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America’s Involvement in the Saudi Arabian Oil Market Term Paper

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Updated: Nov 25th, 2021

Introduction

The world economy in most points depends on the transition of oil within the countries. In fact, it is one of the most strategic energy inputs for provision of dominance and credibility within countries. Thus, the probable deposits of oil characterize a definite country in terms of its profitability. The possession of oil determines possession of money and power. It is known that the Gulf region in the Middle East is rich in deposits of oil. Moreover, this region is asserted to be with the hugest amounts of Black Gold on earth, especially in Saudi Arabia. Political relations in the world arena in many points relate to the oil affairs and agreements within particular partners in some respects. The international hegemony of the United States of America also spread its activity on the governmental level toward the merger with Saudi Arabia in oil issue. Thus, ARAMCO appeared, as the result of uneasy agreement between two countries: the US and Saudi Arabia.

Discussion

Reasons for merger

First of all, it is vital to point out the main reasons for the merger of the US with Saudi Arabia. In this respect one should bear in mind that big corporations lean to the union with big opportunities. In other words, two major giants in the market of oil products, Chevron and Texaco, on behalf of the governmental trend in the external relationships in the Middle East made a great attempt in merging with Saudi oil domain before other two even bigger companies, Exxon and Mobil bought forty percent share after the World War II (Vitalis 9). In this respect with huge financial approaches Saudi side of the agreement tried to make such union according to the financial procedures described above, called ARAMCO. Sounding somehow in Arabic manner it inscribed the meaning of the Arabian American Oil Company. With such abbreviation and partnership this company became the largest oil corporation in the world. Thus, the main reason for control and supervision of oil torrents in terms of the international agreements was achieved in American favor.

However, since the foundation of the company the relations between two countries began deepened toward conflict situations. One of the reasons for that was the unfair and somehow outrageous for Saudi royalty division of incomes. For instance, in the year 1949 ARAMCO “paid $43 million in U.S. income tax but only $39.1 million in fees and royalties to the Saudi government” (Bronson 55). Since the times after war the situation in the Gulf and in the Middle East constantly changed causing military conflicts in the area. However, ARAMCO underwent all challenges and ordeals of the time and still provides the powerful presence among other oil companies.

Logistics

Logistics of ARAMCO is versatile in its facilities. The thing is that ARAMCO provides the storage and transportation of oil not only in the Kingdom of Saudi Arabia but also overseas. In this respect it vital to admit that the company is able to store more than 100 million barrels of oil in the facilities placed all over the world (Highbeam para. 1). The partner countries are the US, Caribbean and Asian Pacific Basin, and even the Netherlands (Highbeam para. 2). The territorial spread of ARAMCO is still increasing due to high turnover of the main products.

Conclusion

To sum up, the merger of Saudi Arabia and the US is uneasy, but still the US imports about 15% of its oil from ARAMCO and controls the work of the company on the basis of bilateral agreement.

Works cited

Bronson, Rachel. Thicker than oil: America’s uneasy partnership with Saudi Arabia. Oxford: Oxford University Press US, 2006.

Highbeam. “Saudi Aramco Logistics – Storage Facilities”. APS Review Gas Market Trends. 1993. Web.

Vitalis, Robert. America’s kingdom: mythmaking on the Saudi oil frontier. Stanford, NJ: Stanford University Press, 2007.

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1. IvyPanda. "America’s Involvement in the Saudi Arabian Oil Market." November 25, 2021. https://ivypanda.com/essays/americas-involvement-in-the-saudi-arabian-oil-market/.


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IvyPanda. (2021) 'America’s Involvement in the Saudi Arabian Oil Market'. 25 November.

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