Oil in the New World Order

Edited by Kate Gilespie and Clement M. Henry. Gainesville: University Press of Florida, 1995, 352 pp. $49.95.


Reviewed by Patrick Clawson

Middle East Quarterly
June 1996

http://www.meforum.org/1118/oil-in-the-new-world-order

Nine essays in this volume derive from a 1992 conference at the University of Texas at Austin analyzing specific major oil-producing countries, mostly in the Middle East. The essays on Kuwait, Iran, and the Caspian Sea countries are about the countries' oil industry; those on Iraq, Algeria, and the GCC deal with overall economic development and its political impact.

The contributors are caught in the past, when oil price and volume were dictated by cartels of powerful companies (the Seven Sisters) or powerful states (OPEC). In their introduction, they argue that at present, world oil is under a "Saudi-American regime" that has replaced OPEC. Three essays (by Giacomo Luciani, Ian Skeet, and Keith Brown and Robert Semmens) speculate that the future may see a return to an "oligopoly of vertically integrated companies" like the Seven Sisters; another (Odell) argues regional blocs will replace a world oil market.

Editors and authors alike seem to have missed the sea change in the oil industry toward the free market. Prodded by the U.S. deregulation of its energy industries and spurred on by European Union actions in the same direction (with Britain in the lead), sophisticated investors have created multibillion-dollar spot and futures markets in which anonymous forces of supply and demand determine oil prices. The growing strength of markets also shows up on the oil supply side, where decisions about investment increasingly are made based on market criteria rather than politicial influences. The effect has been to stabilize the world oil market: within five months, it absorbed the loss of Iraq's production and return to pre-crisis prices; in contrast, a similar-sized drop in Iran's production after the 1979 revolution kept prices high for five years.

Related Topics:  Patrick Clawson  |  June 1996 MEQ receive the latest by email: subscribe to the free mef mailing list To receive the full, printed version of the Middle East Quarterly, please see details about an affordable subscription. This text may be reposted or forwarded so long as it is presented as an integral whole with complete information provided about its author, date, place of publication, and original URL.