Saudi Arabia and Russia cooperated for years to maintain the value of their chief export—oil. This month, that collusion collapsed into a price war with both countries unexpectedly boosting production. In the midst of the coronavirus pandemic and China’s decreasing oil demands, fears of an uncertain future are shaking the fossil fuel economy.
In fall 1978, Abadan’s oil refinery workers played a decisive role in the Iranian Revolution by joining the national mass strikes. Just two years later, Abadan and the adjoining port city of Khorramshahr were shelled by the invading Iraqi army and effectively destroyed during the Iran–Iraq war (1980–88), which scattered their population of over 600,000 as refugees across Iran and abroad.
For many, especially in the United States, the Arab world is closely associated with fossil fuels. But over the past several years, a raft of news articles, opinion pieces and analyses have hailed the advent of renewable energy—especially solar power—in Arab countries. Many such pieces open with images meant to defy the reader’s expectations. In the first line of an essay in The Atlantic titled, “Why the Saudis Are Going Solar,” the author notes that according to his first impression, “Everything about [Prince Turki of Saudi Arabia] seemed to suggest Western notions of a complacent functionary in a complacent, oil-rich kingdom.” Yet he was surprised to find that “Turki doesn’t fit the stereotype, and neither does his country” because of the prince’s leadership in Saudi Arabia’s drive to develop a domestic solar industry. In a similar vein, an Economist article on the blossoming of solar energy in the developing world opens with an anecdote about solar arrays being built in an arid part of Jordan, accompanied by a Getty Images photograph of a solar panel resting in front of a sand dune in an unidentified locale—solar power making the desert bloom, so to speak. Also fitting this pattern, the International Energy Agency’s World Energy Outlook 2016 misleadingly summarizes a “New Policies” scenario for Middle East power generation that includes oil, gas, nuclear, hydro, wind and solar energy with the statement, “Natural gas is gradually joined by renewables as the fuel of choice.” A more accurate summary of the IEA’s own data might read, “Oil and gas continue to dominate a more diverse energy mix.”
After about three years of hovering around $110 per barrel, with highs of $125 and lows of $90, oil prices began a precipitous decline in the summer of 2014, reaching a low of $48 per barrel in mid-August 2015 before plummeting to just under $30 per barrel five months later. While investors are no doubt reeling from the impact of this price decline on their portfolios and ventures, it’s well worth pondering how the Middle East and its geopolitics are likely to be affected.
But how to explain this downward spiral in the first place? By all accounts, reasons abound.
As of mid-May 2015, crude oil prices had fallen to the lowest level in recent years, under $60 a barrel for US domestic benchmark West Texas Intermediate (WTI) and about $66 a barrel for the international Brent benchmark. These market prices are compared to several types of “break-even” prices and affect decision-making by oil producers at several levels: whether price covers just production costs or incorporates a satisfactory level of profit, whether budgets balance and whether long-term capital investment is attractive.
On February 17, Syrian Minister of Oil Muhammad al-Lahham warned Parliament that the price of fuel would have to increase. This announcement came just one month after the government raised the official price of diesel by more than 50 percent to 125 Syrian pounds (70 cents) per liter, the largest single hike since the uprising of 2011 and an eightfold increase since May of that year.
The price of oil is hovering around $50 per barrel of West Texas Intermediate crude, and $60 per barrel of Brent crude, the lowest levels since the global economic downturn of 2008-2009. Until the end of February, when they rebounded slightly, oil prices had been dropping since the middle of last summer.
In the past, Saudi Arabia has cut its oil output to halt this sort of freefall. As the “swing producer,” the country with the largest and most easily extracted reserves, the desert kingdom can afford to reduce supply in the short run to steady price levels in the long run. This time, however, the Saudis ordered their rigs to keep pumping as usual, doing nothing to stop the downward spiral. Why?
The themes of Adam Curtis’ new documentary Bitter Lake should be well known to those familiar with his body of work: power, techno-politics, science, managerialism and the media. The film uses the contemporary history of Afghanistan to tell a story about how polities in the West have become incapable of understanding the complex and horrible happenings around them. Traditional forms of power in the West and Afghanistan have taken advantage of the fear and confusion to consolidate their control, but at the expense of an intellectually deskilled Western public and a world that is fundamentally less governable. Bitter Lake is more fable than scholarship, but the film is nonetheless a devastating examination of how Western interventions in Afghanistan refract the vacuousness of our own politics.
For immediate release July 18, 2014 Middle East Report 271 Summer 2014
FUEL AND WATER: THE COMING CRISES
Matthew Huber, Lifeblood: Oil, Freedom and the Forces of Capital (Minneapolis: University of Minnesota Press, 2013).
“The American way of life” — is there another phrase that sounds so innocuous yet is so fraught? To most Americans, and admirers of the United States abroad, the four words evoke naught but virtue, the “values” of life, liberty and the pursuit of happiness that make the United States the envy of the world, for better and for worse. To critics fond of scare quotes, the term is more likely to mean runaway consumption, particularly as regards car culture, and blissful (or even willful) ignorance of the perils.
Over the last few decades, the phrase “energy security” has spread like an oil spot from specialized literature outward into the standard lexicon of reporters and politicians. Like “security” itself, it is a term whose meaning seems transparent but resists precise definition, in part because the meaning is not immediately obvious and in part because the meaning seems to expand as time goes by. What is “energy security”? Why did it become so prominent in discussions of global politics in the late twentieth century and why is it so important today? We asked Toby Jones, associate professor of Middle East history at Rutgers University and an editor of this magazine, to supply some clarity about this concept. Jones is working on a book that will treat this subject in depth.
It wasn’t supposed to be like this. South Sudan and Sudan had agreed to share oil revenue, oil was flowing again and, despite considerable problems, relations appeared headed in a slightly better direction. Both governments were drawn to China as a key provider and practical enabler of economic assistance, a political partner and international ally. In early December 2013, South Sudan and China had made progress on negotiations about a package of support to expand a serious non-oil Chinese role. Then, on December 15, the irruption of violence in Juba and its rapid spread to other parts of South Sudan changed everything.
The Coalition Provisional Authority, the US-British body that briefly ruled in Baghdad from May 2003 to June 2004, had grand ambitions for Iraq. The idea was to transform the country completely from what was basically a command economy (notwithstanding liberalization measures in the 1990s) into an open market and from a dictatorship into a liberal democracy. The radical nature of these plans and orders, coupled with the CPA’s swift dissolution, has led many to dismiss the body as a hasty and ill-conceived imperial experiment. Indeed it was — and a destructive one as well. But the CPA period still deserves serious examination. It was the only time when the US, in its capacity as occupier, was in charge of Iraq administratively and legally.
“The Iraq war is largely about oil,” wrote Alan Greenspan in his memoir The Age of Turbulence (2007). “I’m saddened that it is politically inconvenient to acknowledge what everyone knows.” It may indeed be self-evident that the United States invaded Iraq in 2003, as the former Federal Reserve chairman says, because of oil. But what does this proposition mean? The answer is not so obvious.
It’s like clockwork: When the race for the White House is on, the contestants will promise to make America self-sufficient in energy. Everyone understands this concept to mean less dependence on imported oil from the Middle East, though politicians do not always come out and say so. The implication is that if the US can break its supposed dependence, then it can disengage from (even forget about) a region that many Americans see as perennially volatile, if not hostile.
All claims to the contrary, the Persian Gulf monarchies have been deeply affected by the Arab revolutionary ferment of 2011-2012. Bahrain may be the only country to experience its own sustained upheaval, but the impact has also been felt elsewhere. Demands for a more participatory politics are on the rise, as are calls for the protection of rights and formations of various types of civic and political organization. Although these demands are not new, they are louder than before, including where the price of dissent is highest in Saudi Arabia, Oman and even the usually hushed United Arab Emirates. The resilience of a broad range of activists in denouncing autocracy and discomfiting autocrats is inspirational.
Every US president since Jimmy Carter has spoken earnestly of the need to wean America from “foreign oil,” which is often more bluntly called “Middle East oil.” After the September 11, 2001 attacks and the resulting spotlight on Saudi Arabia, the clamor grew, only to subside, and now has resurfaced with the deepening cold war between the West and Iran. As part of their posturing on Iran, today’s GOP presidential candidates trip over themselves to pledge more drilling and exploration in the good ol’ US of A.
With another interminable presidential campaign approaching, Americans grit their teeth as the aspirants to the White House take turns deploring the country’s dependence on foreign (particularly “Middle Eastern”) oil. It is a theme as old as disco and the pet rock — vapid and dull, yet forever capable of arousing popular scorn. On the one hand, every president since Jimmy Carter has set the goal of ridding the United States of this scourge, but to no avail, for American consumption of imported petroleum inexorably climbs. On the other hand, volatile gasoline prices, climate change and the specter of terrorism enhance the urgency of finding an alternative, if not to oil, then at least to oil of Middle Eastern provenance.