There is only one market for oil, and that is the global market. The market is subject to effects of world politics especially concerning matters of diplomacy, and pricing wars between major suppliers. These will in effect have adverse political implications as well as economic effect to the major players especially the United States of America.
This is because the US is the world-leading importer of oil, with the country importing at least 70% of its oil needs, which has risen from 33% in the last 20 years (Yergin I). As such, the US heavily relies on major suppliers of the commodity to fulfill its domestic energy requirement, thus enhance its energy security. The major exporters of oil to US include Canada, Venezuela, Mexico and Saudi Arabia.
The complexity of the global oil market is enhanced because the global oil business has heavy political implications with major world suppliers led by Russia using it as a political tool to advance self interest in the world political affairs. As such the US finds it hard to engage effectively with such countries especially Russia as such dependency will undermine the place of the US in the world politics (I).
Former British premier, Sir Winston Churchill observed that to circumvent the issue of political manipulation from oil supplying countries, oil dependent countries ought to create a diverse oil supply mechanism such that should one source be affected, the country will still have enough suppliers as contingency plans (LeVine 1). As such, the US government has been strongly opposed to over reliance on one source especially Russia, for oil; Europe is heavily reliant on Russia for her oil and natural gas supplies (Woehrel 18).
Major players in the global oil market such as India and china have made tremendous effort in diversifying their energy supply by moving from energy sufficiency to development of a diverse energy supply mechanism. This is not only as a way of ensuring energy security but also as part of their foreign policy development.
This proves how important oil is to diplomacy and foreign policy development and as such, the US cannot be left behind by emerging nation such as Indian and china. This means that due to the frosty diplomatic and politically complex nature of the US-Russia ties, Washington cannot therefore turn to this Moscow for its energy supply diversification needs.
America will have to look elsewhere and possibly towards the east. Despite the tension that has [previously existed between the two countries America has no alternative than to enhance its ties with Saudi Arabia. Developing such relations means multiple benefits that come along with it especially in enhancing America’s foreign policy in the entire Middle East. Thus, this paper endeavors to describe why the US needs Saudi Arabia for its energy supply diversification program as well as foreign policy development for the Middles East.
Russia has developed its natural gas and oil resource as well as investing heavily in the energy supply infrastructure to become a force to reckon with in the global energy market. It has established something of a monopolistic strategy in European and Eurasian energy market. Diplomats and political analysts have argued that this, accompanied by the decision to abolish trade aids to former soviets states is the new Russian foreign policy aimed at consolidating its position in matters of international politics (Woehrel 1).
The US is however strongly opposed to Russian energy expansion program and has seen advised European countries to check their reliance on Russian oil. Furthermore it has supported the development of oil pipelines such as Baku-Tiblisi-Ceyahn pipeline that will help supply oil from Azerbaijan to the European market thus shrinking Russian European domain and subsequently its (political) influence (14, 15).
This is in efforts to contain Russian growth and influence as a world power. Therefore the Washington cannot look up to Moscow as a energy supply diversification alternative but consider other alternatives especially those that The US stands to gain at the economic as well as the diplomatic fronts.
America’s major suppliers of oil and natural gas are Canada, Mexico Venezuela and Saudi Arabia. Canada supplies about 17% of America’s needs while Mexico 13% exports to the US market. Venezuela averages about 7% of America’s oil needs. The three are among the four main suppliers and more importantly are Americas neighbors.
Since oil is part of the wider foreign policy the US needs to look further beyond its neighbor and develop strong relationship with Saudi Arabia the suppler that complete the quartet and the third major exporter of oil to the US market at 11%, which is about 1.46 million barrels per day. With the price if oil approaching US$ 100, the US is spending a colossal amount of money on oil from the gulf (LeVine 1; Yergin II).
Further studies have indicated that the demand for oil will rise in the next forty years and Saudi Arabia tops the countries with the greatest potential for expanding oil supply, and as such will be a possible supplier to the US future increased energy needs (Yergin II). This further supports the need that the US needs Saudi Arabia more than ever before.
LeVine adds that the notion that some sections of Washington think that some of that money spent by US to buy oil from Arabia goes to fund terrorism is misplaced and a misrepresentation of facts (2). This is because of the important role that Saudi Arabia is applying in maintaining peace in the Middle East. Washington has always called upon Riyadh as one of its key diplomatic alleys in carrying out its activities of repressing terrorism in that region.
Riyadh is playing key diplomatic roles , and successfully so, such a mediation with terrorists and terror groups in countries like Afghanistan, Yemen Lebanon and Iraq, as well as gathering counter terrorism intelligence , the latest of which thwarted an attempt to send explosive parcels to Washington.
Without Riyadh’s support, the US diplomatic duties in the Middle East would almost be non-existent and in great peril where they exist. Thus, they us need to look to Riyadh for oil as its energy diversification strategy but more importantly, it needs to needs the oil as a way of strengthening its only ally in the Middle East.
The very nature of the political situation exposes the US Middle East soft diplomatic underbelly and thus makes the US more dependent on Saudi help (oil). Such dependency however has its negative repercussions on a country. Some suppliers such as Russia use oil as a political weapon to advance their political agenda, and as such may use that trade advantage to influence political decision in their weak trade partners.
To avoid such occurrences the US is diversifying its energy sources not only through diversifying supply and sources but also in looking at alternatives to oil. This is intended to reduce its dependency on oil. There are efforts to develop new technologies and enhance energy efficiency. Energy efficiency is a technology that ensures that there is optimum out put for every input of unit of energy and thus avoids wastage.
Energy efficiency efforts have doubled up in the last decade. Accompanying energy efficiency methods is the development of clean energy through solar, wind and other liquid fuels such as bio fuels. These alternative sources are supposed to supplement US domestic energy needs and reduce overdependence on oil (Yergin II). However, LeVine explains that alternative energy in the US accounts only for a small percentage of its energy use and as such cannot be entirely depend upon as supplement to oil (2).
Despite the fact that future Saudi Arabia oil potential will significantly increase while the US oil needs will reduce marginally this does not reduce America dependent on oil supply from outside sources. It is also not threat to America’s future but an opportunity to explore and tighten diplomatic relations between these twp frenemies. As such, America still needs oil from Saudi Arabia now and in future.
The future of America greatly depends on how it plays its diplomatic crds well with Saudi Arabia, especially concerning oil trade. This oil is impotent because it has economic implication as well as diplomatic implications. Tightening the relationship will mean the US can buy more oil for the Arab country while Arabia can use that money to strengthen its politics and economy so as to help America carry is diplomatic duties in that region.
Works Cited
LeVine, Steven. Frenemies Forever: How Washington Stopped Worrying and Learned To Love Saudi Arabia, Again. Foreign Policy, 2011. Web.
Yergin, Daniel. The Fundamentals of Energy Security, Foreign Affairs House, 2007. Web.
Woehrel, Steven. CRS Report for Congress: Russian Energy Policy Toward Neighboring Countries. 2008. Web.