Between the summer of 2008 and the beginning of 2009, oil prices plummeted from a high of $147 per barrel to a low of $33. This extraordinary reversal of fortune announced the end of the second oil boom for the countries of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — precipitated, of course, by the broader global financial crisis. How these oil-exporting countries will weather this dual economic challenge is a live question. From the time that the Gulf economies took off in 2003, there were growing worries that their rapid rise was a massive investment bubble built on high oil prices and cheap credit.
On February 26, 2007, the Iraqi cabinet passed and recommended for parliamentary approval a new law governing the country’s immense and largely untapped supplies of oil and natural gas. Grasping at straws for any sign of success in Iraq, the law’s international sponsors hailed a major accomplishment for Iraq’s fledgling government. White House spokesman Tony Snow celebrated the oil law’s passage toward Parliament, one of four “benchmarks” the Bush administration has set for the Iraqi government, as a “key linchpin” in Iraq’s recovery. Three months later the oil law is still awaiting parliamentary debate, its ultimate fate in doubt.
Oil is by its very nature a finite commodity. The question has always been not whether it would run out, but when it would. The doomsday scenarios that some predict –mass blackouts and the imminent demise of suburbia — may be far-fetched, but the era of “peak oil” is here.
From time to time, the boring economic data regurgitated by Jordan’s amply staffed ministries offers up a tantalizing mystery. In the Monthly Statistical Bulletin (May 2004) published by the Central Bank of Jordan, for example, one learns that Jordanian export of refined oil products increased 46 times over from 2002 to 2003 — a trend that continued well into 2004. This is certainly odd, since Jordan has no proven oil reserves.
The steady summertime creep of oil prices past $40 per barrel and over an unprecedented $45 surprised most oil analysts, including this one, who were expecting the price to drop after the US-led invasion of Iraq. But no one is likely to have been as stunned as the Bush administration policymakers, like Deputy Secretary of Defense Paul Wolfowitz, who glibly promised post-invasion prosperity for the country “floating on a sea of oil.”
Rep. Ralph Hall opened a set of Congressional hearings on July 8 with a dramatic flourish, denouncing "the deaths of thousands of Iraqis through malnutrition and lack of appropriate medical supplies." "We have a name for that in the United States," the Texas Republican told a subcommittee of the House Energy and Commerce Committee. "It's called murder."
Americans who voted for “compassionate conservatism” in the November 2000 presidential election have been disappointed. George W. Bush has proven to be much more radical than his moderate campaign rhetoric implied. In the area of environmental policy, Bush’s moves to lift regulations on pollutants, promote the use of nuclear power and “clean coal” and encourage oil exploration off the coast of Florida and in the Arctic National Wildlife Refuge have triggered opposition even on the right. Where Ronald Reagan sought to overturn the social policies of Franklin Roosevelt, George W. seems to seek an even wider reversal of the health and labor regulations instituted by Theodore Roosevelt.
Upon its installment in the White House, the second Bush administration was universally expected to be the loyal handmaiden of Big Oil. The US oil and gas industry lavished $1,387,975 upon the hastily assembled committee which planned the inaugural festivities for George W. Bush and Dick Cheney. BP-Amoco contributed $100,000, and executives from Conoco, Chevron and Exxon Mobil ponied up the same amount. In all, Big Oil gave $26 million to Bush, Cheney and their fellow Republicans in the 2000 election campaign.
Last week's panic within the Clinton Administration over a potential winter spike in heating oil prices has greatly eased, as oil prices have begun to fall. The Democrats' political planners feared that Republican candidate George W. Bush and voters would blame Clinton and Vice President Al Gore for failing to forestall the price rise that dominated the news for the last two weeks.
The contemporary international political economy of oil presents a puzzle: political instability in regions where oil is found coexists with steadily falling prices. This combination of continuing political conflict and uncertainty in the Middle East (particularly the Gulf), and the continuing slide in the real price of crude oil encourages consideration of relations between world oil markets, Middle East politics and the international role of the United States. To comprehend these relations, one must consider both the political and geopolitical objectives of the states involved and the economic motivations of the key actors in the international oil industry.
Among those who direct American foreign policy, there is near unanimity that the collapse of communism represents a kind of zero hour. The end of the Cold War so transformed the geopolitical landscape as to render the present era historically discontinuous from the epoch that preceded it. Policy makers contend that America’s mission abroad has had to change to keep pace with these new circumstances.
Over the last 50 years, a massive infusion of petrodollars enabled the new monarchies of the Gulf to engage in impressive experiments in counterrevolution. During the 1970s, King Faysal of Saudi Arabia attempted to preserve the traditional social hierarchy of his country by modernizing without industrializing. A decade earlier, the Shah of Iran staged a preemptive strike against demands for change by launching his own “white revolution.” Yet the most successful counterrevolution in the Gulf was the massive and successful program of the Sabah dynasty in Kuwait to preserve its power by building the region’s first modern welfare state.