Oil and Gas and American Foreign Policy - Case Study Example

Oil and Gas and American Foreign Policy Introduction One of the key objectives of American foreign policy all along has been to gain and to maintain access to overseas fields abundant in energy resources since World War I. After World War I, the interest of America on vital overseas areas abundant in energy resources was triggered by various factors including concerns over depletion of domestic reserves and increasing competition of America with various nations in Europe in the global market (Dobson & Marsh, 2006). Further, this has been triggered by the uniqueness of energy resources such as oil and gas owing to their perceived centrality to military power and pervasiveness in civilian economies. The goal of gaining access and maintaining access to energy resources overseas resonated well with America’s national security interests during World War II. The US established various energy policies before and during World War II which facilitated successful access into foreign energy reserves especially in the Middle East, a region which is abundant in energy resources (Yetiv, 2004). The same principles have guided the US energy and foreign policies over the succeeding decades, with little modification. Generally, the US policies have focused on increasing access to cheap overseas energy resources and as much as possible, preserving domestic reserves. Though there have been proposals to adopt foreign policies that will reduce dependence on overseas energy resources, the US’s dependence on overseas oil has increased tremendously over the years (Randall, 2005). In view of these facts, this paper addresses American foreign policies, giving specific focus to the energy resources, oil and natural gas. To address this adequately, the paper gives an overview of foreign policies affecting the aforementioned energy resources since World War I. American oil and gas foreign policies since World War I The history of energy industry in America dates back to the 19th century. According to Randall (2005), this industry started with discovery of oil in 1859 at Oil Creek Pennsylvania in 1859. By 1914, during World War I, America had become the largest producer and exporter of energy products in the world, especially oil. Randall further notes that America supplied oil to Allied Forces which helped them to achieve victory. By 1920, the US produced approximately 62% of the world’s energy products and during this time, it realized that it had depleted around 40% of its oil and natural reserves. Concerns started emerging over the rapid depletion of petroleum reserves, which triggered the US to gain interest in obtaining oil from overseas. Competition between the US and the Soviet Union also provoked interest for oil reserves in overseas fields. Further, according to Randall (2005), the US feared that it was going to be outflanked by other nations in the international arena as major companies from other powerful nations extended their global reach for oil resources. There also were concerns that nations such as the Soviet Union, the Netherlands and Great Britain were increasingly buying oils wells from oversees reserves which was likely to provide them with greater influence and control over the world of commerce as well as military power (Schneider, 2005). This compelled the US to develop vigorous overseas policies to ensure that American interests were not left behind by firms from other nations. The foreign policies focused primarily on gaining and securing access to overseas energy reserves (McCormick, 2010). Among other steps, the US decided to develop an international firm financed by American capital, guided by American engineering and supervised in its international relations by the government of the US. The main goal for this establishment was to secure and develop petroleum properties in foreign countries. However, according to Randall (2005), this idea failed to materialize. By mid 1920s, many nations had imposed restrictions on American nationals who wished to explore petroleum in those countries. In response, the US passed the Mineral Leasing Act of 1920 which allowed domestic foreign-owned corporations’ access to oil and natural gas in American public lands on condition that similar privileges were given to American citizens in foreign nations. In other words, the Act established a principle of reciprocity of America with other nations whose oil corporations existed in America (Randall, 2005). Given that the US was the greatest producer and consumer of oil and natural gas in the world in the 1920s, the denial of investment for corporations from nations which were perceived to discriminate against American citizens proved to be a powerful wedge in opening doors overseas (Wittkopf, et al, 2008). For instance, in 1927, America refused to grant Shell, a Netherlands firm, access to explore oil in certain public lands in America on the grounds that Netherlands imposed restrictions on American businesses (Wittkopf, et al, 2008). The US reconsidered this decision only after the Netherlands met the specifications it laid down. On top of maintaining of an open door for American enterprises abroad, the US maintained active support for private enterprises in obtaining foreign concessions. In spite of the international depression that set in during the late 1920s, American foreign-based petroleum companies intensified corporative ventures and sought to consolidate their holdings in order to maximize competition globally. For instance, in the 1930s, fifteen private oil companies from the US formed a ‘Webb-Pomerene’ export corporation in order to reduce price competition with firms from other nations (Randall, 2005). According to Randall (2005), the US government started adopting policies designed to protect domestic resources and maximizing the exploitation of foreign resources. This move started with efforts to gain and maintain access to foreign energy reserves in the Gulf of Mexico and the Caribbean. The US started protecting its citizens to secure energy properties in foreign nations. It further started preventing holders of domestic properties from transferring them to foreign nationals as well as cooperating with foreign-based domestic oil firms to establish blackening facilities in commercially strategic posts. In addition, US government provided financial assistance to these firms to enable them purchase properties in other nations. At the same time, the US still maintained its retaliatory measures to combat discriminatory measures for American nationals abroad (Randall, 2005). After successful entries into the Gulf of Mexico and the Caribbean, US foreign oil policies started taking a gradual shift towards the Middle East, especially Iraq and Kuwait (McCormick, 2010). During World War II, the demand for oil in the US and abroad continued to rise as the US became a major exporter to its allies. To a considerable degree, the nation still relied on indigenous petroleum products. During the war, it increasingly shifted its foreign energy policy emphasis from the Gulf of Mexico and the Caribbean to the Middle East. According to Yetiv, (2004), the production of oil and natural gas in the Middle East was then dominated by Europe, especially Britain. This posed numerous challenges for the US, hampering its successful entry into the Persian Gulf. The US then started stressing the need for international cooperation in the development of energy policies. However, according to Randall (2005), the US maintained its aggressive foreign policies, leading to an open competition with Britain in the Middle East. This alarmed some governments especially the major oil and natural gas producing nations to contribute to reiteration actions against US corporations. The US government responded by forming the Petroleum Reserves Corporation, a government-sponsored international company, to replace private corporations in the Middle East. It reasoned that such a corporation would help to increase government involvement in the Persian region, thereby increasing importation of oil from overseas, while increasingly preserving local reserves (Randall, 2005). However, according to Randall (2005), this move led to disagreement between the private sector and the government, with the private corporations accusing the government of nationalizing oil corporations. Finally, the Petroleum Reserves Corporation lapsed into nonexistence. The collapse of PRC did not reduce American determination to access the Persian Gulf energy reserves. The US government established a basic pattern of cooperation with major companies and continued pushing for equal access to Persian Gulf energy reserves with Britain. With increased emphasis on maximizing foreign holdings and sustaining a private enterprise model, the US succeeded in its access to oil and natural gas in various regions in the Persian Gulf. McCormick (2010) notes that the US foreign policy framework established prior to and during World War II has always provided the framework, values and geographic focus of policy until today, with the primacy of attention focusing on the Middle East. The same principles of policy have remained consistent in the subsequent decades, though there have been shifts in emphasis and in the intensity of concern among policy makers as global conditions evolve. McCormick further asserts that there have been cases of antagonism to state enterprises and preference for private sector investment. In most cases, there have been close working relationships between state actors and officials of private corporations. However, there have been constant disagreements resulting from constant efforts to reduce dependency on any single region of the world especially the Middle East. Proposals have been made constantly to reduce focus on the Persian Region and increase focus on the Western Hemisphere in the aftermath of the two major oil shocks of 1970s (McCormick, 2010). According to McCormick (2010), there has been little change in the administrative structure of decision making after the 1950s though there has been an increased tendency to concentrate power in the White House, in the hands of United States presidents’ closest advisors or national security staff. However, one major administrative change occurred during the Carter administration which resulted into the establishment of the Department of Energy, an initiative which had been proposed before by President Ford, and which has worked until today. This department absorbed all energy-related programs which had been established by various departments including Defense, Commerce, and the Department of the Interior. Several ad hoc advisory committees have been established from time to time which dealt with emergencies that have occurred especially in the overseas oil fields. For instance, in 1967, President Johnson’s administration established the Emergency Petroleum Supply committee to deal with the impact of the Arab-Israel war. President Nixon’s administration also established a committee called the Project Independence Advisory Committee to address the challenges of the 1973-74 Arab oil embargo. Throughout, there have been firm interests by the US to secure access to oil and natural gas reserves. However, during the Cold War era, US military and foreign policy planners tended to shift their position on the question of imports and domestic resources and reasoned that in order to enhance US national security, there was need for a well developed domestic industry with Naval Petroleum Reserves in a state of readiness. On top of this, the US has always reasoned that it is essential to develop strategic petroleum reserves to meet emergencies as well as oil shortages in the future. As Randall (2005) notes, such thoughts were naturally intensified by the Arab States-OPEC oil embargo during 1970s which underlined the dangers of reliance on foreign oil for any significant proportion of domestic requirements. Therefore, strategic planning has recently been focusing on the need to secure access to foreign supplies while at the same time focusing on reducing dependency on such supplies. Randall (2005) argues that various incidents brought the Middle East to the forefront of American Foreign policy including the Iranian revolution, the Soviet invasion of Afghanistan in 1979, the Iran-Iraq war in 1980s the consolidation of Saddam Hussein’s power in Iraq, the increasing importance of Islamic fundamentalism and the Al-Qaeda inspired attack on the United States on 11 September 2001. Since the US’s entry into the Middle East, it has fought several major wars including war against Iraqi forces and in Afghanistan against the Taliban forces and supporters of the Al-Qaeda group (Wittkopf et al, 2008). Although not all US involvements are occasioned by the importance of energy in the Persian Region, in most cases, energy has been established to be the source of interest (Wittkopf et al, 2008). Conclusion In conclusion, US foreign policies have helped to gain and to maintain access to overseas oil and natural gas reserves. The policies have enabled the US to achieve its goal of preserving domestic reserves. As a result of the foreign policies, the US has been able to gain much control over major overseas oil and natural gas reserves, especially in the Middle East. This has helped the nation to earn much significance in terms of national security and power over its competitors in the global arena. As noted in this essay, the current US foreign policies focusing on oil and natural gas date back to the time before World War II but with little modifications. In the past, policies have been advanced to conserve oil and natural gas and reduce dependence on foreign reserves. However, the policies have often clashed with political and economic interests and the US’s dependence on foreign sources has been increasing with growing demands of energy resources. Today, the greatest concern facing the US is not how to gain access to overseas energy resources to meet the growing demands. Rather, the greatest concern is how to move away from overdependence on foreign oil and gas reserves, a situation that can been described as an unsustainable path. References Dobson, A. P. & Marsh, S. (2006). US foreign policy since 1945, New York: Taylor & Francis. Halabi, Y. (2009). US foreign policy in the Middle East: From crises to change. Cornwall: Ashgate Publishing, Ltd. McCormick, J. M. (2010). American foreign policy and process (5th edition). Boston, MA: Wadsworth/Cengage. Randall, S. J. (2005). United States foreign oil policy since World War I: For profits and security. McGill-California: Queen's Press – MQUP. Schneider, J.D. (2005). “Crude Awakenings: Global Oil Security and American Foreign Policy.” Energy Law Journal, 26(1): 211-214. White House (2003). “Energy policy could help mitigate oil shocks.” Oil & Gas Journal, 101(5): 34-34. Wittkopf, E. R., Jones, C. M. & Kegley, C. W. (2008). American foreign policy: Pattern and process. Belmont: Cengage Learning. Yetiv, S. A. (2004). Crude awakenings: Global oil security and American foreign policy. Ithaca, New York: Cornell University Press. Read More