chinese case: Praised for its relatively low-profile stance on the international
arena, China, with its increased prosperity and might and incredible national pride,
is raising eyebrows very seriously. Sabre-rattling on Taiwan, its shooting down of a
satellite are worrisome symptoms. But what really tends to shock: China is having
very crude oil diplomacy in Africa. Amnesty International condemns: Uncontrolled
arms exports from China continued to fuel massive human rights violations in
Sudan. The Chinese government opposed the strengthening of the UN Security
Council arms embargo on Sudan. Yet some say that China is not having any more
ambitions than to secure its oil supplies but why does China need to accompany it
all with official diplomacy and send out Hu Jintao, the president himself, to oilproducing African country? Yes, of course it is a new diplomacy for petroleum
security.
The Importance of Arab Oil in the American Economy:
The American economy is very dependent on oil and the United States is one of the
most important importers of oil in the world. The key role that that United States

play in the oil industry, as the largest importer of oil, is reflected in the fact that oil
is always priced in US dollars.
The population of the United States account for about 5 percent of the population of
the world, but it consumes about 25 percent of the oil that is used in the world
every year. The daily rate of oil consumption per person in the United States is
about double the rate of consumption in the European Union.
The US is the largest consumer of oil in the world, and it is also the world's largest
importer of oil. The United States import about two thirds of the oil that it uses.
The American economy needs oil for energy production and for fuel. Oil is the most
important source of power in the US, where alternative sources of energy have not
been developed extensively. About 40 percent of the energy that is used in the
United States every year comes from oil. American society is based around the car,
so the US requires a lot of oil for fuel as well as for energy production. Oil provides
about 97 percent of the fuel used by American vehicles, including ships, trains,
planes and automobiles. Oil is also a source of important chemicals for a number of
industries, such as the plastics and textile industries.
Much of the oil, which is brought into the US, comes from the Arab World,
particularly Saudi Arabia, although the United States imports oil from a number of
different countries in the Arab World, including Pakistan, Iraq and Syria. About 13
percent of the oil that is imported into the United States comes from Saudi Arabia.
The United States does import oil from countries that are not part of the Arab world,
but which means that it is not entirely dependent on Arab oil. However, the US
economy needs Arab oil if it is to continue functioning as it does now. The
importance of Arab oil to the United States was demonstrated by the events of the
1973 crisis, when the Arab world raised its oil prices, cut oil production and put an
embargo in place preventing the sale of oil to the US. This resulted in significant
economic impacts in the United States as the power shifted away from industrial
countries and towards the oil producing countries. The cost of oil in the United
States rose dramatically in response to the price increases and to the embargo on
Arab oil. The state of Oregon actually banned the use of Christmas lights and
commercial lighting in order to reduce unnecessary energy consumption. In

response to calls from the government, approximately 90 percent of gas stations

stopped selling gasoline on Sundays and Saturday evenings. However, by the end of
February 1974, about 20 percent of gas stations in the US had completely run out of
fuel. Changes in the price of the oil produced by Arab countries can create serious
economic difficulties for the United States. The effects of the 1973 oil crisis were
long lasting and significant, and they affected everyone in the United States,
causing public unrest in some cases, when truck drivers reacted badly to oil
rationing. Similar effects occurred in the US when oil prices rose between 2005 and
2008.

Conclusion:
The world economy has been growing faster and faster in the last few years, driving
demand for natural resources. There is no doubt that politics is easily hostage to oil
interests.
The oil industry is the fuel of todays booming and ever integrating world economy,
and although it is the worlds biggest industry in value, it is paradoxically the least
globalized, in the sense of being driven by cross-border market forces.
Oil has changed the rules of world power. It has changed the idioms of international
politics. It has given twists and turns to water-tight ideologies. Oil has turned friends
into enemies and enemies into friends. Oil has become a compelling factor. Oil has
summed up in itself all the laws of the world politics. So the consequence of oil
politics is significant for world politics. And in todays world everything strategies,
expediencies, interests, friendships, hatreds and conflicts have come from oil
politics.