Skip to main content

tv   The U.S. Middle East Oil Since 1945  CSPAN  November 29, 2019 10:15am-11:21am EST

10:15 am
history tv programs as a preview of what's available every weekend. lectures in history. american artifacts. real america. the civil war. oral histories. the presidency. and special event coverage on our nation's history. enjoy american history tv now and every weekend on cspan 3. in this national history center congressional briefing we hear about the role of middle east oil since the end of world war ii. especially about the importance of saudi arabian oil. this briefing is on the geo politics of middle east oil, historical perspectives on the current crisis. i want to just briefly explain
10:16 am
what we are doing here and why we're doing it. this is part of an ongoing series sponsored by the center that brings historical perspectives to current issues. the center itself is strictly non-partisan. the purpose of the program is not to advocate for any particular policies, but in fact to provide sort of historical context to help inform policy makers and the public as they deal with difficult issues. i want to thank or acknowledge the financial support of the mellon foundation, which makes this briefing series possible. i want to thank rachel wheatly in the back of the room who is our assistant director and has helped to organize this. i want to thank the office of jerry connelly. i also want to alert you to the fact you have index cards on your chairs. this is for questions. as the presenters are speaking,
10:17 am
feel free to jot down questions. we'll collect them. they'll give formal remarks in the first half hour and the second half hour will be devoted to q&a. we'll go from there. thank you all for coming. >> good morning, thank you for coming. my name is david painter. i've been teaching international history at georgetown university for 30 years. i didn't mention i worked briefly with the congressional research service a little longer for the department of energy conservation solar and then seven years at the state department. as the flyer notes, my research and publications focus on the political economy and geo politics of oil. before i introduce today's speakers i want to say a few words about the importance of
10:18 am
studying history. there are many ways of understanding the world, why study history? i would say first in addition to be interesting, it expands our range of experience. learning from other people in other times and places forces us to think outside our own experience in time and place. it helps us understand who we are as individuals, as nations and human beings. second in contrast to popular uses, history is not just about the past. it's also key to understanding the present and preparing to face the future. studying history helps us understand how the world got to be the way it is today and then helps us understand the forces that govern its ongoing evolution. as my late teacher michael hunt and his co-author steven levine wrote in their 2012 book, without historical perspective,
10:19 am
we flounder in mid ocean to shore from which we came already out of sight the land we seek well sgraund tbeyond the horizo. third is history is a way of learning. the methods historians use to understand the past are the same methods we can and should use to understand the present and to think about the future. let me give you some examples. historians stress the importance of context. both temporal and spatial. it matters a lot when and where events and decisions are made. although historians study change over time, they're sensitive to consnui co continuity. historians emphasize the interconnectedness, the various aspects of the human experience.
10:20 am
historians try to see the world and all its dimensions rather than focusing narrowly only on some factors. historians -- this is probably -- but great emphasis on close engagement with historical texts and primary sources. studying history helps us develop the ability to explain and contextualize change over time. studying history helps us develop the ability tool identify relevant sources and studying history helps us distinguish between types of sources and how to support our conclusions with evidence. studying history helps us learn how to evaluate different interpretations and how to distinguish between evidence based conclusions and unfounded statements. our speakers today will draw on knowledge based on years of research and primariy and
10:21 am
secondary sources. they'll exam continuity as well as change over time. they'll analyze the interconnections and many factors that influence the geo politics of middle east oil. they'll strive to provide you with a historical perspective on the current crisis. our speakers today are the associate professor of strategy and policy, u.s. naval war college. he's got a long list of -- this his brief cv. and the barber kirkland history professor at rice university. he has written many, many articles and two fine books on the middle east. his latest book, envisioning the arab future, won the robert h. farrow book prize. this is the prize given to the best book after the first book. it's a great honor.
10:22 am
then i'm going to turn this over now. >> okay, so there's no need to go over my background. i'm an associate professor at the u.s. naval war college. obviously i do need to add a disclaimer to my remarks. i'm here in an official capacity, none of the opinions or attitudes i express should be construed as representing the united states government or any of its agencies. this is a short version of the talk i give to my students at the war college regarding the global oil industry. i'll try to keep it ten minutes and hopefully david will keep me honest. all right. so the aim of this talk is giving you one as to how the foreign oil business operates. the second point is to explain
10:23 am
how oil has influenced u.s. policy and strategy since 1945. now the first point i want to make here is that oil is different from other commodities. for most commodities i'm going to give you a brief session of macroeconomics. what you need to know is that for most commodities, they can choose. the supply issue is shaped. if there's a high demand for shoes, you'll produce more shoes until the supply exceeds the demand, at which point you cut back on the supply. that's straightforward. the thing is oil doesn't operate under those conditions. it tends to be inelastic. if oil is $2 of gallon or $3 a gallon, you're still driving to work. it doesn't do a whole lot to
10:24 am
effect demand over the short term. the most important factor shaping supply is not demand, but rather the price of oil. the price of oil determines whether or not certain supplies of oil are economically produced or uneconomically produced. for instance, if you have a high price for oil, it makes sense to say produce oil in canada. at a low price that makes no sense. again, i want to stress the most important factor behind shaping the overall supply of oil is not demand, but rather the price. the second point i want to make is lots of economists including nobel prize winners will tell you that oil is fungible. y'all know what fungibility is? whether or not something can be substituted for another. coke is fungible with pepsi. i don't know why anyone would
10:25 am
drink coke. but so lots of economists like to talk about oil has being fungible. it uses the analogy of a bath b bathtub. oil taken from one part of the bathtub is replaced by oil somewhere else in the bathtub. this is wrong. anyone who works in the oil industry can tell you pretty quickly, oil is not fungible because all types of crude oil are not the same. specifically, oil is usually done in two ways. oil tends to be sweet or sour. that has to do with its sulfur content. or it tends to be heavy or light depending on its specific gravity. so u.s. shale oil tends to be light sweet crude. as sweet as a mountain spring, as light as a cloud as people used to say. whereas oil from the middle east from saudi arabia specifically tends to be light, but also
10:26 am
tends to be sour. that is high sulfur content. why does this matter? well, it means that oil in different compositions cannot be refined in the same facility. if you have a refinery that's there to produce light swede crude, it can't handle heavy sour crude. and the process of basic converting refineries. i've talked to people in the industry. can take anywhere from several months to several years. all right. so for that reason, never think of udoil crude oil as being fun. if refineries are designed to process oil from the middle east, that's all they can handle. they can't substitute oil from the united states or west africa which has different chemical compositions, chemical properties. important fact to bear in mind. oil is expensive to produce, but it is not scarce. i want to stress this.
10:27 am
oil is not scarce. how much do you pay for a barrel -- for a gallon of gas? back home it's about $2.50. i guess it's around the same here. think to yourself a little bit higher. let's just say it's $3 a gallon. how many liquids out there in the world can you buy for $3 a gallon? go to the supermarket, tell me. how much does a gallon of milk cost? how much would a gallon of pepsi cost? i mean, petroleum is relatively speaking rather inexpensive considering how much we use. the important thing to bear in mind is there are high barriers to entry in terms of finding the oil and producing it. and the economies are scaled. the marginal cost of oil goes down the more you produce. but it's very tricky to find and produce that oil in the first
10:28 am
place. and the other point i want to make is how much oil is there? if i knew the answer i wouldn't be at the national history center, i would assure you. generally you get two answers. if you asked a geaologist how much oil there is at this given point and time, they'll give you an answer. the point is, that answer is only good for that window of time. only based on their knowledge at that particular point in time. that's why geologists every, you know, 20 or 30 years will tell you, well, we only have 30 or 40 years of oil given these rates of consumption. every 30 or 40 years, it turns out we have more oil. that's not that geologists are idiots by any stretch of the imagination, geology is not a predictive science. it's there to study the earth's past, not its future.
10:29 am
i'd like to dump on economists, but unfortunately they're probably the people you need to ask when it comes to how much oil is there. they'll ask you do you want to know how much oil there is? tell me what the price of oil is. if the price of oil is high, odds are there will be large quantities of oil. if the price is low, ironically, that will shrink the amount of oil that's available because it's not economical to produce. what is the position of the united states government? do we want high or low prices? high prices carry severe economic costs for consuming nations. they tend to inhibit economic growth and promote inflation. but as we've seen since 2013, low prices in and of themselves can cause problems. in the sense that they discourage efficiency of conservation and will tend to undermine the political stability of oil producing nations that depend on exports.
10:30 am
in the remaining time i want to sketch out, why is oil and specifically middle east oil significant? how is it significant to u.s. policy since 1945? i want to make clear control of middle east or gulf oil is at the center of the u.s. since 1945. most people would think it's significant because we need the oil for ourselves. strangely, it's not actually because we need it for ourselves. we imported it in the 1970s, starting in the 1980s, the importance to the middle east to u.s. supplies specifically tended to decline. what's more significant is that this oil was vital for european
10:31 am
and asian consumption. specifically, i want to make this clear. the oil was not important for the united states, it was important for u.s. allies. and that's a factor that probably still continues because as we can see in the asia pacific to this very day, basically all u.s. partners and allies rely on middle east oil anywhere from 50% to 80% of their consumption of their oil imports to this very day. secure supplies fueled reconstruction in both europe and japan after the second world war. and discouraged them from relapsing economic nationalism by developing synthetic fuel sources domestically or tending to grab resources from neighboring countries as we find out. we didn't want to have a replay of operation barbarosea or pearl
10:32 am
harbor. the development of the gulf after the second world war for the most part can promote price and supply stability. for the most part, promoted american prosperity even after the united states became an importer of oil after 1948. why is the middle east so significant? it's not the amount of oil it produces. specifically, the united states and russia and the soviet union beforehand. what's specific about the middle east is one, it's rolling global export markets. it's a relatively small consumption relative to how much they can export overseas. how much they can ramp up production or turn it down depending on their supply or oversupply in the rest of the world. overall, this prosperity, which in large part is fueled by
10:33 am
middle east oil facilitated the containment of the soviet union and its communist allies. not to help put too fine a point on it, helped to win the cold war. anyways, basically in the remaining time i have, i think i have one more minute. what are u.s. aims regarding the oil industry past and future? because i'd argue there isn't a whole lot of difference between what they were in 1945 and what they are today. the most important factor is control over the global oil trade. not control over foreign oilfields, per se. remember the oil is only useful if you have a market for it t. as long as we control access to those markets, the most importance of which is the united states and the developed world he tends to be more oil
10:34 am
intensive, you don't actually need to control the oil fields themselves in the producing world, which obviously makes relations with oil producers much much more than it would be if you owned the resources. you want to secure oil for the u.s. and allies and partners at a reasonable cost, which we do so again by commanding the commons. we tend to be rather ambivalent towards continental powers which want pipelines rather than oil tankers. the second northstream pipeline from russia to germany is not new. the united states has traditionally viewed russian oil and gas exports to europe starting in 1970s and 80s as a threat to u.s. national security because that was a supply that could not be controlled, access
10:35 am
to which could not be controlled or intermediated by u.s. companies and most importantly my ploemployer, the u.s. navy. we want to make sure that oil revenues go to our partners and not to hostile oil producers. i think that should be self-explanatory. we want to enhance the u.s. economic position in the gulf that if oil producers are selling to u.s. partners and allies in the united states and they're doing so through u.s. companies. even if we're sending dollars to that part of the world they'll recycle those dollars using companies, banks that tend to be american or american allies and partners. it's way of recycling those petrol dollars and ameliorating the account strain that's placed on u.s. balance of payments. most importantly -- i'll close my talk with this point -- we want to prevent the domination of the gulf by any external
10:36 am
power. this means we want to have a monroe doctrine for the gulf that no external or internal power would dominate the ree reasoning. i'm talking about the carter doctrine of 1980 which was designed to stop a potential soviet bid to dominate the region and it was expanded by president reagan. he was talking about iran, which had just gone through a revolution. with those comments in mind, i'll leave one question in your mind. bearing all that i've said, does it make sense for the united states to wind up its commitments in the gulf when the overall context that surrounds u.s. engagement of the gulf and the u.s. position globally is not so different as it was at the end of the second world war. u.s. allies and partners continue to rely on the gulf and
10:37 am
we control access to that by mediating supplies that travel overseas and controlling access to markets. >> thank you, everyone. i'd like to thank the national history center for organizing this event and inviting me. i'd like to thank all of you for coming to hear this discussion early on a monday morning. a few weeks ago, the u.s. defense secretary announced a new deployment of u.s. military forces to saudi arabia. at the time of that deployment, he said saudi arabia is a long-standing security partner in the middle east. it has asked for support to supplement its own defenses and
10:38 am
defend the international rules based order. this statement and the deployment itself gives us an entry point in our discussion this morning for talking about the history of the u.s. saudi arabia relationship and american foreign policy in arabia and the gulf war generally. those phrases, phrases like security partnership or maybe heard the phrase a bargain of security for oil are frequently used today describe the u.s./saudi relationship. these descriptions serve to portray that relationship as natural, as inevitable and apolitical. historical research by we and by many other people in the field, however, there's great work being done right now shows that there was nothing inevitable about the u.s./saudi relationship which developed over time and in the contingent
10:39 am
manner. on the basis of conflict, as well as cooperation and in a way that generated significant political controversy in both countries, in my remarks i'm going to give you a sense of the literature by talking about three major themes or sets of topics in talking about the u.s./saudi relationship. the first has to do with what historians call the post-war petroleum order. the basic idea is the relationship emerged not simply on a bilateral basis, but is part of the system that developed middle eastern oil for fuelling, as you heard, western europe and japan after world war ii. when we talk about u.s./saudi relations, we're not talking about a bilateral relationship, we're talking about the place of that relationship in that larger system. a system that included major oil
10:40 am
companies as well as states that included oil transits states. that is those countries who territory was crossed by oil on its way to market as well as oil producing states. that included governments in the region as well as great powers like the united states and like great britain. so major u.s. corporations formed the arabian american oil company, or aramco to develop saudi oil and built the transarabian tap line across four different countries to transport oil from the gulf to the mediterranean. the relations were based on a deal struck in 1950 for a 50/50 profit sharing arrangement. but those relations were also based on conflict and characterized by conflicts over payments and ownership of the company, over the housing promotion and treatment of saudi workers.
10:41 am
and over aramco's overall commitment to economic development in the kingdom. u.s. recognition of and support for israel also complicated this relationship and isolated saudi arabia within the arab world. a second stint of topics or themes has to do with the politics of reform, domestic politics within the saudi kingdom. within saudi arabia. and the basic sort of recognition or basic argument that historians make is that from the beginning this relationship in the 1930s, 1940s, the u.s. government and american oil companies were involved in domestic saudi politics. strikes among aramco workers in 1945, 1953 and 1956 led to demands for reform and the nationalization of aramco by the
10:42 am
saudi government. the government suppressed the strike and arrested or exiled the leaders. the groups such as the national reform front later called the national liberation front, formed out of these ups arising. later leaders and dissidents regarded the u.s. air base and aramco itself as constituting a colonial presence in saudi arabia. this was the era of anti-colonial nationalism, decolonization in the arab world. a movement for a constitutional monarchy supported by workers, by some government employee and technocrats, and even some members of the ruling family was defeated in the early 1960s.
10:43 am
the u.s. government closed ranks behind the king who had opposed the constitution and who in 1964 deposed his brother, his half brother. so a third and sort of most -- this is sort of the most recent round of or body of scholarship on the relationship has to do with the 1970s and the period subsequent to the 1970s. so the scholarship that examples the 1973/74 oil embargo, its consequences and then the way that the relationship was sort of reconstituted following that embargo. so prior to 9/11, the most serious crisis in the relationship came when saudi arabia joined other arab oil producers in an oil embargo against the united states imposed for american support of
10:44 am
israel in the october 1973 arab/israeli war. the arab oil embargo came at a time when tight global oil supplies gave producing governments leverage over major companies. the result was a major shift in what historians had called and what i described a moment ago as the post war petroleum bord room. producing states pursued what is sometimes called resource nationalism in the forms of higher prices, demanding a greater share of the wealth produced by a production of oil. and also corporate nationalizations, in other words, demanding ownership rights within the companies that were producing oil within their territories. as a consequence, saudi arabia nationalized aramco that culminated in the 1980s with the
10:45 am
the creation of the state owned company, saudi aramco which has a presence in houston where i now live. security for oil, kind of bargained between the united states and the u.s. offers security in exchange for secure access to saudi oil. that's security for oil bargain pertains most to the post embargo era. so the period after the 1973/74 oil embargo. the relationship was reestablished on the basis that recycling petrol dollars, especially through weapons sales, the sales of weapons produced by u.s. companies to saudi arabia and also saudi arabia's purchase of treasury bonds. helping to fund the debt of the united states. as well as saudi support for anti-communist causes in the cold war, especially the support
10:46 am
for the islamist insurgeonncy i 1979. in 1979 the u.s. lost the shah of iran to a revolution. the iranian revolution placed added emphasis on saudi arabia as a regional u.s. ally, but proposals to arm the saudis elicited strong opposition to pro israel groups here in the united states. following the announcement of the carter doctrine, which you also heard about, in 1980 the u.s. increased its military presence in the gulf. this encompasses the creation of the rapid deployment joint task force and later centcom.
10:47 am
hundreds of thousands of u.s. troops were then deployed to the region, including saudi arabia during the gulf war of 1990, 1991. as you might expect, from what i was talking about earlier, the u.s. troop presence provoked opposition and resistance and opened a new chapter in the saudi opposition against the ruling family and close u.s. saudi relations. al qaeda, which carried out the 9/11 attacks, and included saudi dissidents, such as osama bin laden. and veterans of the anti-soviet campaign in afghanistan. most recently, saudi leaders have seen the u.s. as a principle ally against iran and its regional proxies. saudi iranian rivalry has entered a violent phase as these
10:48 am
two powers have conflict in the region. in yemen, iraq, syria, lebanon, the saudi iranian rivalry has escalated and intensifies violence. it's often framed in sectarian religious terms but are about regional power. prioritizing the conflict with iran has led saudi arabia to mute its criticism of u.s. policies toward the israeli/palestinian conflict. even as the current u.s. position is key issues such as the status of jurz. it's split the gulf cooperation council. the alliance of arab gulf states for saudi arabia and other states seeking to isolate quatar. by threatening the stability of the gulf, the recent attacks on
10:49 am
oil tankers and saudi oil installations raise questions about whether the saudi and iranian governments will seek to de-escalate their rivalry and the implications of this development for the u.s. campaign of maximum pressure on the iranian economy through sanctions. so as in the past, if we were using the past as a guide, rather than annase political security partnership, conflicts over regional power, the place of oil in the global economy and domestic politics in both countries will shape or determine the contours of the u.s./saudi relationship and u.s. policy in the arabian gulf going forward. i'll conclude my remarks there and look forward to your
10:50 am
questions. thanks very much. [ applause ] >> you have your cards. if you have questions, we'll take questions through the cards rather than the raising method. i wanted to also i -- a question about opec, that opec seems dominate a lot of people's minds. you even see people talking about the opec embargo in 1973. there was none. it was owe aipac, the arab producing countries. i find in statistics that people still, the eia lists opec countries and nonopec producers. i wonder, let's starred with the doctor here, how important is opec anymore? i would -- i teach a course at georgetown world power, i teach under grad wait and graduate
10:51 am
level, we talk about, was there an opec era? is it still on? did it only last a short time? how would you gauge opec's power? >> opec's power, please for give me for not mentioning this in the talk, the power is greatest when oil prices ironically are low, not high. because when -- if you can sustain oil prices at a low level for a long period of time, guess what, who controls the largest share of the world's cheap oil prices? who has the lowest cost of production? those tends to be producers in the middle east who dominate opec. so the reason why opec -- they might not have been an opec oil embargo but there were price increases in the early 1970s to comp
10:52 am
compensate of the u.s. dollar following the nixon shock in 1971, the delinking of the dollar to the gold, but more importantly oil prices were too low, it was unfair. this marnt if you had sustained low oil prices obviously the middle east was going to become more and more important in ermz it of global oil production because it made no sense to produce it anywhere else because you couldn't make money off of it. low oil prices tend to increase opec's power. high prices, they benefit opec in the short term. opec does enjoy a four fold increase, but that created a problem for them. every boom lays the seeds for the next bust and vise versa.
10:53 am
an oil boom encourages finding new sources of oil which lead to lower oil prices and the cycle repeats. basically that's how it assesses opec's role right now because of the sustained high prices not just in the early 2000s but actually in the 1970s and '80s we had a new source that didn't exist before and that's u.s. shale oil which poses not a mortal threat but really undermines its ability to control the price of oil through its production, increases and cuts. >> i apologize to whoever wrote this question. they asked the same question i did. whatever happened to opec as an independent actor in shaping the geopolitics of oil and does it remain a force independent as a force in the u.s.? >> i can, as a historian, i can
10:54 am
give a little bit of historical background or context for opec. it was established in 1960, and at the time it was established, the u.s., the eyes hoisenhower administration viewed it as a less threatening outcome than placing it in an arab narclist. the fear was that oil produced in the gulf would be used for political purposes, would be used to pressure the united states, especially in its policy toward israel in another context, but opec emerged as an oil producers' club, arab and nonoil arab states.
10:55 am
that included states like iran, venz vay law. so opec to the greet relief of american leaders in 1960 took oil out of the context of arab nationalitilist politics and ma id it this producers club where the focus was on bargaining over prices and other technical issues. a second contextual point to make, at the time of the embargo that we've been talking about, the arab oil embargo of 1973, '74, as the professor is right to stress, many developing countries, developing countries who's economies were based on the production of primary materials, raw materials, viewed that embargo as a kind of model for trying to force a reform or restructuring of the global economy in a way that in their view would be more just and more
10:56 am
equitable to those kinds of developing countries that produce primary materials. and was this known, some of you may know, in the history of the united nations, as the new international economic order. this was an agenda of developing states. there are many reins why that didn't come to pass, why countries that produced products other than oil couldn't follow in the path or in the footsteps of opec and of the arab oil producing states. had to do with u.s. foreign policy and opposition to that kind of agenda but it also had an awful lot to do with what dr. top rani was talking about at the beginning, the fact that the structure of the global oil industry, the nature of oil as a commodity is different from others like minerals and others. >> question here, and i'll start
10:57 am
out with the doctor, someone asked about explain a little i more of the slack capacity or excess and how that applies both to middle east oil in general and then maybe dr. sa tina can talk about how it refers to saudi arabia in particular. and maybe work in swing producer. >> swing producer. power in the oil industry comes from not just the ability to produce oil but the ability to produce oil on demand that you can increase or decrease production as circumstances may require it. so in the united states in the longest period of time that role was played by the great state of texas, that it could increase or decrease production depending on u.s. or global conditions. and that role has shifted
10:58 am
largely to the middle east. and when i say the middle east, i really mean one country, the kingdom of saudi arabia. as far as we can tell has pretty much all of the world's slack capacity. it's the difference between what you produce and what you could produce. that if theoretically tomorrow, if there was a problem, like not getting bombed, that's an issue, because that affects the ability to produce oil, but if there was a problem elsewhere, venezuela descended into anarchy, there was problems in iraq, nigeria was having systemic issues, countries in the gulf, specifically saudi arabia, could increase production to compensate for the shortfalls elsewhere in the world. that gave them the world of so-called swing producer. larngly that power of increasing oil production to compensate for
10:59 am
shortfalls anywhere else in the world lies not just within opec but largely within the gulf. as far as statistics for how much slack capacity in the world are pretty opaque at this point. it's no more than 5 million barrels aday. it used to be 20, 30 years ago, 10 million barrels. but it's 4 to 5 million barrels. it's a closely guarded secret and anywhere from 3 to 4 billion barrels of that is located within the kingdom of saudi arabia. >> i don't have much to add other than to say that, i mean the importance of saudi arabia as a swing producer, undeniable. i think that saudi foreign policy benefits from the perception that that's the case. there are -- we lately more smaller and medium sized producers that are coming online and are going to add to world supply and may drive down price
11:00 am
at least to an extent. the other factor is the tremendous production in, you know, the last, you know, ten years or so in north america, in developing new technologies, so-called tight oil, that is available now in north america, that has to some extent undermined that role of swing producer. >> that was another question, the role of the u.s. shell oil production. some people have argued that the shell industry is now the new swing producer, not so much because it has a lot of extess capacity but it's easy to bring on and off line. it's on land. you have small producers. there's a lot of equipment but they can go on enough. what would you sa i to that argument, the impact of the shale oil production on the
11:01 am
united states on the global balance of power? >> the iris that there's a time lag that if there's an immediate shortfall like two or three or you name it "x" million barrels goes offline tomorrow, who is going to replace that oil tomorrow? it's not going to be u.s. shale producers. that will take at least several months to years to be able to do so. i've been following this in the wall street joournl and other places, the u.s. produces a lot of oil, shale oil, it's supposedly very -- transformed the global energy outlook. but shale companies are incredibly poor investment. they're incredibly -- they basically all have negative cash flows. it's an unprofitable business to be in. it benefited from a period of basically clean money and low interest rates that allowed companies to produce oil at will and make their money through
11:02 am
volume rather than through the price, because it was low. but their profitability was very low. what we've seen in the shale patch over time is these small companies are increasingly going out of business or having their access to capital restricted. and larger companies have taken their place. these larger companies do not have the same interest in maximum production and choose to make them money not through volume but through a higher sustained price of oil. these larger companies mind you have interests elsewhere in the world and want to see a higher price for oil if at all possible. i'd argue that shale has again, yes, it has transformed the global oil industry by creating a large new source of supply just as say countries like guyana and grbrazil and others y play a role in the future. but that's not the same thing as saying they have global slack capacity. the production is what you have
11:03 am
at any given point in time. usually it's all-out production or nothing. the question is how much do you hold back production in order to compensate for shortfalls anywhere else? i'd stress the only country in the world that has the ability through simple turning of valves is the kingdom of saudi arabia. if the russians have supposedly played today opec as far as we can tell is really not opec, it's just saudi arabia and russia, supposedly russia has been trading production cuts in order to stabilize oil prices. but as a russia oil analyst told me beforehand, i won't give him name, it's not clear that the russians are actually trading oil production so much as having a natural decline in the productivity of their oil field. really the only country that's decreasing production and raising it as circumstances may
11:04 am
require is the kingdom of saudi arabia. and really u.s. shale does not compare in quite that same regard. >> let me throw one issue out there that obviously is hanging over the global oil industry and that's climate change, and that's -- so the description i gave of the history of aramco and the way that in a planned nationalization in saudi arabia acquired what became saudi aramco by the 1980s as many of you know and may have been reading it's going to be offered as a publicly traded company, at least a couple percentage -- percent of the company will be offered for, you know, in public shares. in we're we're reading that this is part of the strategy by the saudi kingdom to hedge against the possibility of and perhaps
11:05 am
the reality of a decreased demand for hydro carbons as people become more concerned about carbon induced climate change. >> a couple of people asked questions about the saudi-iranian conflict. you say a few things about not only saudi-iranian conflict but the relationship of the u.s. to saudi arabia as well as iran and how that has changed over time, how it developed and changed over time? >> i would sort of expand just a bit on the comments that i made. in the late 1960s, the principle imperial power in the gulf for many years for more than a century have been great britain. britain withdrew from the gulf. the u.s., sort of in this cold war context, saw a power vacuum,
11:06 am
what it regarded as a dangerous power vacuum and inkraetsingly relied on saudi arabia and also iran at that time ruled by the shaw of iran as sort of the pillars of american foreign policy in the gulf. the shaw was the much more powerful regional state at the time. and when the iranian revolution occurred in 1979, this posed a tremendous difficulty and challenge to the united states to its foreign policy in the gulf, to a certain extent saudi arabia took up that -- took up that role or took on a greater responsibility as an american ally in the gulf. the saudis at that moment were experiencing their own difficulties and challenges. as some of you may know, there was a seizure of the grand mosque in mekca by islamist
11:07 am
militants. also in 1979 an uprising by minority shia in the eastern province in the eastern part of saudi arabia mobilized by the iranian revolution as well. so some background there to the -- that relationship among the united states/saudi arabian oil. >> question that come up, how -- somebody get another card up here. i can get it. >> i'll get it. >> thanks. did you seem to imply earlier that the saudi/iranian conflict is less over religion and more over power? >> that's my sense. and i think that -- i think that historians and other analysts look at that relationship much more as one over regional power, over two kinds of broad coalitions of states and regimes
11:08 am
in the middle east, one that's sort of allied with or at least aligned with the united states, israel, other sort of pro-u.s. regimes, and those that are aligned with iran, including syria, other states that are opposed to sort of the first coalition. the emphasis on sectarian politics, on sunni versus shia, for example, is a kind of phil strate -- political strategy that i think was seen as beneficial by parties on both sides of that conflict in mobilizing political owe support, in establishing transnational coalitions of supporters. so for iran, for example, seeing hezbollah in lebanon as a valuable ally in the confrontation against israel and
11:09 am
the united states would be an example. but also a kind of political strategy for undercutting the sort of democracy movements that we saw during the arab spring in 2011 and which have a history in the region, as i suggested in my remarks, about the constitutional movement in saudi arabia in the late '50s and early '60s. >> i have a question here. it's an interesting one. while we're on iran, anybody would like to speak about the u.s. role in overthrowing the iranian government in 1953 and the long-term implications of that action. either one of you want to touch that one? >> that's certainly an important topic that we can, you know, approach from a number of different ways. i'll say two things. first, the real importance, i think, of historians' work in
11:10 am
sort of uncovering what happened and getting on the public record what happened. recently the office of the historian at the u.s. state department produced a new volume of the foreign relations of the united states series, the official documentarian record of u.s. foreign policy that offered a much more transparent and complete accounting of organizing the coup that over through him in august of 1953. that's professional historians doing that important work of insisting that documents be released and be made as transparent as possible for historical researchers and for students. another interesting point about that era, the mowsa deck era, is even before his overthrow, iran was under economic sanctions.
11:11 am
so it's a kind of precedent for the current moment of maximum pressure on iran for sanctions on its economy. and the reason that iran was to a certain extent embargoed successfully is because this was a moment back in the early 1950s when a handful of major oil companies controlled the industry. that's no longer the case. it's more difficult to impose that more than half a century ago. there are buyers like china and others who aren't part of the maximum pressure campaign. >> i feel the need to make a point about iran and the coup. and i'm not an iran expert so i'm shamelessly pilfering an iranian colleague's work on this, to sort of masquerade as an expert for the purposes of
11:12 am
today. but there are a couple of things you need to bear in mind about the coup which i think are of real relevance and to the subject today in the importance of history and understanding contemporary challenges. the first point to make as my colleague once told me, is that most of that coup in 1953 is really trumpeted not by the shaw's regime. it's trumpeted by the iranian revolutionary regime after 1979. that it was more important to them as evidence of u.s. perfidy than obviously anyone beforehand. so as far as they're concerned, they're the ones who create the sort of museum about the moe sek coup in the embassy. they're the ones that constantly -- not beforehand. in fact he was skort of a
11:13 am
marginal figure. before the revolution. so understand that it's a revolutionary regime that is appropriating mows deck and his legacy for political reasons even though they have absolutely no time for a politician in any other circumstance other than a u.s. coup. the second point, there is a tremendous decline in iranian's perceptions of the united states before the revolution, but it's not due to mosadek but it's due to that's forgotten today, a status of forces agreement in 1966. what really turns iranians against the u.s. is the notion that americans within iranian and there were tens of thousands in iran before the revolution, that these personnel would be subject to extra taretor yalt which is a fancy way of saying they would be subject to
11:14 am
american laws, not iranian laws. that iran was being kolnized by the west. it's the status of forces agreement more than the coup against iran that really undermines the perception of the united states and americans within iran before the revolution, not the coup against mossadek. and this is an important point to bear in mind considering under what conditions do we want u.s. troops to operate in other nations of the world? do we want to insist they are subject to american laws, not domestic laws? for all the talk that was given about president obama's decision to withdraw in iraq after 2009, the sticking point was not just would american troops remain in iraq? they were fairly indifferent to that. it's a question of would they be subject to iraqi law or not? it was the position of the u.s. government they would have extra
11:15 am
territorial rights. and that was unacceptable to the iraqis, hence the decision to withdraw the troops. you can argue amongst yourselves whether or not that was a good trade to make, whether the mayhem and panned monium could have been avoided had we been willing to choose a different path. but bear in mind, tlafs the sticking point just as it was in iran in the 1960s. >> we have a question here and it goes to another question of the supply/demand balance. daniel joregen and his book the prize talks about that's what drives oil prices and politics. what is the supply/demand balance today and what are the factors that affect it? we have a question here that mentions, would increase capacity for renewable power in the united states, would that -- how would that change if the u.s. was less dependent on
11:16 am
fossil fuels, how would that change u.s. relations with the middle east and especially with the persian gulf? >> the supply and demand balance is basic as far as we can tell the only -- there is only one place in the world that's seen an increase in roil consumption over time and that's east asia. the oecd developed parts of the world are seeing flatlining demand for oil. they still consume a lot but that's where the demapd and growth is coming from. if you want growth you're looking to sell to east asia and maybe one day to africa assuming that we're still consuming oil that africa is able to modernize. the question is who will control access to those markets because that's where the money is to be made in terms of future market growth? in terms of supply balance, basically the only part of the world that's seen any significant supply growth over the last few years has been the
11:17 am
united states because of shale, that virtually i think about 90% of the new oil supplies that have come in line over the last ten years is the u.s. production. basically that's it. but bear in mind of course, where are the reserves of the world located? what's the cost of production in those reserves? the bulk of the world's resoifbz still tend to be within the gulf, which has the lowest cost of production. yes, supposedly venezuela has larger reserves but they're of heavy crude and obviously nobody really wants to invest a whole lot in venezuela today for reasons that have -- that are only ance lairily related to oil. role of the middle east means even if you have a lot of supply growth in the united states those are largely being consumed within the united states or within the western hemisphere. the middle east remains
11:18 am
important because of its low cost 6 production, role in export markets, and it is the only part of the world that can conceivably in the short to mid-term satisfy expanding growths within east asia and south asia. >> i want to thank again the national history center for setting this up and thank you for coming today. thank you. [ applause ] watch american history tv all week on c-span3 and features this weekend, saturday at 5:00 p.m. eastern, calling rin kobe and kathleen stafford held captive during the iran hostage crisis talk about their experience 40 years later. >> one of the marines said to me, kate, why did you not ever say you were in solitary? he said you keep saying i was
11:19 am
alone. my mind didn't work in those connections of, this is solitary imprizinponment. my mind, i've been given an incredible gift of of time. no appointments. no meetings. no plans. what can i do with it? and from the richard nixon presidential library, hill roe roddam clinton and william weld during the impeachment of richard nixon. >> if it does fall to you while you're in the house to examine abuses of power by the president, be as circumstance expect and careful as john doorr was. restrain yourself from grandstanding and holding news
11:20 am
conferences and playing too your base. this goes way beyond whose side you're own. >> explore our nation's past on american history tv every weekend on c-span3. next on american history tv, three authors explore the role of men in the women's suffrage movement and the reasons they supported the movement. this is one of a series associated with their exhibit rightfully hers, american women and the vote. well, good evening. welcome to the william g. mccoun theater. i'm debrawall, deputy ar kooifr for the u.s. i'm pleased you can join us whether you're here or


info Stream Only

Uploaded by TV Archive on