Decreasing Global Dependance on Middle Eastern Oil
July 15, 2018 | Expert Insights
Background:
Following the First World War and the downfall of the Ottoman Empire, Great Britain took control a large part of the Middle Eastern region, including military rule over Palestine, which the League of Nations termed ‘The Mandate.’
Throughout recent history, surveyors have discovered massive oil reserves in the Middle East and Northern Africa (MENA) that, today, constitutes the majority of the world’s oil supply. According to the Organization of Petroleum Exporting Countries (OPEC), its member nations control nearly 82% of the world’s crude oil reserves. This region consequently became very attractive to the British because of their pressing need for oil during wartime.
At the time of the Second World War, the British were becoming so much more dependent on Arab oil over the years that by 1958, fifty percent of their imported oil came from Kuwait alone.
In May 1967, Egypt decided to close the Suez Canal, an artificial waterway connecting the Red Sea to the Mediterranean, to Israel shipping. In response, Israel took up arms against Arab forces led by Egypt in what became known as the Six-Day War of 1967. Israel won this conflict, but the Suez Canal remained closed until 1975, and nearly all the Arab oil producing countries initiated an oil embargo on nations that supported Israel, such as the United States and the United Kingdom, which consisted of refusing to supply oil or selling it at extremely high premiums to these countries.
In 1973, Syrian and Egyptian forces attacked Israel in the War of Yom Kippur to attempt to regain control of Palestine.
On October 17, 1973, the Arab oil- producing nations reiterated their frustration over Israeli presence in Palestine and initiated another embargo directed toward Israel and its supporters. These Arab states continued cutting oil production and increasing its price per barrel almost four-fold to send a message specifically to the U.S. and the Netherlands, which were staunch supporters of Israel at the time.
In response to this oil embargo, thirteen oil-consuming countries came together to form the International Energy Agency to discuss ways the world could move forward without having to rely on oil as their only energy source coming mainly from the Arab producers.
Analysis:
This move suggested that perhaps the reign of OPEC oil producers as kings of energy might not last forever, since their proven ability to use their pseudo-monopoly as diplomatic capital would urge the rest of the world to search for alternative sources of energy in the future so as to decrease their dependence on the Arab nations.
The increased tension between Palestine and Israel reflected the larger conflict between Arabs and Jews in the Middle East. The two sides have repeatedly engaged in military skirmishes and battles, and throughout the conflicts, oil refineries and transportation facilities have always been key targets.
Discord in the Arab League started in 1973 and 1974 because while the majority of the Arab League imposed an oil embargo, some key players did not agree with the decision. This shows that although the Arab League nations form a collective in their significant contribution to the global oil market, they have remained divided when considering their individual economic interests for decades.
Past oil production cuts by Arab nations have compelled importers around the world to look for new exporters, develop alternative energy sources, and tap into any oil reserves they may control. Following the 1973 Oil Embargo, the United Kingdom and France began bartering with MENA countries to secure lower prices for their oil, and Japan began looking for new sellers in China and the Soviet Union.
Another factor driving countries to decrease their dependence on Arab oil has been the realization that fossil fuel reserves have limits. Following the 1974 oil crisis, the world began to embrace the Green Revolution, initiating an era which would drive human search for alternative energy sources that could prevent global warming while still providing us with the resources we ultimately need.
Terrorist organizations like Al-Qaeda and ISIS have destabilized oil production in the Arab nations in various ways. First o , they smuggle oil to anyone with refineries in the region, including people looking to cause civil unrest, such as the Syrian government, which is currently engaged in a bloody civil war.
Assessment:
Our assessment is that the current oil market offers a great opportunity for the Arab League to bring together all countries involved in the production cuts and to ensure that each is pulling its own weight. We believe that one of the goals of the League should be a collective push toward economic prosperity in the region, not only in a select group of countries like OPEC. We feel that Addressing these circumstances as a divided committee would only aggravate the situation, exemplifying the need for unity at the present moment.