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The Roil in Oil

Oct 12, 2014 Editorial

Most Guyanese have been transfixed by the protests in the Middle East and North Africa (MENA) that have already toppled two dictators and are threatening several others. But the sudden jump in our gas prices should have alerted us to another dimension in the crisis that has affected every other country in the world: the future of oil. Whatever the outcome of the protests, uprisings and rebellions now sweeping the region, one thing is guaranteed: the world of oil will be permanently transformed. And oil, we should know by now, is what makes the world go around.
While coal literally fuelled the 19th century industrial revolution – powering factories, railroads and steamships – it was cheap oil that made the modern, globalised world possible from the turn of the 20th century.
That world would grind to a halt and crumble without a steady and continuous stream of oil – of which MENA produces 36% of the total world’s output – 29 billion barrels per day in 2009. While this may not seem overwhelming, consider that it exports more of its production than any other surplus area – 20 million barrels daily.
And this fuel goes to the energy- hungry manufacturing behemoths – China, the US, EU and Japan. MENA’s strategic importance is accentuated when one considers that by 2035 its production ratio will jump to 43%. The hard fact is that two-thirds of the world’s reserves are locked under MENA’s soil (or sand).
Now we can appreciate why all these dictators were being supported for so long by western powers: they were simply securing their lifeline. Oil was discovered in Iran (then Persia) in 1908 and exploited by the Anglo-Persian Oil Company (now BP). Churchill nationalised the company in 1914, then removed the pro-German Shah during WWII, replacing him with the latter’s son, Mohammed Reza Pahlavi. Himself soon deposed, he was reinstated by the British and Americans who overthrew the democratically elected PM Mossadegh. The point was to guarantee the supply of oil.
After Pahlavi was finally overthrown in 1979 by Khomeni and the oil nationalized once again, we can understand the ire of the west against the Iranian regime. After all, they have the second largest reserves of oil after Saudi Arabia. Neighbouring Iraq has had a remarkable history. Not coincidentally, it’s reserves are equal or somewhat larger than Iran. The US invasions of 1991 and 2003 were all about controlling oil. The first Americans entering Baghdad immediately secured the Ministry of Oil HQ. However, the expected oil bonanza was never realized because of the war of attrition waged by the Iraqis.
The experiences of Iran and Iraq may not be exactly comparable to those of Algeria, Bahrain, Egypt, Iraq, Jordan, Libya, Oman, Morocco, Saudi Arabia, Sudan, Tunisia, and Yemen. But in all of them there have been western powers behind the installation of the high handed leaders.
Interestingly, China has been one of the major backers of the dictatorial regime in Sudan. This simply illustrates the point that oil is vital for any nation that hopes to industrialise or maintain its industrial base.  Algeria, Egypt, Iraq, Libya, Oman, and Sudan are oil producers; Egypt and Jordan guard vital oil pipelines and, in Egypt’s case, a crucial canal for the transport of oil; Bahrain and Yemen as well as Oman occupy strategic points along major oil sea lanes.
All have received substantial US military aid and/or housed important US military bases. And, in all of these countries, the chant is the same “The people want the regime to fall”.
The kingpin and the largest prize, of course, is Saudi Arabia – which is connected by a bridge to Bahrain, now locked in unrest. The Saudi monarch is hoping to defuse any uprising in his kingdom by authorizing US$36 billion to be spent immediately to improve conditions for the poorer elements.
While sectarian concerns may preclude a unified opposition (the province nearest to Bahrain is Shia, unlike the majority Sunni), on the other hand sectarian riots may just as effectively affect production.The bottom line is that oil will be roiling for quite a while.

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