Oil, Politics and Power

Oil and politics have always gone together for a simple reason; since oil became an indispensable commodity without which the world as we know it today would not function, countries that produce oil have learned how to use it as a weapon. And who says weapons, says politics.

The power of oil as a political weapon became evident during the 1973 Arab-Israeli conflict that became known as The October War in the Arab world and the Yom Kippur War in Israel. Hoping to sway Western sentiments in favor of the Arab cause Arab oil producing countries such as Saudi Arabia and the Gulf sheikdoms agreed to reduce their output. Naturally, less oil on the market meant higher prices at the pump and for the home consumer of heating oil. The Arab oil embargo forced Western governments to enact strict measures in order to safeguard oil reserves.

The tactic employed by the oil producers however backfired: forced by some governments to leave their cars in the garage on alternate days along with having to pay more money for less gas, the 1973 Arab oil embargo initiative was a public relations disaster. Furthermore, given that they were producing, exporting and selling less gas, the oil producers lost billions of dollars in potential revenues.

However, what the ‘73 oil embargo did accomplish was demonstrate the potential oil had as a weapon. The outcome changed much in the modern history of oil and politics. The embargo forced the West to become less dependent on Arab oil and American and international oil companies began looking elsewhere to supplement Arab oil.

There were alternatives to Arab oil except that until the Arab embargo of 1973 purchasing Arab oil was far less expensive than erecting platforms in the inclement weather of the North Sea, for example, in Norwegian waters or off the English coast. The Arab oil embargo and rising oil prices justified exploitation of North Sea oil, Canadian oil and other previously untapped oil fields. The outcome was two-fold; first, European and American dependence on Arab oil lessened; and second, it gave the new producers additional revenues as oil prices continued to escalate.

However, the importance of oil in politics, or rather the importance of the politics of oil, and the important role oil would play in modern post-World War II geopolitics was recognized by the United States very early on. It soon became evident that in the industrialized era oil would replace coal as the main source of energy and as the coalmining towns of Newcastle and West Virginia began to die, a new mirage began to rise in the deserts of Arabia.

The U.S.’s keen interest in oil politics surfaced around the close of WWII, when on Feb. 15, 1945, U.S. President Franklin D. Roosevelt flew to Egypt to meet with Saudi Arabia’s King Abdulaziz ibn Saud aboard the USS Quincy in the Great Bitter Lake in the Suez Canal. The meeting between Roosevelt and inb Saud was a major landmark in contemporary history of oil as it opened the chapter of oil-politics when the American president promised the Saudi king to protect his oil fields in return for preferential treatment.

Just weeks earlier the United States had thwarted a final German attempt to make one last thrust through Allied lines at Bastogne, (where Gen. Anthony McAullif is reported to have said “Nuts,” when asked by the Germans to surrender). Had the Germans been successful they would have been able to link their forces in the Ardennes with the Belgian port of Antwerp, thus giving them access to an uninterrupted flow of oil, essential to keep the gaz-guzzling tanks moving forward. As it turned out the Germans lost the Battle of the Bulge because their tanks ran out of gas.

Roosevelt immediately recognized the strategic importance of oil. Had Nazi Germany won the Battle of the Bulge World War II would have been prolonged perhaps just long enough to allow German scientists to finalize the V2 rocket and as they hoped, produce the first atomic bomb, giving them ultimate victory. In essence what lost the war for Germany was shortage of oil.

Since the end of WWII there were other wars that were fought over oil. The United States went to war in 1990/91 against Saddam Hussein to liberate tiny Kuwait from Iraq after Saddam’s forces declared Kuwait was Iraq’s 19th province and occupied it.

Indeed, one might even trace the events of 9/11 and Osama bin Laden’s hatred of America for the nearly unconditional support given by the U.S. to the House of Saud to that historic meeting in the Great Bitter Lake between Roosevelt and bin Saud.

Finally, it is interesting to note that the two presidents who took America into wars in the Middle East over oil –President George Bush and his son, George W. Bush – both had connections to oil money. Coincidence? You decide.

This article was written by Claude Salhani for OilPrice.com