The Foreign Service Journal, December 2003

and infrastructure to meet rising demand for energy in harmony with environmental goals. But because policies to promote oil development, to shift to alternative sources or to limit wasteful con- sumption have not been put in place, the United States has become increasingly dependent on Middle Eastern oil to satisfy its growing needs. Unlike Japan and the European Union, the United States has been relatively ineffective in controlling growth in its oil use. Tokyo and Brussels imposed huge taxes on oil consumption of 400 percent or more over the past two decades in response to the oil crises of the 1970s. These policies have helped curtail growth in oil demand and promoted efficient technologies that have led to rising exports of highly energy efficient motor vehicles. The United States, unfortunately, has taken a reverse course, and its rising demand remains a prob- lem for the international market. In fact, U.S. net oil imports are a key support for OPEC. Despite talk of an expanding, energy-hungry Chinese economy, it is the incredible surge in U.S. oil imports that is the most significant factor in the oil mar- ket today. U.S. net imports rose from 6.79 million bar- rels a day in 1991 to 10.2 million b/d in 2000. During that same period, global oil trade — that is, the amount of oil exported from one country to another — rose from 33.3 million b/d to 42.6 million b/d. This means that America’s imports alone accounted for more than a third of the increase in oil traded worldwide over the past decade. In terms of OPEC, the U.S. import mar- ket was even more significant — more than 50 percent of OPEC’s output gains between 1991 and 2000 wound up in the United States. For the past two decades, United States internation- al oil policy has relied on maintenance of free access to Middle East Gulf oil and free access for Gulf exports to world markets. Throughout the 1980s, this policy was intensified as the U.S. strengthened its special relation- ships with major Middle East exporters, who expressed a common interest in stable oil prices and adjusted their output to keep prices at levels that would neither fuel inflation nor discourage global economic growth. The U.S., in turn, played the role of guarantor of regional security, a commitment it honored when it rushed troops to Saudi Arabia in 1990 after Iraq invaded Kuwait. Further, the United States counted on these countries to make the sub- stantial investments needed to sus- tain enough surplus capacity to form a cushion against disruptions elsewhere in the world. Shifts Within OPEC But over the past few years, there has been a dra- matic shift in the internal politics of OPEC, reflecting changes in political leadership at the highest levels as well as changes in the broader policies of key members. The result has been greater cohesion inside the pro- ducer group and a clearer articulation and implemen- tation of goals and aspirations. The mid-1990s were characterized by OPEC dis- unity and overproduction, as the organization struggled to deal with Venezuela’s aggressive bid for a greater share of oil markets and the gradual rise of Iraqi exports through the U.N. Oil for Food program. The unexpected economic meltdown of Southeast Asian economies in 1997 precipitated a sharp drop in Asian oil use. By 1998 oil prices had collapsed below $10, and the financial squeeze on oil producers brought them together on a major agreement to trim output. At the time, OPEC set a price band of $22 to $28 as its tar- get. That price target remains in place today. OPEC also developed a more unified dynamic that is rooted in several factors. First, a rise in democrati- zation, freedom of the press and political debate and a growing tide of anti-Americanism ushered in greater concern for popular opinion inside OPEC countries, especially in the Middle East, than in past years. This new concern for popular sentiment is restricting the options of regional leaders to accommodate Western interests. Populations, as well as some leaders, remain bitter about the suffering that took place when oil prices collapsed in the late 1990s. Second, rising populations and economic stagnation in many OPEC countries has meant revenue pressures have been taking precedence over other considera- tions. And finally, lack of investment in infrastructure and oil fields over the years, due to tight state treasuries and rising pressures for revenues to be spent on social projects, has greatly curtailed OPEC’s spare productive F O C U S D E C E M B E R 2 0 0 3 / F O R E I G N S E R V I C E J O U R N A L 25 In the aftermath of 9/11, U.S. political rhetoric also became tougher and more strident.