Academic journal article Journal of International Affairs

War and the Oil Price Cycle

Academic journal article Journal of International Affairs

War and the Oil Price Cycle

Article excerpt

Complex rivalries for influence among regional powers, most notably between Saudi Arabia and Iran but also including Turkey, Qatar and the United Arab Emirates, are transforming the Middle East. As local borders and ruling institutions have become contested in the aftermath of the Iraq War and the Arab Spring, so has control of the region's major oil and gas facilities. Warring militias, the Islamic State of Iraq and Syria (ISIS), Al Qaeda and traditional governments are increasingly focusing on maintaining or gaining control of oil production and refining installations. Additionally, regional conflicts, now complicated by the active military involvement of Russia, have spilled over to affect global oil markets as Saudi Arabia and its Gulf allies, seeking to influence regional military and geopolitical outcomes, have initiated a market share war that has brought about a collapse in oil prices.

This paper examines how conflicts in the Middle East, including the Syrian civil war and the rise of ISIS, are shifting the geopolitics of oil. These conflicts are raising serious new risks to regional oil facilities, making them both strategic assets and spoils of war. Current diplomacy to resolve the conflict in Syria faces serious challenges. In addition to humanitarian grounds, it is imperative to find a durable solution in order to prevent the continued destruction of major regional oil and gas production and export facilities. The ongoing destruction of such infrastructure may represent a major challenge to global energy security in the three to five year timeframe.


Oil has shaped international conflict for decades. According to one estimate, twenty-five to fifty percent of interstate wars between 1973 and 2012 had oil-related linkages. 1 But the cyclical nature of oil's contribution to global conflict is not well understood. Not only are oil prices cyclical, but the geopolitics of oil are linked inexorably to the same boom and bust price cycle.

Military adventurism, proxy wars and regional pathologies in the Middle East expand and contract with the ebb and flow of massive petrodollar accumulations related to the oil price cycle.

The massive inflow of petrodollar revenues when oil prices are high creates disposable incomes that can be easily dispensed on regional arms races, especially since oil consuming countries like the United States are incentivized to increase arms sales as a means of solving oil import related trade deficits. Besides transferring wealth from industrialized countries to oil producers in the Middle East and North African (MENA) region and Russia (and stimulating renewed drilling for oil and gas in North America), high global oil and natural gas prices also slow global economic growth and encourage energy conservation. This causes petroleum demand to slow globally, lowering oil prices. Social and political problems in the region reemerge as oil prices recede. Regional governments have fewer resources to spend on restive populations that have become accustomed to generous handouts enabled by high oil prices. Job creation and visible social programs slow, dissatisfaction rises, and the consequences of economic downturns incite support for militants. Ensuing instability forces governments to use newly purchased arms, which ironically begins the cycle yet again, as new conflicts disrupt oil supplies.

In this manner, the world experiences perpetuating patterns of military conflict, followed by oil supply crises, and accompanying global financial instability. In effect, the Middle East resource curse has become globalized. The challenges this is presenting on humanitarian, security and economic fronts have become increasingly dangerous. The arms race that has accompanied the rise of oil prices over the 2000s has been no exception and is now all the more complicated due to the violent participation of sub-national radicalized groups that are less susceptible to diplomatic pressures or initiatives. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.