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The Surprising Sources of Oilís Influence

Authors: Blake Clayton, Adjunct Fellow for Energy, and Michael A. Levi, David M. Rubenstein Senior Fellow for Energy and the Environment and Director of the Program on Energy Security and Climate Change
December 2012-January 2013
Survival

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Should countries care about where they get their oil? As Middle Eastern oil exports to Asia rise while shipments to the United States and Europe fall, analysts are asking whether this trade shift will have geopolitical consequences, drawing China politically closer to the Middle East while driving the West further away.1 In North America, the debate over the Keystone XL pipeline, which would have transported crude from Canada to the US Gulf of Mexico, featured proponents who trumpeted the value of relying on a friendly source of oil and sceptics who insisted that the origin of US oil imports doesn't matter. Throughout the world, many still worry that dependence on the Persian Gulf leaves countries exposed to blackmail; other analysts, though, insist that markets have rendered such threats impotent.

Indeed, scholars and policymakers are sharply split on the fundamental question of whether the precise patterns of oil trade matter. One camp, dominated by economists, asserts that the answer is a resounding 'no'.2 There is one world price for oil, and all consumers pay it regardless of who their suppliers are. The only preference consumers should have is that they get the cheapest (and perhaps least polluting) oil possible; where it comes from is immaterial. The other camp, dominated by security strategists, is equally confident that the answer is 'yes'.3 They see countries as wise if they carefully choose their oil-trading partners in order to strengthen their own position in the world. Such worries date back to the two world wars and the oil shocks of the 1970s, and despite massive changes in global oil markets since then, these concerns persist.

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