Trouble spots
Terrorism is only one of the forces of instability that now plague the world's major oil-producing nations
Even as the energy markets breathed a sigh of relief that Indonesia's oil fields had escaped the devastating impact of earthquake and tsunami, news of two terrorist attacks in Saudi Arabia last week sent oil futures upward. Although oil facilities were not targeted, the recent release of a tape in which al Qaeda chief Osama bin Laden called for attacks on Persian Gulf oil producers added to the reminder of the security threats and tenuous politics besetting many of the world's key oil producers.
Rarely have the world's leading economies seemed so bound to a turbulent oil-exporting world. Rising demand and scant spare pumping capacity have magnified the impact of geopolitical jitters, even as the sources of instability have multiplied. "Wherever you look on the oil scene, you have political and economic problems," says Leo Drollas, chief economist at the Centre for Global Energy Studies in London. With the exception of the 1973-74 embargo by Arab members of OPEC, the Organization of Petroleum Exporting Countries, Drollas says, "this is probably the most dangerous period we've gone through since World War II."
As it surveys a troubled oil world, the free-market-oriented Bush administration finds itself mostly a spectator to events. In Colombia, the U.S. Army is helping train and arm local troops defending a pipeline from leftist rebels. But few countries want a U.S. military presence. Still, the administration has encouraged Saudi Arabia, home to the world's largest known oil deposits, and other producers to expand capacity as a cushion against supply cutoffs. It also lifted general sanctions against Libya, which should allow U.S. oil firms to eventually raise Libyan oil production.
Last year U.S. officials also explored the possibility of Saudi Arabia's stockpiling oil closer to the U.S. market, but the idea foundered for lack of sufficient surplus production capacity, U.S. News has learned. The administration also proposed a northeast Asia-focused forum for cooperation on energy and other issues with China, Japan, South Korea, and Russia. But Beijing, whose growing appetite for energy has been matched by aggressive moves to secure oil and gas deals in Latin America, Africa, and Asia, refused to participate.
To some administration strategists, the U.S. venture in Iraq could also benefit consumers--though not by taking control of Iraq's huge oil supplies, as critics charge. For the next half century, officials reckon, economics and technology leave America no real alternative to foreign oil. By 2030, Arab-dominated OPEC is projected to supply more than half the world's oil, up from about 35 percent now. With mostly authoritarian regimes, the vast area from North Africa and the Arabian Peninsula to central Asia and western China is dubbed the "crescent of instability" by some officials, who argue that fostering democracy in a major Arab-majority country like Iraq would improve oil supply security. "You're going to have to establish a beachhead somewhere--democratic forces to defeat the forces of instability," says a senior government adviser.
Bane. That ambitious hope aside, political scientists and industry-watchers often talk of an "oil curse" that retards democracy, public institutions, and even civil liberties. With oil wealth concentrated at the top, people in countries like Venezuela, Nigeria, and Azerbaijan have shared little in their nations' windfalls, while factions scrap for the money. Oil states Equatorial Guinea and the African island nation of São Tome and Principe have suffered coup attempts. Oil dependence also curbs incentives to diversify economies. And, as the watchdog group Transparency International repeatedly documents, oil riches encourage corruption. Oil, says a senior U.S. official, "becomes a narcotic. You don't develop the rest of your economy. You don't do the things you need to do in the 21st century to succeed."
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