Global oil industry (Essay Sample)

Student’s name Instructor’s name Course title Date Does the Global Oil Industry affect International Politics? After industrialization of the world in the 19th century, oil came up as the chief source of energy for the global economy replacing the use of coal. The upsurge of industries and the invention of motor vehicles increased demand for fuel in the countries of Europe and in Northern America where civilization had come of age. From the start of the 20th century, oil becomes the most important commodity in the economies of the developed country. This made it be entrenched into international politics as countries struggled to gain an advantage on key oil sources. Betts, Eagleton-Pierce and Roemer-Mahler believe that towards the Second World War United states was the biggest producer and consumer oil in the world (4). This contributed to its growing economy and political superiority in the world. Other countries in Europe such as Britain and France were also in control of the vast oil sources in the Middle East through their oil drilling and refinery companies. The links between international relations and the oil industry is evident is several aspects. These include international trade, foreign policies, the issue of sustainable development and environmental conservation. The oil industry affects the world’s economy directly, and this is reflected in the manner crude oil prices affect the foreign exchange prices and prices of commodities internationally. Thus, the global oil industry affects international relations directly. Despite the huge amount of oil reserves owned by the developing countries in Middle East, Africa, and South America, the producing companies are from North America and Europe (Marc Baaij, de Jong, and van Dalen 791). The complexity of drilling oil had made it difficult for national governments to invest directly in the business. The governments made a deal with producing consortia who are directly involved in the drilling and exploration of oil reserves. The major oil producing companies are about seven in the world, and they have formed a cartel to protect their interest and have a bargaining power against governments (Marc Baaij, de Jong, and van Dalen 789). The Economist identifies the major producing companies as BP plc(United Kingdom), Chevron Corporation(United States), ExxonMobil Corporation (United States), Royal Dutch Shell plc( Netherlands and United Kingdom), and Total SA(France)(1). These five companies are today referred to as “supermajors” because of the huge control they have in the oil industry (The Economist 1). These companies started their dominance in the oil industry in the 1950s, and they have rapidly grown to hold control of their entire global oil producing industry. However, there is an indication that the control of the major oil producing companies is dropping as National Oil Companies are taking over the production of oil (The Economist 1). Oil Industry and International Politics The oil industry is tightly linked to politics because of its importance to the economies. The oil exporting countries want to get the best value for their products while the importers want to have a guaranteed supply of oil at affordable rates (Hillebrand 737). At the region level, Middle East is in focus because of the large oil reserve possessed by several countries in the region. Most of the countries in the Middle East depend on oil exports to sustain their economies(O'Hagan 44). The countries in the region also have a common culture based in Islamic laws. This has helped the region to develop a strong bond that helps them to bargain with other countries. For example, the United Arab Emirates consist of several Emirates in the gulf region that depend on oil. Their unity has enabled them to create a large economy and bargain collectively on economic matters (Odell 315). Luciani also notes that call for pan Arabism is gaining more support as the Arabic oil producing countries are seeing the point of coming together as a strong union (97). The Middle Eastern region has also experienced conflicts because of the oil. The 1990 Gulf war was initially a dispute between Iraq and Kuwait. This was before United Nations collation forces led by United States went to support Kuwait against Iraq. Iraq invaded Kuwait claiming that possession of some oil-producing region. Iraq was also not pleased because Kuwait was overproducing oil contrary to their OPEC quotas agreement. In the 1970s, there was also conflict between Iraq and Iran. The source of the conflict was also on the rivalry between the oil rich countries in the Middle East. Saudi Arabia, which is the biggest producer of oil in the region, has in all the conflicts being non-partisan. Even though the Saudi kingdom supported Iraq, they avoided being involved directly with the conflict. The international politics surrounding the oil industry has been the most interesting. The United States has been at the centre of most political situation touching on oil and international relations. Eagleton-Pierce and Roemer-Mahler argue that United States as the economic superpower seeks to protect its global interest (6). Among its chief interest is the protection of oil supplies across the world. This has made the United States keen on influencing the international relations in the Middle East. The economy of the United States highly depends on fuel. Despite efforts to reduce the use of fossil fuels, the country still, depend on it more than any other source of energy. The oil reserves of United States have dropped drastically since the 1980s; this makes United States be depended on oil from Middle East (Lawrence 67). The United States has tried their best to be diplomatic and in good terms with the major producers of oil, especially Saudi Arabia and the UAE. However, the involvement of the United States in the gulf war in the 1990 and lately in 2003 show that the country is ready to use force to protect its interests in the region. Frieden, Lake and Schultz argue that United States does not explicitly show its interest in the oil-producing region but uses excuses such as protecting the interest of Israel in the region or other countries (87). The issue of global security has been of concern to the united states because of its terrorism that seem to have support from some countries in the Middle Eastern region. The invasion of Afghanistan in 2001 was justifiable by the war on terror. However, the Iraq invasion in 2003 was believed to be a way of taking control of the region's oil industry by eliminating the influence of Saddam Hussein regime(Sherr 20). Apart from the United States, other developed countries have also showed interest in the oil industry. Luciani identifies the United Kingdom and France as some of the US allies that have been actively seeking to gain control of the oil industry (82). Unlike Russia and United States, which produces, oil, France and United Kingdom depends on imported oil. This has made the two countries, and others in Europe to maintain good diplomatic relationship with countries in the Middle East. The Middle Eastern countries also need the support of the oil importers. This makes them reach out to the large importers of oil in Europe to secure markets for their products. In South America, Venezuela is the largest producer of oil. Lawrence states that the country has used this position to exert its supremacy in the region (61). Venezuela is a middle-income economy, but its leadership has in several occasions defied the western powers, especially the United States because they know that they have control of a crucial resource in the region. Venezuela has recently signed an exporting deal with China that is growing to be the largest consumer of oil in the world (Lawren...