Energy politics

Access to energy resources is something that has, for millennia, shaped national politics, social mobility, economic performance, and even self-identity. Although wood and human labor continue to be important sources of energy, the social and economic well-being of modern, developed nations are reliant on fossil fuels such as coal, petroleum and natural gas. Energy resources thus hold a high priority for governments and are reflected in both the domestic and foreign policies they pursue. So important is access to energy resources that, historically, this has often served as a cause for conflict.

Background

Historically, civilizations have rested on their energy base. Those that controlled slaves when human labor was the principal source of energy erected pyramids and temples thousands of years ago. Civilizations that did not possess that energy source are buried in the past, often surfacing only as footnotes in ancient history texts.

Modern history can be similarly written. In 1800, nearly a score of countries—including Spain, Portugal, Austria, and Holland—of roughly equal power contended for influence. A century later, those capable of significantly influencing world affairs numbered approximately one-half dozen, some of which were not included in the earlier listing. The winnowing process revolved around coal, the essential fuel for full participation in the Industrial Revolution. Among the Northern Hemisphere powers, only the United States, Britain, the newly formed Germany, Russia, and Japan possessed it in abundance. Fifty years later, this number had been reduced to the two superpowers of the postwar era: the United States and the Soviet Union. These were two industrialized countries with large indigenous sources of oil: the most efficient, utilized, and strategically important source of energy in the twentieth century. Lacking it, Adolf Hitler planned Germany’s World War II strategy around an early acquisition of the oil fields of western Russia and North Africa. Similarly, to maintain access to oil, the United States and a grand alliance composed predominantly of industrialized, oil-importing states fought a war in 1991 to eliminate the threat Iraq posed to the vastly important Saudi Arabian fields in the Persian Gulf, the Earth’s late twentieth-century geopolitical heartland.

Pre-1973 Energy Politics in United States

Perhaps because of its vast energy resources, the United States did not have a definitive domestic energy policy prior to the oil crisis of 1973. It did have, as David Howard Davis notes in his Energy Politics (1982), fuel policies for each of the three fossil fuels it held in abundance (coal, gas, and oil) as well as for the nuclear power industry, whose development the government encouraged after World War II. These policies often differed widely from one another, reflecting the different physical properties and periods of origin of each of the four fuels. An overall energy policy did not exist. Moreover, much of the time, the individual fuel policies were by-products of other policy concerns; for example, the attention given to oil in the United States in the postwar era was related to the importance of oil to postwar economic growth, whereas environmental considerations led to a 1970 freeze on the construction of the Alaska oil pipeline.

Energy in general and oil, in particular, were much more direct concerns of the makers of American foreign policy, especially after the US Navy converted from coal to oil in the early twentieth century. To secure a supply of oil for refueling the fleet, the government encouraged American oil companies to go abroad. Although the US government never created its own public oil company to seek a secure oil supply, it frequently used its political, economic, and diplomatic power to assist the American-based multinational corporations that developed that oil. Thus, after World War I, antitrust laws were never applied to the cooperative activities of the principal US oil firms, much less to the international activities of the five great, American-based multinational oil companies (Exxon, Texaco, Gulf, Mobil, and Standard Oil of California) that collaborated with Royal Dutch Shell and British Petroleum in the “Seven Sisters” cartel that effectively controlled the world oil market between 1926 and 1966. On the contrary, Congress rewrote US tax codes after World War II to benefit those American oil companies in the Arabian Peninsula that suddenly had to share their profits with Persian Gulf governments. Likewise, President Dwight D. Eisenhower pressured Britain into including American firms when it reopened the British Petroleum venture in Iran after covert American operatives toppled the Iranian government, which had nationalized Iran’s oil industry, in 1954. Prior to 1973, foreign policy required attention to energy far more than domestic policy did, and in the international arena, energy politics was oil politics.

Oil Crises of the 1970s and International Energy Politics

Events beginning with the 1973 Arab oil embargo on the United States and other countries friendly to Israel during the October 1973 Yom Kippur War vastly intensified the importance of energy as a policy issue. To be sure, Arab embargoes had been threatened during both the 1956 and 1967 Arab-Israeli wars; however, on those occasions the threat had little meaning. Most Western countries either were still producing most of the energy they consumed or were able to procure ample imported oil in an international buyer’s market where supply often exceeded demand.

By 1973, imported oil had become essential to the economy of much of the developed world. Even the United States, although still one of the world’s major petroleum producers, was importing nearly 30 percent of the oil it required to maintain the high living standard of American consumers. In Japan and Western Europe, where postwar economic recovery had been based on oil rather than on indigenous coal supplies, and where imported petroleum accounted for 60 to 80 percent of all energy being used, petroleum imports had become essential to life itself. The oil embargo thus came as a terrifying shock to the industrialized world. Western civilization, or at least the materially rich lifestyle associated with it, had become dependent on an energy source that the Western, oil-importing countries did not control and for which there was no immediately available energy substitute.

In the aftermath of the 1973 Yom Kippur War, the US allies were pressured—by the threat of losing their shipments of Arab oil—into endorsing the United Nations resolution calling for Israel to return the Arab land it acquired during the 1967 Arab-Israeli war. The same states also bid, almost hysterically, against one another for available oil supplies. By the end of October of that year, the Organization of Petroleum Exporting Countries (OPEC) had exploited this situation, taken over the control of oil production from the Seven Sisters, and established the official price of OPEC oil at four times its prior cost. In its turn, this sudden jump in the price of oil to nearly twelve dollars per ignited a global recession. The recession had barely ended before the fall of the shah of Iran in January 1979. The outbreak of war between Iraq and Iran in the fall of 1980 significantly reduced the supply of exportable oil, producing a second oil crisis in which the price of OPEC oil catapulted to more than thirty-six dollars per barrel.

The oil crises of 1973 and 1979 made energy the key policy issue throughout the developed, energy-importing world for several years. The crises triggered double-digit inflation and unemployment figures in most Western countries and collectively cost the Western world as much as $1 trillion in lost gross national product. Lest OPEC oil again become available only in limited amounts and/or at prohibitive costs, countries sought a mix of energy sources capable of minimizing their dependency on imported petroleum. Toward that end, most states without domestic oil or options gravitated toward a strategy of enhanced efforts, a greater use of coal, and more reliance on nuclear power in their national energy systems. As a result of these efforts, and of economies reshaping around the service sector and less energy-intensive industries, Japan and most industrialized states in Western Europe subsequently reduced the proportion of imported energy in their overall energy profiles—even after recovering from their oil-crises–induced recessions. However, in most instances, they also still remained dependent on oil imports for one-half or more than one-half of their total energy needs. Like the United States, these countries have had difficulty reconciling their continued dependency on oil and use of coal with the commitments that they have made to reducing emissions under the environment-related agreements negotiated during the 1990s.

Energy Politics and United States Foreign Policy from 1979 to September 11, 2001

For the United States, securing oil at a stable price for itself and its import-dependent allies became a central foreign policy objective following the oil crises of the 1970s. The focus has been on the Persian Gulf, where three factors have shaped US policies: long-standing US relationships with the oil-exporting states in the region, the geopolitical importance of this oil-rich area, and the special relationship the United States has with Israel. Thus, the United States government has supported and cultivated the friendship of governments in the Persian Gulf area for decades.

The overthrow of pro-Western governments in the oil-producing states of Iraq, Algeria, and Libya during the 1950s and 1960s and the fall of the shah of Iran in 1979 intensified the importance of the oil-rich states of the Arabian Peninsula: Kuwait, Saudi Arabia, the United Arab Emirates, Bahrain, Qatar, and Oman. The vast majority of all known petroleum reserves is located in a very small percentage of the known pools of oil, and the richest of these pools lie under the lands of Iraq, Iran, Saudi Arabia, Kuwait, and the smaller Arabian states in the area. In fact, approximately three-quarters of the total proven oil reserves of petroleum-exporting states and more than 60 percent of the known oil reserves in the world lie in this region.

A little-noted feature of the American Lend-Lease policy with Britain prior to its entry into World War II involved the British government paying millions of dollars to the king of Saudi Arabia to assure continued access to Saudi oil. More notable was the successful effort led by the United States to restore the shah of Iran to power in 1954 and the sales of arms to Iran during the 1970s to serve as a “policeman” in the Persian Gulf. Most visible of all was the deployment of US warships to the Persian Gulf during the latter stages of the 1980–88 war between Iraq and Iran in order to protect oil shipments and US efforts to organize an international force to restore the Kuwaiti monarchy after Iraq’s 1990 occupation of that country. Both ventures dramatized the growing importance, in both US foreign policy and the world energy market, of the oil-rich states along the Arabian Peninsula’s Persian Gulf.

Saudi Arabia is the linchpin, with not only the largest reserves (conservatively estimated at more than 200 billion barrels in the mid-1990s) but also the ability to produce more than one-third of the oil imported by the Western world during the 1990s and early twenty-first century. Maintaining the stability of Saudi Arabia’s government and access to its oil have thus become central objectives of United States foreign policy. The protection of Saudi Arabia was the first goal for the United States in deploying its troops to the Persian Gulf following Iraq’s occupation of Kuwait in August 1990. Energy concerns similarly explain why, following the war against Iraq and the liberation of Kuwait, the United States chose to retain a large military presence in the area in order to keep Iraq in check and better defend the Saudi fields should the need arise to do so.

United States as Mediator

Petroleum politics after the 1973 Yom Kippur War also explains in part the mediator role that the United States assumed following that war in trying to negotiate an overall settlement of the Arab-Palestinian-Israeli conflict. Keeping friendly governments in power and maintaining access to Middle East oil for itself and its allies have been two of the enduring goals of US policy in the Middle East. Ensuring the survival of Israel has been a third. Prior to 1973, support of Israel was arguably the highest priority of the three goals. This was true despite the fact that pursuing it frequently handicapped the United States' pursuit of the other two goals, because Arab states found it difficult to be publicly close to the strongest ally (the United States) of their worst enemy (Israel).

The Organization of Arab Petroleum Exporting Countries’ (OAPEC’s) oil embargo during the Yom Kippur War effectively linked access to oil to the Arab-Israeli conflict. After the war, the United States adopted a more evenhanded approach to the Arab-Israeli conflict and accepted the long-term role as mediator. The 1978 Camp David Accords—in which Egypt recognized Israel in exchange for Israel returning the Sinai Peninsula to Egypt—and the 1990s agreements between Israeli, Palestinian, and Arab leaders—which led to Palestinian home rule zones in Gaza and the West Bank being created—were more than just significant US foreign policy accomplishments. To the extent that they helped avert future Arab-Israeli wars, they also represented successes in US international energy policy.

Energy Politics in New Millennium

During both the era of low oil prices in the 1990s and the era of high oil prices between 2005 and 2008, Western governments struggled to reconcile their desire to create a cleaner environment with their continued dependency on fossil fuels. During the first of these two periods, the low cost of imported energy simultaneously deflected their attention away from developing alternatives to imported sources of energy and encouraged consideration of environmentally friendly legislation, even if it increased energy costs. In the United States, for example, the efforts by oil producers to acquire exploration and drilling rights in the Arctic were effectively opposed by environmental groups. In Europe, such organizations have had some success in getting major European oil companies to endorse, verbally at least, environmentally friendly energy plans.

The Terrorist attacks on the United States on September 11, 2001, reshaped the energy debate, and subsequent developments quickly made energy politics a mainstay of international relations between 2001 and 2008. In a world with a tightening oil market resulting from the increased demand for oil by India and China, both of whom accelerated development projects of relatively inexpensive imported oil, pursuing policies deemed offensive by oil-exporting states suddenly became more difficult for the United States. Thus, United States efforts after September 11 to track down and cut off the funding of terrorist groups supported by Saudi religious organizations floundered when the US government was, under the changed economic and political conditions, unwilling or unable to lean heavily on the Saudi government to crack down on such bodies. Similarly, United States efforts to isolate Iraq, a country seemingly bent on acquiring nuclear weapons, came to little when Western US allies proved to be unwilling to antagonize Iran, Iraq’s eastern neighbor, in a time when Iranian oil exports were important to the world’s economic health. Perhaps most important, the United States' invasion of Iraq in 2003 radically altered the world oil market and produced both a series of foreign policy problems for the United States and aggressive foreign policy actors on the world stage.

A consequence of the decision by the United States to remove Iraqi president Saddam Hussein from power was that it eliminated a central that had encouraged the Organization of Petroleum Exporting Countries to keep its prices in the moderate range throughout the 1990s. Iraq was operating under United Nations sanctions and was only permitted to export a small amount of its production capacity; however, it was within the power of the United Nation to remove those sanctions at any time. The threat of substantial Iraqi oil exports suddenly being unleashed on the world market in response to irresponsible Organization of Petroleum Exporting Countries pricing action influenced its decision-makers for more than a decade, encouraging them to keep price increases to modest levels. The disruption of Iraq’s oil production capacity as a result of the United States invasion, and the subsequent turmoil in Iraq, removed that factor. When the growing demand for oil subsequently coincided with the political uncertainties surrounding its availability from other suppliers such as Iran and Nigeria (whose oil-producing region is hotly contested by several tribal groups), the result was a steep increase in the price of oil from the $35-per-barrel range that existed prior to the invasion to $150-per-barrel by 2008. The windfall in revenues encouraged the leaders of authoritarian, oil-producing countries such as Iran, Venezuela, and Russia to pursue more aggressive foreign policies outside of their borders. Governments in the developed world began to explore renewable energy alternatives such as wind and solar power. The exorbitant price of oil soon led to its over-production by mid-decade in the 2010s, By the early 2020s the combination of oversupply from new sources such as fracking, and also reduced demand resulting from the Covid-19 pandemic caused the price of oil to plunge. For a brief period, the price of oil turned negative. This meant that energy companies were producing oil at a financial loss. These enterprises found insufficient markets and had to pay buyers to retrieve and store oil supplies. In February 2022, Russia invaded Ukraine. Both European countries and the United States imposed restrictions on the imports of Russian-produced petroleum and other energy resources such as natural gas. This resulted in pressures on supply and subsequently resulted in a steep increase in the price of oil. By the summer of 2022, the price of oil was at levels similar to the early 2010s. This itself sparked a reduction in global demand and oil prices began to fall in early 2023, then remained relatively stable through 2024.

The abundance of petroleum in countries with underdeveloped institutions has often been referred to as a curse. This remains evident in the decade of the 2020s in nations such as Nigeria, where social turmoil is perennially in evidence. Venezuela contains the world's largest proven oil reserves. However, as a result of disastrous policies initiated by the authoritarian rule of Hugo Chavez from 1999-2013, Venezuela is viewed in the 2020s as a failed state.

Because of the central role petroleum consumption plays in global climate change, international efforts to develop renewable energy sources have gained momentum in the 2020s. This can suggest potential economic difficulties ahead for those governments dependent on oil revenues. Access to energy sources, which in the future may take different forms than petroleum, will nonetheless remain a cause of tension among nations. The 2022 Russian invasion of Ukraine was, in part, motivated by a desire to annex strategic Ukrainian mineral assets such as nickel. Another example is in Taiwan, where its predominant position as a global leader in microprocessor production is an incentive for the People's Republic of China to follow through on threats to invade and control these facilities. Other nations with mineral reserves critical for producing critical electronic components may likewise become future conflict zones.

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