Reports & Papers
from
Belfer Center for Science and International Affairs, Harvard Kennedy School
Recent events and ongoing developments in the Middle East have brought the need to reassess the economic and political implications of the United States’ growing dependence on imported petroleum, and to evaluate the changing relations between the United States and Middle East oil producing countries.
On May 14, 2003, the BCSIA and ENRP welcomed over 30 experts from industry, government, and academia for an executive session on Oil and Security. The session aimed to explore how the issue of oil and security has evolved over the two decades since the publication of “Energy Security” (Deese and Nye, 1981), and how it may unfold in the future.
Session participants engaged in a retrospective look at the evolution of the global oil market and at policy responses. Participants commented on the timely convocation of the session, noting a renewed interest in strategic, geopolitical and national security considerations. The issue of oil security, they noted, has taken on new dimensions, particularly given the focus on the threat of terrorism and its potential connection to oil. This connection can be either indirect, through the incapacity of governments to prevent the activities of terrorist organizations or to effectively curb the flow of capital to these organization, or more direct, through the use of oil proceeds to finance terrorist activities.
Participants explored the role played by Saudi Arabia as the swing producer, and examined the impacts that a potential regime change may have on the country’s future policies, and on the stability of the global oil market. Participants also discussed the implications of the emergence of natural gas as a worldwide commodity, noting that on the one hand, it creates opportunities for increased security through supply diversification, but that on the other hand, it also increases the risk of infrastructure disruption.
Growing energy consumption in the developing world, and China in particular, is expected to reshape the future geopolitics of oil. The increasing concern over global climate change and the environmental impacts of oil consumption will also greatly influence consumption choices, and transform the North-South debate, which is currently focused on economic and security concerns, towards one about meeting the challenges of curbing global carbon emissions.
In terms of policy responses, participants also discussed at length, without reaching a clear consensus, the function and use of the strategic petroleum reserve (SPR). Some participants suggested the need for clear rules on when and how to use the SPR, while others supported preserving the current flexibility.
The session identified a number of questions for future attention, including:
- Whether Saudi Arabia will continue to play the role of swing producer over the coming decades and whether that role is essential to a stable oil market;
- What will be the impact of the increasing role of natural gas on security;
- Whether it is desirable and achievable to integrate oil within international trade agreements; and
- What is the value of the strategic petroleum reserve?