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Begin New Search Political Geography Middle East Publishing Institution Center on Global Energy Policy (CGEP), Columbia University

1. Saudi-Russia oil war is a game theory masterstroke

Author:
Antoine Halff
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
On the face of it, the idea of Saudi Arabia and Russia starting an oil price war in the middle of a global pandemic is as dumb as it gets. From a game theory perspective, it is a masterstroke. Analysts have called the breakdown of Opec+ and the lifting of the supply cuts that kept the oil market balanced in the last two years anything from a spectacular blunder to collective suicide. A new model of the oil market led by the inventors of mean-field game theory, Fields Medal laureate Pierre-Louis Lions and Jean Michel Lasry, suggests otherwise.
Topic:
Energy Policy, Oil, Natural Resources, and Strategic Competition
Political Geography:
Russia, Europe, Middle East, and Saudi Arabia

2. A Saudi-U.S.-Russia Oil Deal Is Not a Good Idea

Author:
Christof Ruhl
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Oil markets are sending confusing signals at a time when more confusion is the last thing anyone needs. When Russia walked out on OPEC+ rather than contribute to more output cuts, Saudi Arabia turned on the crude taps. Whatever Riyadh’s intention, this “price war” was quickly made meaningless by the impact of the new coronavirus on global oil demand. The price collapse has been beyond anything anyone could have imagined. Now, storage room for crude is becoming scarce. Analysts warn darkly that plunging prices may threaten global economic stability. Equities follow the oil price news. Everyone seems to agree that prices should stop falling; and yet no one seems to argue that a very low oil price is exactly what the world’s economy needs to recover. The combination of price war and pandemic is also creating strange bedfellows. Some American shale producers are advocating that their country blocks Saudi oil imports, others want to talk to OPEC. President Donald Trump’s government has expressed an interest in cooperating on global oil supplies with Saudi Arabia and Russia; it’s nudging OPEC+ to reconvene, or an even wider group of producers to meet. Could we be witnessing the emergence of an unholy alliance of Saudi Arabia, Russia and the U.S., to “manage volatility,” and incidentally shore up the price of oil?
Topic:
Energy Policy, International Trade and Finance, Oil, and Natural Resources
Political Geography:
Russia, Europe, Middle East, Saudi Arabia, North America, and United States of America

3. 5 Reasons Why a Global Agreement to Prop Up Oil Prices Won’t Work

Author:
Jason Bordoff
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
In April 1986, U.S. Vice President George H.W. Bush traveled to Saudi Arabia with a request for King Fahd, the country’s ruler at the time: Please raise the price of oil. After falling around 60 percent over the course of a few months, cheap oil was becoming a “two-edged sword for America,” Bush explained. Consumers might enjoy low prices at the gas pump, but evaporating revenues for U.S. oil producers undermined America’s own oil supply, and thus its national security. That was the last time the White House publicly sought more expensive oil—until now. U.S. President Donald Trump has been pushing Saudi Arabia and Russia to cut output in the hopes that less crude on the market will raise oil prices, which have fallen by two-thirds since the start of the year. A low oil price threatens an already teetering U.S. shale oil sector with a wave of bankruptcies and job losses. All eyes are therefore on OPEC and its allies, which will meet by videoconference on Thursday to discuss the way forward—followed by an emergency meeting of G-20 energy ministers on Friday, where the United States will be represented as well. It was at the last meeting of OPEC and key non-OPEC producers in Vienna on March 6 that Russia refused to go along with a Saudi proposal for deeper production cuts. The subsequent surge in Saudi supply set off a vicious price war that has seen the price of oil briefly fall below $20 a barrel.
Topic:
Energy Policy, Oil, Regional Cooperation, Natural Resources, and OPEC
Political Geography:
Middle East and Persian Gulf

4. Under a Cloud: The Future of Middle East Gas Demand

Author:
Robin Mills
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
During the early years of the 21st century, the Middle East emerged as a fast-growing center not just of natural gas production and exports but also of demand. Including Egypt, total growth in annual demand from 2000 to 2017 was greater than any region except Asia, a feat more surprising when considering the region’s relatively small population and economy. That’s about to change, however. After two decades of rapid expansion of natural gas consumption in the Middle East, growth should drop through 2035 due to four factors: improved efficiency, higher gas prices, slower economic growth, and alternative generation. Demand growth was driven by low, subsidized gas prices intended to spur economic growth, encourage energy-intensive industrialization, and share some benefits with the local population. But budget deficits and unsustainably rising domestic energy consumption have encouraged regional governments to cut subsidies and introduce efficiency policies, particularly since the fall in oil prices in late 2014. Industrial demand growth is also poised to fall as the Middle East’s key competitive advantage was its low energy and feedstock cost. The analysis undertaken in this paper to project future gas demand in the Middle East yields significantly lower estimates than forecasts by a number of international bodies (IEA, GECF, BP, ExxonMobil), especially post-2030.
Topic:
Energy Policy, Natural Resources, Gas, and Trade
Political Geography:
Middle East

5. The 2020 Oil Crash’s Unlikely Winner: Saudi Arabia

Author:
Jason Bordoff
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
With 4 billion people around the world under lockdown as the coronavirus pandemic grows, demand for gasoline, jet fuel, and other petroleum products is in freefall, as are oil prices. The price of a barrel of crude has been so low in the United States that sellers recently had to pay people to take it off their hands. As a result, oil-dependent economies are reeling. In the United States, the largest oil producer in the world, the number of rigs drilling for oil has plummeted 50 percent in just two months, almost 40 percent of oil and gas producers could be insolvent within the year, and 220,000 oil workers are projected to lose their jobs. Around the world, petrostates from Nigeria to Iraq to Kazakhstan are struggling and their currencies tanking. Some, like Venezuela, face an economic and social abyss. While 2020 will be remembered as a year of carnage for oil nations, however, at least one will most likely emerge from the pandemic stronger, both economically and geopolitically: Saudi Arabia.
Topic:
Energy Policy, Oil, Natural Resources, and Gas
Political Geography:
Middle East, Saudi Arabia, and Gulf Nations

6. Nuclear Decision-Making in Iran: Implications for US Nonproliferation Efforts

Author:
Ariane Tabatabai
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Assessments of foreign policy tend to fall into one of two major camps: either they ascribe to a state’s actions all of the characteristics of a unitary actor, in which there is a decision made and executed as designed; or they fixate on the minutiae of the internal politics and deal making that went into the decision, underscoring the complexity of decision-making but often losing the thread of what results. This is particularly pernicious when involving the actions of a state with opaque decision-making and where attribution of responsibility is often itself the subject of intense internal political debate and controversy, as is the case with Iran. In this paper, Ariane Tabatabai seeks to pierce the veil of Iranian nuclear decision-making to both explain how decisions are reached and identify the effects of those decisions as a matter of Iranian state policy. This is, in many ways, an essential matter for those interested in understanding how Iran will decide—and what Iran may decide—to do in response to the continued stresses being imposed upon it by US-led international sanctions, especially when previous analysis has proven to be both overly optimistic (that Iran would meekly absorb the costs of US sanctions) and, at times, overly pessimistic (that Iran would withdraw from the nuclear agreement known as the Joint Comprehensive Plan of Action without delay). It is necessary to understand better how Iran reaches its decisions, particularly in the nuclear sphere, to be able to more accurately predict what it may choose to do next. This has utility in a variety of lines of work and study, but perhaps no more so than in the energy industry, which is both affected by—and has the power to affect in turn—Iranian decision-making. For this reason, we commissioned this paper and commend it to you as an important source of knowledge on how Iran’s decision-making process works, especially as relates to its nuclear weapons–relevant capabilities. Though the weapons program remains dormant, the way in which Iranian officials—and Iran as that unitary actor—think about these capabilities is an essential element of the story to come.
Topic:
Foreign Policy, Energy Policy, Military Strategy, and Nuclear Energy
Political Geography:
Iran and Middle East

7. The Implications of an Iran Sanctions Snapback

Author:
Richard Nephew
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
For several months, it has seemed likely that the Trump administration would elect to pursue the reimposition, or snapback, of UN Security Council (UNSC) sanctions against Iran. For those less steeped in the terminology, the concept of sanctions “snapback” is one developed as part of the Joint Comprehensive Plan of Action (JCPOA). It refers to the ability of the United States and other partners to quickly reimpose the sanctions that were suspended as part of the quid pro quo that saw Iran accept significant restrictions and transparency requirements for its nuclear program. Conceptually, this was necessary because Iran had the ability to restart its nuclear program if the United States or others were seen as cheating on the deal. The United States and its partners needed some assurance that, if Iran were found to be cheating, they could react just as swiftly. On August 20, Secretary of State Mike Pompeo finally submitted the notification that, according to the US government, would trigger a 30-day timeline for the reimposition of these sanctions. In the US view there is now no stopping the return of the UNSC’s original Iran sanctions regime, though there may be some procedural wrangling over how and when the measures will be reimposed. It is not clear, however, whether this will be the case. A fair amount of analysis has gone into the fundamental question of whether the United States has the standing to trigger snapback, which is an issue I explored in 2019.[1] European, Russian, Chinese, Iranian, and other observers argue that the United States has no such standing, because, under the terms of the UN Security Council resolution that created the snapback mechanism (UNSCR 2231), it is no longer a “participant” of the JCPOA following its withdrawal in 2018. Even former National Security Advisor John Bolton—who was in large part responsible for the US withdrawal from the JCPOA—tends to agree with this reading.[2] The Trump administration obviously disagrees. It is an important question, and one that speaks to the underlying credibility and integrity of the US snapback decision as well as its results. But, ultimately, there is no way of finding a conclusive answer. International law being what it is, there are no authoritative arbiters available to determine whether the United States or its many critics are right. Snapback is happening and will have consequences, we now need to shift to considering what comes next. I see four main outcomes that are directly relevant to this decision and the future of US sanctions policy and negotiations.
Topic:
Arms Control and Proliferation, Nuclear Weapons, United Nations, Military Strategy, Sanctions, and JCPOA
Political Geography:
Iran, Middle East, North America, and United States of America

8. In Dire Straits? Implications of US-Iran Tensions for the Global Oil Market

Author:
Ilan Goldenberg, Jessica Schwed, and Kaleigh Thomas
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
In recent months, Iran has responded to rising tensions with the United States—particularly the US launch of the “maximum pressure” campaign against Iran—by attacking oil tankers and infrastructure in the Persian Gulf region around the Strait of Hormuz (the Strait). These actions have been designed to signal to the United States, the Gulf states, and the international community that the American strategy of strangling Iran economically will not be cost-free, and to Saudi Arabia in particular that it is highly vulnerable to Iranian retaliation. As the Strait of Hormuz is one of the world’s most critical energy chokepoints, the implications of Iran’s efforts merit close scrutiny and analysis. This study was designed to examine three scenarios for military conflict between Iran and the United States and assess the potential impacts on global oil prices—as one specific representation of the immediate economic impact of conflict—as well as broader strategic implications. The three scenarios are: Increasing US-Iran tensions that ultimately lead to a new “Tanker War” scenario similar to the conflict of the 1980s, in which Iran attacks potentially hundreds of ships in the Persian Gulf and Gulf of Oman over a prolonged period while also launching missiles at Gulf oil infrastructure. An escalation of tensions between Iran and the United States in which Iran significantly increases the scope and severity of missile attacks directed at major oil and energy infrastructure in Saudi Arabia and the UAE. A major conflict between Iran and the United States that includes damage to Gulf oil infrastructure and a temporary closure of the Strait of Hormuz. Its main conclusions are: The risk of a major military confrontation between the United States and Iran has increased in recent months but still remains relatively low, as neither the United States nor Iran wants war. That said, the September 14, 2019, attack on the Abqaiq and Khurais facilities was a strategic game changer and shows that the biggest risk is a prolonged, low-intensity military conflict. The fact that Iran was willing to conduct such an attack was a surprise to most analysts and to the US government and its Gulf partners. The level of accuracy it showed in the strike demonstrated a technical proficiency the US government and outside analysts did not believe Iran had. In the more moderate and likely conflict scenarios, increasing tensions between the United States and Iran are unlikely to dramatically affect global oil prices. The most profound costs in the more likely scenarios are not energy-related but security-related. Even in the less escalatory scenarios, the United States would be forced into long-term deployments of a large number of air and naval assets that would need to remain in the Middle East for years at a cost of billions of dollars. Such deployments would take away resources that would otherwise be dedicated to managing great power competition with China and Russia. In the more extreme conflict scenarios, major loss of life and an even bigger and longer-term American military deployment would be expected. In the lower likelihood scenario of a major military confrontation between the United States and Iran, global oil prices would be dramatically affected, though price impacts would not be prolonged. All assumptions about the potential impacts on oil prices are based on the supposition that the United States protects global shipping lanes, but that theory deserves further scrutiny. For more than a generation, the United States has viewed securing global shipping lanes that are critical for commerce and energy as a core vital interest. But given the isolationist tendencies in the United States and President Donald Trump’s attitude that America should stop underwriting the defense of its allies, it is conceivable he may choose not to respond in the types of scenarios described in this paper or demand that countries most dependent on oil trade from the Gulf—most notably China—step up instead. Another wild card for oil prices in a major crisis scenario would be President Trump’s unpredictable policies regarding the Strategic Petroleum Reserve. Typically, an administration would be expected to coordinate an international response with the International Energy Agency (IEA) to release the SPR of a number of countries, but this cannot be assumed in the current administration. Though these conclusions are to some extent comforting, the authors acknowledge that a key issue with any analysis of this situation is the unpredictability of the United States. In the present moment, neither US adversaries nor partners know quite what to expect—and, for that matter, neither does the US government or its observers.
Topic:
Foreign Policy, Energy Policy, Oil, and Global Political Economy
Political Geography:
United States, China, Iran, Middle East, and Asia