A brief overview of oil and gas politics, presented to Prof. Khaled Abdel Fattah, Cairo University faculty of Engineering

1. CreditHours System
PEN 101 Cairo University
Introductionto PetroleumIndustry Faculty of Engineering
Final Research
Oil Politics
Submitted to
Prof. Khaled Abdel Fattah
Submitted by
Abdulrahim Adel Mohsin
Ahmed Khaled
Zeiad Mohamed
Mamdooh Hatem

2. 2
Table of Contents
Table of Contents.......................................................................................................................2
Table of Figures..........................................................................................................................3
Introduction .................................................................................................................................4
Oil Politics in the world ............................................................................................................5
OPEC..........................................................................................................................................7
History....................................................................................................................................8
Members of OPEC ............................................................................................................12
OAPEC.....................................................................................................................................16
History..................................................................................................................................16
Nationalization of oil supplies ..............................................................................................17
Purposes Behind Nationalization ....................................................................................17
Petrodollar .................................................................................................................................21
History.....................................................................................................................................21
Petrodollar Recycling..........................................................................................................21
Petrodollars and US Dollar as a currency .....................................................................22
Petroleum Conflicts.................................................................................................................23
Crimea/Ukraine Conflict......................................................................................................23
South Sudan and Nigeria...................................................................................................24
South China Sea Conflict...................................................................................................25
Conclusion.................................................................................................................................27
References.................................................................................................................................28

3. 3
Table of Figures
Figure 1 OPEC share in oil production since 1973 ...........................................................6
Figure 2 OPEC share of crude oil reserves.........................................................................7
Figure 3 Graph showing WTI crude dropping below zero............................................11
Figure 4 Map of OPEC countries ........................................................................................12
Figure 5 Map of OAPEC member countries ......................................................................16
Figure 6 Ukraine's current pipelines...................................................................................23
Figure 7 Location of South China Sea's Conflicted Areas ...........................................25

4. 4
Introduction
Oil plays an important and critical role the world economy, as oil is the primary source
of energy in our life. Because of the economic and strategic importance of oil it cannot be
separated from politics, neither can politics separated from oil.
Oil politics vary around the world as there are producers of crude oil that benefit from
exporting oil to the global markets and help move the production wheel in the industrial
nations. Additional there are oil countries importing countries that benefit from oil as a
power source and industrial usage. Oil politics changed over time in both oil exporting
and importing countries.
War plays a major role in deciding oil policies such as the Arab-Israeli war of 1973.
which led Arab countries to place an embargo over oil trade to Israel supporting western
nations.
Many of these western nations changed their policies regarding oil following said
embargo as many of them have created a strategic reserve of imported crude oil enough
to last a few months in case of a similar embargo.
Oversupplying the markets with crude oil leads to lower demand and lower prices.
These lower prices could lead to bankruptcies of oil companies and damage the
economies of oil producing countries, as it is no longer economically feasible to explore
and drill new oil wells.
Events such as the COVID-19 Pandemic also reduce the demand for oil and caused a
price war known as the Saudi-Russian price war.
The importance of oil isn’t limited to its use as an energy source as many industrialized
nations oil not only as an energy source but also resource in many manufacturing and
chemical applications.

5. 5
Oil Politics in the world
Of the world's top 10 oil producing countries, five are from The Middle East, Saudi
Arabia, Iraq, Iran, The UAE, and Kuwait. Together, these countries produce 28% of the
global needs of petroleum products and the entire region contributes by one-third of the
global supply thus, empowering The Middle East position on the global stage.
In 2018, Saudi Arabia produced 12.79 million bpd and consumed only 3.3 million bpd.
Iran also extracted 4.47 million bpd and only used 1.8 million bpd. In both cases, they
only used around 25% of the daily production while the majority was exported. That is a
curse in disguise, because the large numbers of barrels exported everyday keep the
country away from diversifying its economy, and when the global demand of petroleum
declines the economy will take a major hit. (Zaidi, 2019)
The United States and China are also on the list of most oil producing countries,
ranking first and fifth respectively. In 2018, The US produced 17.87 million bpd and
consumed 19.69 million bpd. China extracted 4.82 million bpd and consumed 12.79
million bpd. These data show that The US and China are also the world's biggest oil
consumers. The production-consumption lag makes each country dependent on oil
imports to keep the wheels of the economy moving. During the cold war, The Soviet Union
was self-sufficient in oil production, where its western rivals were more dependent on
importing oil for defense and economic purposes.
In case of market failure, climate change will go bad drastically. Markets fail when there
are negative externalities, which are consequences of actions not accounted for in market
transactions. For oil consumers, prices at the pump do not reflect the true social costs of
a gallon of gasoline or kerosene; these social costs include increasing concentrations of
greenhouse gases and the security costs of periodically waging war to defend access to
oil supplies in the Middle East.
Because oil is one of the most essential commodities right now, it gives a significant
and strategic place for the countries producing it. But at the same time, they have the
''oil curse'' because they cannot diversify their economy and sources of income and with
oil having unstable prices and conditions, it is hard to see their economies' situation even
for just the following 10 years. (Bromley, et al., 2006)

6. 6
Because of increasing political and military interactions and involvement in the oil
market, OPEC's share of oil production has decreased over the last 50 years. This is
having bad outcomes to both governments and civilians. When the share of a neutral
governing body decreases, it opens space to specific producing countries to monopoly
this commodity to create a temporary influence and boost its global position.
Nevertheless, when the OPEC share increases it helps to stabilize the market shares and
prices, without affecting the importing countries negatively.
In 1973, the OPEC share was 0.55 of the global produced oil at the time, this increase
was mainly due to The Saudi Arabia Oil Cutoff so, OPEC raised its share to help
neutralize the impact on the west. And for the next 8 years, the share was relatively high
until reaching the 0.4 line in 1982 thus, giving the producing countries to boost their
economy and secure their global position.
The continued to decrease until reaching its low point in 1983 at around 0.3 and
afterwards in increased once again to finally reach the 0.4 mark 10 years later in 1993.
Since then, the share never went under 0.4 of the global produced oil.
The following graph helps to illustrate this point. (OPEC)
Figure 1 OPEC share in oil production since 1973

7. 7
OPEC and OAPEC
OPEC
OPEC or Organization of Petroleum Exporting Countries is a permanent inter-
governmental organization. It was at the Baghdad Conference on September 10–14,
1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It is headquartered in Vienna,
Austria. (OPEC)
Its mission is to “coordinate and unify the petroleum policies of its Member Countries
and ensure the stabilization of oil markets in order to secure an efficient, economic and
regular supply of petroleum to consumers, a steady income to producers and a fair return
on capital for those investing in the petroleum industry.” (Our mission)
It was created to give influence to oil producers over global prices of oil that were
previously held and monopolized by the “Seven Sisters”; a group of international oil
oligarchies and companies including Shell, Exxon and APOC. (Sampson, 1975)
As of 2019, OPEC controlled roughly 75% of the world's total oil reserves and
produced 42% of the world's production. (Sharma, 2020)
Figure 2 OPEC share of crude oil reserves

8. 8
History
The idea for an inter-governmental organization of oil producing nations started shortly
after the World War II.
The first move towards the establishment of OPEC took place in 1949, when
Venezuela and Iran, invited Iraq, Kuwait, and Saudi Arabia and suggested that they
improve communication among petroleum-exporting nations and exchange views and
explore further avenues for regular and closer communications between them. (General
Information, 2012, p. 1)
The need for further communications and alliances came closer in 1959 when
international oil companies “seven sisters” reduced the price of Venezuelan and middle
eastern crude by about 10 percent. This led to the first Arab Petroleum Congress held by
the Arab League in Cairo. This congress deduced that the international oil companies
should consult the governments of oil producing counties before taking any decision on
the prices of Oil.
In August of the next year the prices were further dropped by the international
companies this led to the Baghdad conference in following month on September 10 – 14
held by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela. The conference led to the
establishment of OPEC.
Baghdad was originally called to be the headquarters of OPEC but Venezuela argued
for a neutral location. It was agreed that organization would be headquartered in Geneva,
Switzerland in 1961, and later the headquarter were moved to Vienna, Austria in 1965.
(Yergin, 1991, pp. 499-505)
Photograph 1 Baghdad conference of 1960

9. 9
In the following years, these five nations were joined by Qatar Indonesia, Libya, United
Arab Emirates, Algeria, Nigeria, Ecuador and Gabon. And OPEC rose to international
prominence during this decade, When the Arabic countries of OPEC declared an
embargo of oil trade to the United States and the western world over the support for Israel
in the October 1973 war causing the what is known in the western world as the1970s oil
crisis this also increased OPEC revenue from US$3/bbl to US$12/bbl and causing several
western nation to switch their support from Israel to the Arab world against the Israeli
Aggression. By doing this OPEC nations demonstrated convincingly that their oil could
be used as both a political and economic weapon. (Maugeri, 2006) A second crisis
happened after the Iranian revolution of 1979.
OPEC broadened its mandate with the first Summit of Heads of State and Government
in Algeria in 1975, which addressed the plight of the poorer nations and called for a new
era of cooperation in international relations. The lead to the creation of the OPEC Fund
for International Development in 1976. (OPEC, 2012, p. 25)
In the 1980s, in response to high prices of oil in the last decade many western nations
took steps to reduce oil consumption and source their oil locally and from non-OPEC
nations. Many nations dropped their dependence oil by moving to coal, natural gas and
nuclear sources for generation of electricity, and by investing in multibillion-dollar project
to find an alternative to oil and to use more efficiently in the automotive industry. (United
Nations Environment Programme, 2013)
The United States also established the Strategic Petroleum Proven reserve (SPR) a
large system of tanks to fulfils the US needs for oil and provide oil to Israel in case of a
petroleum emergency. In addition to that, major oil fields in Alaska, Siberia and Mexico
have been found which allowed for large scale production of oil outside of OPEC.
Photograph 2 Closed gas station pump in the United states
following the 1973 embargo.

10. 10
All of the mentioned above led to an abundance of oil and very low demand met by a
high supply a (glut) the price of oil dropped from 27$ to 10$ per barrel and the market
share of OPEC is reduced from 50% of the last decade to 30% in 1985.
By 1986, the demand for crude oil dropped by more than 5 million barrels a day and
the non-OPEC oil fields production rose by even more.
Saudi Arabia advoked production quotas to limit output and regain control of the prices
but many OPEC member nations did not comply. Saudi Arabia limited its own supply from
10 million barrels a day to one third of that amount but reversed that action later after
proving ineffective effort to control the prices, this flooded the market with cheap oil further
reducing the price of oil under 10$ per barrel.
In the following decade, oil prices continued to rise and fall but moved less dramatically
than the previous decades. In 1997-1998, the Asian financial crisis caused the price oil
fall back to 1980s level.
The invasion of Iraq in 2003, and the increasing insurgency following it and China’s
rapid economic growth in the 2000s causing a rapidly increasing demand for oil aided by
other factor prompted a sharp rise in the price of oil reaching an all-time high in 2008
being 147$ for WTI crude although it fell down couple months later (BBC News, 2008) it
passed the 100$ mark during the Libyan revolution of 2011.
In 2014 oversupply of oil by OPEC member and many other factors such as ISIS
insurgency in Iraq caused yet another glut. Nations agreeing to cut carbon emissions in
the 2015 Paris Climate Agreement further reduced the demands for oil.
By 2016, OPEC partially remedied the issue by using production cuts and the basket
price gradually rose to 40$.
Photograph 3 Oil fields burning in Kuwait, 1991

11. 11
In 2017, production cuts were agreed upon by OPEC countries and non-OPEC oil
exporters which led to the creation of OPEC+; an agreement between OPEC and 10
non-OPEC oil exporting countries lead by Russia to limit production and aid mutual
benefits. (New Decade, New OPEC Oil Curbs.Same Mixed Results, 2020)
Following the COVID-19 Pandemic, Russia rejected the cuts in production as
American shale oil production increased and the decrease in demand caused by said
pandemic. This resulted in ending the three-year partnership and led to what is known
as the Saudi – Russian Price war (Mufson, 2020), an economic wear that is ongoing and
resulted in a massive drop in the price of oil to the point of becoming negative in April 20.
This Saudi imprudent behavior is causing other producers to be unable to sustain
production of oil and causing shale oil to be economically inviable. The United States
threatened to issue a No Oil Producing and Exporting Cartels (NOPEC) act. (Watkins,
2020)
Figure 3 Graph showing WTI crude dropping below zero

12. 12
Members of OPEC
OPEC currently has 13 member countries and three former members. Approval of a
new member country requires agreement by three-quarters of OPEC's existing
members, including all five of the founders. (OPEC Statute, 2012)
Founding Members
These were the founding members of OPEC in 1960 at the Baghdad conference:
Iran
Islamic Republic of Iran is on the founding members of OPEC, it has 158 billion Barrels
of oil in proven reserve and produces 3,990,956 barrels of crude oil a day. The revolution
in 1979 caused an oil price spike and its war with Iraq in 1980-1988 was one of the
reasons of the 1980s glut.
Iraq
Republic of Iraq is one of the founding members, it has 142.50 billion barrels in proven
reserve and produces 4,451,516 barrels a day. It also exports 3,800,000 barrels a day.
Iraq’s numerous wars caused massive changes in oil prices, its latest war with ISIS is one
of the reasons for the 2014 glut.
Kuwait
Kuwait produces 2,923,825 barrels of cured per day and has a proven reserve of
101.50 billion barrels.
Figure 4 Map of OPEC countries (Founding members in blue,active members
in green, ex members in red)

13. 13
Saudi Arabia
Kingdom of Saudi Arabia largest exporter of oil in the world. Its proven reserve is
over 266 billion barrels of oil and its production is 10 million barrels per day. Saudi
Arabia is the defacto leader of OPEC.
Venezuela
Bolivarian Republic of Venezuela has the largest proven reserve of oil in the world.
Its proven reserve is over 300 billion barrels of crude oil. It produces 2,276,967 barrels
per day.
Venezuela was the first country to come up with the idea for an organization of oil
producers.
Other Members
After the establishment of OPEC these five members were joined by:
Qatar
Qatar joined OPEC in 1961 and terminated its membership in January of 2019 Qatari
Minister of Energy, Saad Al‐Kaabi, told a news conference that his country considers it
important to focus on the primary commodity it sells, in reference to natural gas
The minister stressed that Qatar's withdrawal from the organization is due to technical
and strategic reasons, and "not for political reasons," he said. (Aljazeera, 2018)
Indonesia
Indonesia joined in 1962 suspended its membership in January 2009, reactivated it in
January 2016, but decided to suspend it again in November 2016
Libya
Libya joined in 1967, the Libyan revolution in 2011 caused a sharp rise in oil prices
up to 100$ per barrel
United Arab Emirates
Joined in 1967 as the Emirate of Abu Dhabi has 98.63 billion barrels of proven oil
reserves and produces more than 3 million barrels of crude oil a day.

14. 14
Algeria
Algeria, joined in 1969. Its crude oil production stands at around 1.1 million barrels per
day, but it is also a major gas producer and exporter.
Nigeria
Nigeria joined in 1971 and is the 12th largest producer of petroleum in the world and
the 8th largest exporter, and has the 10th largest proven reserves.
Ecuador
Ecuador joined OPEC in 1973 and suspended its membership in 1992, because it was
unwilling to pay the annual 2-million-dollar membership fee and felt that it needed to
produce more oil than it was allowed under the OPEC quota. It rejoined again in 2007 but
withdrew membership in 2020.
Gabon
Gabon joined in 1975 then terminated its membership in January 1995 but rejoined in
July 2016.
Angola joined in 2007
Equatorial Guinea joined in 2017
Congo joined in 2018
In 2019 Saudi Arabia invited Brazil to join OPEC but Brazil declined

15. 15
Country Year Joined
Oil Production
(bbl/day)
%
Oil Reserves
(billion
barrels)
%
Algeria 1969 1,348,361 3.8% 12.2 1.0%
Angola 2007 1,769,615 4.97% 8.3 0.7%
Congo,Republic of the 2018 308,363 0.9% 1.6 0.1%
Ecuador 1973–1992, 2007–2020 548,421 - 8.3 -
Equatorial Guinea 2017 227,000 0.64% 1.1 0.1%
Gabon 1975–1995, 2016 210,820 0.59% 2 0.2%
Indonesia 1962–2008, 2016-2016 833,667 - 3.3 -
Iran 1960 3,990,956 11.21% 158.4 13.4%
Iraq 1960 4,451,516 12.50% 142.5 12.1%
Kuwait 1960 2,923,825 8.21% 101.5 8.6%
Libya 1962 1,003,000 2.8% 48.4 4.1%
Nigeria 1971 1,999,885 5.62% 37.1 3.1%
Qatar 1961–2019 1,522,902 - 25.2 -
Saudi Arabia 1960 12,000,000 33.69% 266.5 22.6%
United Arab Emirates 1967 3,106,077 8.72% 97.8 8.3%
Venezuela 1960 2,276,967 6.39% 300.9 25.5%
35,616,385 100% 1178.3 100%
Founding members
Active members
Former members
In addition to these members, there are also of OPEC+ the non-OPEC oil members
that have entered agreements with OPEC in 2017
 Russia
 Azerbaijan
 Bahrain
 Brunei
 Kazakhstan
 Malaysia
 Mexico
 Oman
 South Sudan
 Sudan

16. 16
OAPEC
The Organization of Arab Petroleum Exporting Countries (OAPEC), is an inter-
governmental organization headquartered in Kuwait.
The objective of OAPEC is “the cooperation of the members in various forms of
economic activity in the petroleum industry, the realization of the closest ties among them
in this field, the determination of ways and means of safeguarding the legitimate interests
of its members in the industry, individually and collectively, the unification of efforts to
ensure the flow of petroleum to its consumption markets on equitable and reasonable
terms, and the creation of suitable climate for the capital and expertise invested in the
petroleum industry in the member countries” (OAPEC)
History
Established in 1968 by Libya, Kuwait and Saudi Arabia in Beirut, Lebanon. The
membership of OAPEC was restricted to countries whose main export is oil, this was
later changed that oil so that other Arab countries can join OAPEC. In 1970, Algeria,
Bahrain, Qatar and United Arab Emirates joined OAPEC. In 1972, Iraq and Syria joined.
In the next year, Egypt joined although it was expelled following Camp David Accords
but later rejoined
The organization was created as a reaction to the 1967 war to use oil as a political
weapon as the 1967 embargo did not succeed in deterring western nations from
supporting Israel in their wicked conquest. (OAPEC History)
Figure 5 Map of OAPEC member countries

17. 17
Nationalization of oil supplies
The nationalization of oil assets alludes to the way toward appropriating oil creation
exercises and private property, for the most part with the end goal of increasing more oil
income for the legislatures of oil-delivering nations. This strategy, which ought not be
mistaken for unrefined petroleum trade limitations, speaks to a critical defining moment
in the advancement of oil approach. Nationalization disposes of personal business
activities — in which private universal partnerships control oil assets inside oil-delivering
nations — and permits oil-creating nations to deal with private property. On the off chance
that these nations are the sole owners of these reallocated assets, they need to conclude
how to expand their realized oil stock's net present an incentive in the ground. A few key
ramifications can be seen because of oil nationalization. "On the home front, national oil
organizations are frequently conflicted between national desires for having to 'convey the
banner' and their own aspirations for business achievement, which could mean a level of
liberation from the limits of a national plan. As indicated by counseling organization PFC
Energy, just 7% of the world's evaluated oil and gas holds are innations that permit private
universal organizations play . Completely 65% are inside the hands of state-claimed
organizations like Saudi Aramco, with the rest of nations like Russia and Venezuela,
where access by Western organizations is troublesome. The PFC study suggests political
gatherings troublesome to free enterprise in certain nations will in general breaking point
exhausting increments in Mexico, Venezuela, Iran, Iraq, Kuwait and Russia. Saudi Arabia
is also restricting limit extension, however because of a willful top, in contrast to the
contrary nations.
PurposesBehind Nationalization
Exploitation
Nationalization advocates asserted the first agreements held between an oil creating
nation and an oil organization were uncalled for to the delivering nation. Indeed, even
without the mastery and aptitudes that the outside oil organizations brought into the
district, the nations would not have had the option to get the oil. Agreements, which
couldn't be corrected or ended until the genuine end date, included huge spreads of land
and proceeded for long spans. Patriot thoughts began when the delivering nations
acknowledged they were being abused by the oil organizations. Commonly these nations
didn't pay the organizations for the loss of their properties or charged just ostensible
aggregates.
The main nation to act was Venezuela, which had the first ideal concession
understanding. In 1943, the nation expanded the whole sovereignties and expense paid
by the organizations to half of their complete benefits. In any case, genuine equivalent
offer wasn't cultivated until 1948. Since oil organizations were prepared to deduct the duty

18. 18
from their expense , benefits procured by the oil organizations didn't change altogether
and, therefore, the oil organizations didn't have any serious issues with the change forced
by Venezuela. Indeed, even with expanded oil costs, the organizations despite everything
held a predominant situation over Venezuela. (Bird & Brown, 2005)
Change in oil costs
Initially, the posted oil cost was the determinant component of the assessments to be
paid by oil organizations. The oil organizations profited by this thought, since they were
the ones who controlled the promoted rates. Organizations could raise the real cost of oil
without expanding the posted cost, in this way forestalling an ascent in the assessments
paid to the sending out nation. Oil-creating nations didn't realize that the organizations
were raising oil costs until the expense of oil fell in the late 1950s and organizations
started consistently bringing down posted costs. The fundamental explanation behind the
decrease in oil costs was the change inside the world's vitality circumstance after 1957
that prompted rivalry between vitality sources.
Endeavors to search out business sectors prompted cost cuts. value cut was first
accomplished by shaving overall revenues, yet before long costs were marked down to
levels far not exactly posted costs as organizations creating oil inside the Middle East
started to offer rough to autonomous and state-possessed refineries. Producing nations
became disturbed when the organizations would downsize the costs all of unexpected .
reliable with "The Significance of Oil. The key clarification for the decline in oil costs was
the adjustment in the post-1957 world vitality circumstance that prompted competition
among vitality sources. Endeavors to search out business sectors have brought about
cost cuts. Value slices were first accomplished through shaving net revenues, yet costs
before long fell far underneath posted costs as oil-creating organizations in the Middle
East started offering unrefined to free and state-claimed processing plants (Odell, 1968)
Nations producing got more unfortunate as organizations out of the blue decreased
expenses as per "the estimation of oil". On the opposite side, high oil costs hoist the
haggling influence of oil-creating nations. Thus, others guarantee that during times of high
oil costs, nations are bound to nationalize their oil supplies. Nationalization can
accompany various expenses, in any case, and it's frequently addressed why a legislature
ought to react with nationalization to an ascent in oil costs instead of actualizing higher
assessments. The way of thinking of agreements offers contentions against
nationalization. (Guriev, Kolotilin, & Sonin, 2009)

19. 19
Structural change of oil-producing countries
The Third World experienced emotional auxiliary change in the decades after oil was
first found. Rising patriotism and the rise of shared gathering cognizance among creating
nations went with the finish of the proper pioneer connections during the 1950s and
1960s. Mutual gathering cognizance among the oil-sending out nations was
communicated through the development of OPEC, expanded contact and
correspondence among nations, and endeavors of regular activity among nations during
the 1960s. The structure of the business, which prompted expanded nationalistic mindset,
was influenced by the accompanying significant changes. (Kobrin, 1985)
Strategic Control
Initially, oil-delivering nations were poor, and they required oil organizations to assist
them with creating the oil and deal with the nation's oil holds. As the nations grew, in any
case, their requests for incomes expanded. The business got incorporated into a nearby
economy which required vital power over valuing and creation rate by the host nation.
Gradually, remote financial specialists lost the trust of oil-delivering nations in creating
assets in the national intrigue. The oil-creating nations requested investment in their
nation's control of the oil.
Expanded capabilities
Besides, mechanical development and administrative aptitude expanded drastically
after war II, which expanded the dealing intensity of assembling nations. Expanded
haggling power permitted the organizations to fluctuate their method of activity.
Development of the oil business
Stephen J. Kobrin states that "“During the interwar period and through the 1950s,
international petroleum was a very tight oligopoly dominated by seven major international
oil companies (Exxon, Shell, BP, Gulf, Texaco, Mobil and Chevron—as they are known
today). However, between 1953 and 1972 more than three hundred private firms and fifty
state-owned firms entered the industry, drawn by the explosion in oil consumption and
substantially diminished barriers to entry.” (Kobrin, 1985)
The new, free organizations have upset the harmony between the enormous business
and the creating nations. Nations knew about their alternatives, when they looked for
better terms of understanding.

20. 20
Changes in Supply and Demand
The lack of oil inside the 1970s expanded the value of oil from earlier decades. The
haggling intensity of assembling nations expanded as both the nation governments and
in this way the oil organizations turned out to be progressively worried about the
proceeded with access to oil. (Kobrin, 1985)
Difference of Ideas between oil-producing nations
Rogers depicts dispersion as' the instrument through which a development (2) is
transmitted through specific systems after some time among individuals from a social
framework. ' Innovations that comprise of innovation, hypothesis, or administrative
methods. Kinds of outlets of correspondence incorporate the news media, associations
like OPEC or the United Nations, or instructive establishments. Because of dissemination,
endeavors to nationalize the oil from creating nations and whether such endeavors were
fruitful, choices to nationalize the gracefully of oil influenced. Two endeavors of
nationalization that had clear repressing consequences for other delivering nations were
the nationalizations of Mexico in 1938 and of Iran in 1951, which happened before the
significant auxiliary change inside the refining business.
The Mexican nationalization demonstrated that in spite of the fact that it had been
conceivable to achieve nationalization, it came at the estimation of disengagement from
the global business, which was overwhelmed by the primary organizations at that point.
The Iranian nationalization additionally bombed gratitude to the deficiency of collaboration
with worldwide oil organizations. These two rates demonstrated to other oil-delivering
nations that, until the structure of the refining business changed to depend less upon
worldwide oil organizations, any endeavors to nationalize would be an astounding danger
and would almost certainly be fruitless. When the structure of the oil business changed,
oil-creating nations were bound to effectively nationalize their oil supplies. OPEC's usage
gave the instrument wherein creating nations could communicate, and quick spread could
happen.
The primary nation to effectively nationalize after the basic difference in the business
was Algeria, which nationalized 51% of the French organizations just ten days after the
1971 Tehran understanding and later was prepared to nationalize 100% of their
organizations. The nationalization of Algerian oil affected Libya to nationalize British
Petroleum in 1971 and thusly the rest of its remote organizations by 1974. An expanding
influence immediately happened, (Kobrin, 1985)

21. 21
Petrodollar
Petrodollars are US dollars paid for offering an item to an oil sending out nation. To
disentangle, the petrodollar plot is an oil trade between nations that purchase oil and the
individuals who sell it for US dollars. The petrodollar was the reason for the oil emergency
inside the mid-1970s when costs went extremely high . It helped increment the unfaltering
quality of oil costs named in U.S. dollars. The term recaptured reputation inside the early
a piece of the 2000s when oil costs rose again. While petrodollars were alluded essentially
to cash earned by Middle Eastern nations and individuals from the Organization of
Petroleum Exporting Countries (OPEC), these days the term has stretched out to
incorporate different nations. (Amadeo, 2020)
Petrodollars are oil incomes in U.S. dollars. they're the primary wellspring of salary for
some, oil-trading individuals from OPEC, additionally as other oil exporters inside the
Middle East , Norway, and Russia. Since petrodollars are designated in U.S. dollars .their
actual purchasing power relies upon both the center U.S. swelling rate and the U.S. dollar
esteem. This implies petrodollars would be influenced by monetary conditions similarly
that US dollar is influenced. Likewise, if the dollars’ worth drop, so does the estimation of
petrodollars, and thus the pay of the legislature additionally drops in esteem.
History
The roots of the petrodollar framework returns to the Bretton Woods Agreement, which
changed the highest quality level to the U.S. dollar on the grounds that the save money.
Under the understanding, the U.S. dollar was pegged to gold, while other worldwide
monetary standards were pegged to the U.S. dollar. However, because of colossal
stagflation, Nixon declared in 1971 that the greenback would not be traded for gold to
increment monetary procedure for the U.S. It prompted the making of the petrodollar
framework, where US and Saudi Arabia consented to set U.S. dollar oil costs. That
implied that whatever other country that bought oil from the Saudi government would need
to trade its cash into U.S. dollars before the deal was finished. That prompted the
remainder of the OPEC nations sticking to this same pattern and valuing their oil in U.S.
cash. (Tun, 2020)
Petrodollar Recycling
The petrodollar framework makes surpluses, known as petrodollar surpluses. Since
petrodollars are fundamentally US dollars, these surpluses lead to bigger stores of US
dollars for oil exporters. These surpluses got the chance to be reused, which recommends
they will be diverted into residential utilization and speculation, want to loan to different
nations, or be contributed back inside the us through the obtaining of bonds and T-bills.
This procedure makes liquidity in money related markets inside the U.S. By contributing
their surpluses, these exporters decline their interest for oil income. (Hertzberg, 2004)

22. 22
Petrodollarsand US Dollar as a currency
Following the fall of the Bretton Woods best quality level in the mid-1970s , the United
States marked an arrangement with Saudi Arabia to normalize dollar oil costs. The
petrodollar framework was conceived from this agreement, alongside a move away from
fixed cash rates and gold-upheld monetary standards to unbacked, gliding rate systems.
The petrodollar framework raised the U.S. dollar to the world's hold money and, through
this status, the us appreciates industrious exchange shortfalls and might be a worldwide
financial authority. The petrodollar framework additionally gives U.S. money related
markets with a wellspring of liquidity and remote capital inflows through petrodollar
"reusing." However, a full clarification of the results of petrodollars on the U.S. dollar
requires a brisk summary of the historical backdrop of the petrodollar. (Amadeo, 2020)

23. 23
Petroleum Conflicts
Natural resources and specifically petroleum are triggering violent conflicts almost
everywhere they are found at: Crimea/Ukraine, South Sudan, and the South China Sea
are handful examples of places that witness the most ferocious fights over oil and natural
gas.
Since oil and natural gas are the most wanted natural resources, it will be a real
surprise if there was not any conflict surrounding them after all; many of the developing
countries' economies are heavily depended on the petroleum industry. Moreover, the
world today is an energy-consuming world. That means that the control over the most
important source of energy can and often leads to geopolitical conflicts that not only affect
the people living in the conflict area, but most people around the world as well. For that,
there is always a chance of external involvement to try neutralizing the area and securing
the production line of petroleum. (Klare, 2014)
Crimea/UkraineConflict
The Crimean Peninsula was annexed by Russia in 2014 and with that, Ukraine's supply
of oil and gas deposits in the Black Sea has decreased by 80%. The Russian Kremlin
claims these oil and gas deposits to be inside the exclusive Russian economic zone;
obviously, Ukraine claims the same.
With the presence of 10000 Russian soldiers and civilian, Russia tries to prove its
strategic position and influence over Crimea like what happened in November 2019 when
24 Ukrainian sailors arrested by the Russian coastguard. (Cohen, 2019)
Figure 6 Ukraine's current pipelines

24. 24
When the annexation took place in 2014, Russia took by force the oil and gas
reservoirs in The Black Sea that before was possessed by Ukraine. As a result, The
Russian Sidehas extracted 1.8 billion cubic meters of natural gas and 61.1 million barrels
of crude oil in 2015 alone. They also gave the green light to construct five new production
wells. Crimea alone produces 7.8 billion cubic meters of natural gas annually, which was
about 15.6% of Ukraine's annual consumption before the annexation. (Bugriy, n.d.)
South Sudan and Nigeria
The conflicts in Nigeria and South Sudan are similar; they are both feeding on the
anger towards the corrupted government officials who became wealthy because of oil
money.
Nigeria is the largest oil producer in Africa, producing 2.5 million barrels of crude oil
every day, with most of it exported, Nigeria possesses a potential key to wealth and
power. The annual revenues are speculated to tens of billions of dollars and most of that
fortune ends up in the pockets of very small number of people. The same case occurs in
South Sudan.
For South Sudan, the well production was about 150 000 barrels everyday as of 2013,
which is not a lot but it can help developing the country. In late 2012, rebel forces were
formed under the leadership of the former vice president with the aim of overthrowing the
president by controlling the oil fields in the country. The rebel forces saw of the fields a
power of submission that can help create a powerful position in the region. As of 2020,
the fields are firmly in the hands of the government, with rebel forces taking a strike at
periodically. (Klare, 2014)

25. 25
South China Sea Conflict
It is perhaps the biggest oil-based conflict in the world. According to the United States
Energy Information Agency, this area contains around 190 trillion cubic feet of natural gas
and 11 billion barrels of crude oil. These resources are all located in a region claimed by
China, Vietnam, The Philippines, and Malaysia. (Asia Maritime Transparency Initiative,
n.d.)
The feud between these countries began in the 1970s when everyone started claiming
islands in the sea to extend their exclusive economic zone and the diplomatic relations
between the neighboring countries got complicated even more when oil and natural gas
were discovered there. In recent years, China tried to reclaim land from the sea by
increasing the area of the islands they do possess so far, they reclaimed 3200 new acres.
The United States got involved in the situation to protect its political interests in the
region by stepping up to China's territorial claims and efforts to reclaim land from the sea.
Japan sold military ships to Vietnam, The Philippines to ensure their presence in the
conflict and secure their maritime capacity. Washington’s defense treaty with Manila
could draw the United States into a potential China-Philippines conflict over the
Figure 7 Location of South China Sea's Conflicted Areas
(Daiss, 2018)

26. 26
substantial natural gas deposits or lucrative fishing grounds in disputed territory. The
failure of Chinese and Southeast Asian leaders to resolve the disputes by diplomatic
means could also undermine international laws governing maritime disputes and
encourage destabilizing arms buildups. (Council on Foreign Relations, 2020)
China spent over a billion dollars to build its Hai Yang Shi You 981 (HYSY 981) deep-
sea drilling rig. When it was launched in 2014, China claimed that the rig was actually
considered Chinese “sovereign territory.” Since then the rig has been used for various
purposes, including a controversial deployment in mid-2014 off Vietnam’s coast in the
country’s U.N. mandated Exclusive Economic Zone (EEZ). The Vietnamese responded
to that move by burning Chinese factories and protesting. These actions forced the
Chinese authorities to withdraw the rig from the area, but the already present tension
grew larger.

27. 27
Conclusion
In conclusion, Oil politics is one of the many faces of modern politics; this comes from
oil being the most needed commodity in the world. Countries that contain large oil and
natural gas reserves enjoy a fundamental role in shaping and influencing the world trading
market. An example of this is when the Arab OPEC countries declared an embargo of oil
trade to western countries that supported Israel in the 1973 war. This forced many
countries to switch sides and increased the OPEC share by 400%. Oil producing
countries also suffer from ''the oil curse'' as they cannot diversify their sources of income
and keeping their economy solely dependent on the most unpredictable product.
The Organization of Petroleum Exporting Countries (OPEC) was established in 1960
to serve as a governing body for global oil trade and to help stabilize the prices of oil
during conflicts or periods of oil abundance. Although it does not have the reputation of
OPEC, The OAPEC was initiated in 1968 to oversee the Arab countries production of oil
and to ease the oil market in the region.
To limit the role of The Middle East in oil politics, The United States introduced the idea
of petrodollars. This happened to ensure that in case of another embargo by the Arab
countries, the oil trading process would not be affected in the same way it was during the
1973 war. When Saudi Arabia agreed on the concept of petrodollars, other OPEC
countries followed their footsteps.
Several key implications can be observed because of oil nationalization, because
confiscating oil and natural gas reserves has a bad outcome on foreign and private oil
companies. However, many governments are using this as a political and influential
weapon to gain more revenue and to try to boost their economy.
Moreover, there are always contradicting governmental benefits which leads to
conflicts. Discovering oil or natural gas in a distressed area is a spark that usually initiates
military involvement and occupation. For example, the Russian invasion of Crimea to
possess 80% of Ukraine's gas reserves in The Black Sea. Another example is the current
claims by several countries in the South China Sea.
The world today is an energy-consuming world. This means that the control over the
most important source of energy often leads to geopolitical conflicts that not only affect
the people living in the conflict area, but most people around the world as well.

28. 28
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