May 17, 2019 in Informative

Introduction

Oil has been and for the foreseeable future will remain the leading resource of the global economy. Denis Babusiaux (2007) states that “Oil is likely to maintain its vital role in the future, particularly in the transport sector” (p. 5). These days, it is the most valuable and popular resource on the planet. All the leading countries of the world are fighting to gain control over the oil fields. It is a cause of wars and conflicts among countries. Oil determines external and internal policy of all states. The fluctuation in the price of oil has a direct impact on all sectors of the economy. In such a way, it is relevant to provide a comprehensive characterization of the role of oil in the world economy. Currently, about 90% of crude oil is processed into petroleum products, and slightly less than 10% is used as the raw material in the petrochemical industry. Due to their technical and economic benefits, oil and derived products occupy a special role in the oil and petrochemical industries in the world economy. The range of the usage of oil in the economic activity is extremely vast – from fuel for cars to the production of high-tech objects and materials on its basis. Oil is also the world’s leading energy resource. As the most demanded resource, oil got into the zone of interests of the most developed countries. The United States is not an exception. For the United States, the struggle for oil is of vital importance since this resource is distributed very unevenly around the world. It is the USA’s main interest because without oil there would be no strong bilateral relations. The aim of the paper is to study the value of oil in the foreign policy of the United States.

Oil Reserves

These days, the world’s oil reserves amount to 1.2082 billion barrels (Olah, Goeppert, & Prakash, 2011). Over the past 25 years, this figure has grown rapidly, increasing by nearly 500 billion barrels (Olah, Goeppert, & Prakash, 2011). According to the latest data, potential oil reserves estimated at 2.614 billion barrels. In terms of oil reserves, the Middle East is the absolute leader. Thus, Middle East oil reserves account for about 61.5% of the total volume (Olah, Goeppert, & Prakash, 2011). In the book Beyond Oil and Gas: The Methanol Economy, it is affirmed that “Presently, the Middle East is the epicenter of many of the ‘oil battles’ because it has the largest oil reserves in the world” (Olah, Goeppert, & Prakash, 2011, p. 38). About 22% of the world reserves belong to Saudi Arabia (Olah, Goeppert, & Prakash, 2011). Eurasia has 12% of world reserves, 6.6% of which belongs to Russia (Olah, Goeppert, & Prakash, 2011). Every year, fewer new reserves of easily accessible oil are disclosed worldwide. The number of open fields in the world increased in the 1960-70s (Olah, Goeppert, & Prakash, 2011). However, then they started to decline gradually.

Oil as the Main Interest of the United States

The main consumers of the world’s oil are highly-industrialized countries. The absolute leader in oil consumption is the industrial economy of the United States (Bohi & Montgomery, 2015). On the one hand, it indicates a high level of industrial development of the country. On the other hand, this fact shows oil dependence of the state. Daily oil consumption in the country is around 23 million barrels or nearly a quarter of the world total consumption, with about half of the oil consumed by road transport (Crane, Goldthau, Toman, Light, & Johnson, 2009).

The main interest for the United States is oil, which can be supported by three statements. The first one is associated with the fact is that over the past 20 years, the level of oil production decreased in the United States. These days, the United States produces only 8% of the world production of oil per year and consumes more than 24%. In the book Imported Oil and U.S. National Security, it is stressed that “The United States remains the largest consumer of oil in the world accounting for 24 percent of global consumption” (Crane et al., 2009, p. 8). This imbalance in the economy of the superpower still leads to various upheavals on a global scale.

As the largest consumer of oil, the United States is a leader in the field of import. Import of crude oil in the United States is increasing particularly rapidly due to a steady decline in the domestic oil production. It is the second statement supporting the thesis. The most active promotion of the United States to the Middle East and Africa began after the oil crisis of the mid 70s of the last century when it became evident for the United States that the lack of control over oil could threaten the interests of national and economic security (Odell, 2013). Since then, the state started a systematic process of expansion to the Middle East and Africa and establishment of control over energy resources, which enabled to avoid sudden decisions that could hit the US economy being a net importer of oil. Currently, the United States controls such countries as Saudi Arabia, Kuwait, UAE, Iraq, Qatar, Oman, Colombia and Mexico (Odell, 2013).

The foreign policy of the United States is focused on the countries producers of oil. Thus, it is the reason for stable relations with these countries. Saudi Arabia is a vivid example of such relations. As the state has the biggest reserves of oil among other countries of the Middle East, the United States tries to maintain steady relationshipss with Saudi Arabia. It is the third statement of the US’s interests in oil. It is a reason for the interest of the United States in this country. The United States and Saudi Arabia are long-standing partners. The Americans have historically protected Saudi interests in the Middle East. Special relationships between the states were built back in the 1930s (Bronson, 2006). In exchange for security guarantees for the House of Saudi provided by the United States, King Abdulaziz signed an exclusive concession with US companies and allowed them to develop oil fields in the East of the country. Since then oil and military security have been the key points in relations between the US and Saudi Arabia. In 1944, Roosevelt administration announced the postwar oil policy that required a search for deposits outside the United States to ensure economic security (Bronson, 2006). After this, many American companies were established in Saudi Arabia, the largest of which were Mobil, Exxon and Texaco (Bronson, 2006). However, Saudi Arabia did not receive enough profit from oil sales since the main portion of the proceeds settled on the accounts of multinational corporations. Such an unfair distribution of oil revenues pushed the leadership of the Directorate of oil and mining affairs of the kingdom to address other oil-exporting countries to protect the interests. As a result, OPEC appeared. It allowed adjusting the price and volume of the production. However, the Arab boycott of 1973 was a terrible blow to the US economy. In response to the support of Israel’s war with Egypt, OPEC announced embargo on oil supplies to the United States (Bronson, 2006). Nevertheless, Washington did not turn away from an Arab partner. Moreover, the country threw forces on the restoration of damaged relations and prevention of repeat embargoes. The result was establishment of the US-Saudi Joint Economic Commission. It intended to implement a program to modernize the kingdom by the forces of American companies on Saudi money. Thus, the US received not only a long-term and reliable source of revenue from the modernization of the economy and defense capability but also had a guaranteed supply of oil at reasonable prices – lower than that of other exporters (Bronson, 2006). Nevertheless, since then the relations between the two countries have changed.

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Geopolitical expansion of the United States over the last 30 years assumes control over energy flows. The state that controls the global oil and gas market can not only influence the prices on them but also control the world. In such a way, the United States constantly takes an opportunity to use oil as an instrument in relations with other countries. The presence of oil and gas in the region has always been used as a political tool. The reason for this is obvious. These days, the United States of America consumes more oil than it produces. The country has a large dependence on oil. In such a way, its foreign policy is greatly associated with the issue of oil. For the country, it is extremely important to maintain good relations with the countries producers of oil.

The basic provision of the US energy policy is to find a solution to the problem of growing dependence not through the regulation of demand but through the growth of supply. In such a situation, intensification of imports from other regions is quite logical. At the same time, if the activity of American business and government leaders in Latin America and the Middle East does not change, the attention to the resources of Africa outlines new horizons of the United States foreign strategy. A well-functioning energy network is the key element of domestic economic security of the country and an indispensable element in the style of the American society (Fawcett, 2013). It encourages Washington to act in all oil areas. The Middle East affects the American economy, even if the direct import of raw materials is insignificant because the oil market is characterized by globalism (Fawcett, 2013). Thus, the problems of the provider country or region-vendor are quickly recognized throughout the global economic space and force to seek for more free and secure access to resources. First of all, the major importing countries including the USA take care of this. The integration of the countries of the Middle East and their enormous potential in the global oil market in the political parameters is beneficial for world economic leaders. Firstly, it can significantly increase the volume of resources in the region. Secondly, it creates conditions for greater competition among exporting countries. Thirdly, it opens access to oil sources for energy companies (Fawcett, 2013). Finally, it is aimed at reducing the sovereignty of the Middle Eastern states on their fields.

Conclusion

These days, oil is a leading resource of the world economy. During the development of the world, economy is often faced with crises. Oil was often a cause of these crises. In such a way, it is often a subject of disputes among countries. Nowadays, there are practically no new deposits of oil. The leading world countries constantly want to establish worldwide prevalence in this sphere. The United States is one of them. Because of the imbalance in consumed and produced oil, the United States needs to maintain stable economic relations with the countries producers of oil.

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