The Politics of Oil and Gas
Oil is a vital, strategic material; any change in its price or supply has an impact on almost every aspect of peoples’ lives. Oil, along with the other fossil fuels (coal and natural gas) account for 90 percent of the energy used in industrial countries and 75 percent of the energy worldwide.
In 1900, coal was king; it was the basis for 55 percent of all the world’s energy use. Oil and natural gas were barely on the scene, contributing between them just three percent of the world’s energy. A century later, according to a British Petroleum report in 2006, coal provided 25 percent of the world’s energy, natural gas 23 percent, and oil was still dominant at 37 percent.
Short Term There’s Plenty of Oil
Almost 40 years ago, The Club of Rome published a report that spooked everyone; the world was running out of oil it said. The “Limits to Growth” study predicted the world’s oil reserves would be exhausted by 1990.
They were wrong.
The Club of Rome’s experts said, in 1972, there were only 550 billion barrels of oil left. Since then, there have been many other doom and gloom predictions about oil shortages. So far, they’ve all been wrong. According to The Oil and Gas Journal (January 1, 2009), there are about 1.3 trillion barrels of proven oil reserves left in the world.
At the current rate of use – about 85 million barrels a day – there’s enough oil left to last 41 years. And, this doesn’t take into account the-who-knows-how-many barrels of undiscovered reserves.
High Oil Prices Bring Political Stability
Several Persian Gulf States, Russia, former Soviet Central Asian Republics, Venezuela, Mexico, Colombia, and Nigeria depend heavily on high oil prices. The income from oil supports whatever political and social stability these countries have. But, in the spring of 2000, most of the nations listed were pretty shaky even with oil prices flirting with historical highs of $30 U.S. a barrel.
Oil Companies not in the Democracy Business
Few things can cause people in the boardrooms of international corporations to break out in a cold sweat more than political instability. If the certainty and stability that keeps executives calm is achieved through authoritarian governments, so be it. As far as corporations are concerned, their business generally is not promoting democracy.
Looking at the world’s major oil producers more than a few of them have non-democratic governments. In fact, the list is almost a roll-call of authoritarian regimes.
Saudi Arabia is an absolute monarchy. Kazakhstan is a dictatorship. Brunei (absolute monarchy); Turkmenistan (dictatorship); Libya (dictatorship); Iran (theocracy); Iraq (war-ravaged); Kuwait (absolute monarchy), and on, and on.
High Oil Prices Good for Security
Having really tough governments in place tends to ensure stability – for a while. But, the repression worries the people whose job it is to be anxious about global security. As they sit in their universities, and departments of strategic studies and suck on the ends of their pencils they visualize a world with low oil prices, and most of them don’t like what they see.
The conventional thinking is that a steady flow of oil wealth keeps the lid on revolution. Oil-rich dictators and monarchs can toss a few goodies to the masses in the form of hospitals and schools. This keeps them from agitating for freedom and democracy.
The New York Times reported on March 28, 1999 on the effects of low oil income: “In Mexico, Nigeria, Venezuela, Algeria, and even in the world’s largest oil producer, Saudi Arabia, shrunken budgets are straining social and political cohesion.”
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