Comment: Time to debunk mythical links between oil and politics

(A different version of this article appeared in Foreign Affairs magazine.)

Over the past year, a perceived connection between the control of oil resources, economic security, and power politics seems to have come back to life from the dusty pages of books of the 1970s.

Supporters of a proactive Western oil diplomacy and new strategies for control over oil are battling conspiracy theorists, who envision a world ruled by the arcane imperii of oil interests with the US government and oil multinationals working closely together.

Yet both parties are wrong, their mistakes stemming from a mythical perception of oil as the ultimate goal lurking behind many major international crises.

Oil matters have always been prone to mythmaking. The prominence of the energy question makes it a highly sensitive and emotionally charged issue for politicians and the media. Distorted interpretations of past events are used to justify current opinions.

But oil is a highly technical and economically complex subject that is virtually impossible to discuss meaningfully without a solid technical background. The current combination of broad public interest and a lack of understanding is the single most dangerous enemy to good policy. The proper antidote to this is in-depth examination of the content and origins of the myths and of the realities of oil.

Oil's Golden Age

Oil emerged as a strategic resource in the aftermath of World War II. Far more than the previous global conflict, World War II confirmed that oil was essential to wage a modern war and to win it, but this objective lesson was obscured by the circumstances that developed after 1945. The onset of the Cold War transformed the vast economic and reconstruction needs of Western Europe into an area of vulnerability to Soviet influence. As a consequence, in order to preserve Europe from Soviet penetration, US policymakers thought it necessary to accelerate European recovery according to an advanced model of industrial society. Within this framework, the Marshall Plan accepted the British and French request for an oil-based reconstruction of Europe—a better choice for the rapid and far-sighted recovery of European economies. But it was not an easy decision. Although Europe's modest oil needs had been mainly supplied (90%) by the US before the war, in 1948—for the first time in its history—the US became a net importer of oil. Fear of oil scarcity assailed American strategists and focused their attention on Middle East oil that had been far from a crucial foreign policy focus until that point. The Middle East was the only region in the world with the huge oil resources needed to serve as Europe's "oil tank" and the supplier of last resort for the US.

Yet growing nationalism, rebellion against traditional British-French dominion, and the outbreak of the Israeli question made the Middle East a politically unstable area and an apparently easy target for the Soviets' aggressive expansion policy.

The combination of these factors led the administration of US President Harry S. Truman to devise a proactive strategy for controlling oil resources in the region, a policy progressively translated into specific actions, official documents, and finally clearly outlined in National Security Council (NSC) Resolution 138/1. The soundness of the oil security architecture envisaged by NSC was demonstrated by the crucial role oil played in fueling postwar economic growth of the Western world—maybe the greatest leap forward in modern history registered by any group of coountries.

Between 1948 and 1972, world oil consumption grew fivefold, ushering in the Golden Age of Oil. Whereas North America's consumption "only" tripled (given its higher initial level of demand), outside North America oil demand increased elevenfold, which meant an average compound growth rate of 11%/year (a doubling of oil consumption every 61/2 years). Over this period, oil replaced coal as the primary energy source in the developed world, spurred mass motorization and transport, fed electrification, and drove the spread of plastics and other synthetic materials that changed everyday life and work. This extraordinary phase in economic development could not have occurred without cheap and abundant Middle Eastern oil; indeed, the production cost in the region was 20¢/bbl vs. 80¢/bbl in Venezuela or 90¢/bbl in Texas. Moreover, notwithstanding postwar fears of oil scarcity—and the brief Iranian (1951-53) and Suez (1956) crises—oil flooded the world right through the 1960s.

This brings us to the first paradox: Oversupply drove down oil prices in real terms (and during the 1960s in nominal terms as well), which in turn fed the upsurge in oil consumption worldwide and exacerbated Western dependence on Middle Eastern oil. In the early 1970s, there was no spare oil capacity in the US (until then considered a cushion for Western security) because every producer had been allowed to pump without restriction in order to fulfill ever-growing demand. At the same time, low prices made reserve replacement unattractive, thus eroding American oil stocks. This shortsighted pattern of Western consumption and the policies that favored it were responsible for progressively transferring an extraordinary power to the Middle East countries—i.e., the ability to use oil as an economic sanction to achieve political ends—which, once wielded, led to the first oil shock in 1973.

The second paradox was the US government's retreat from any real role in maintaining a consistent oil policy—as outlined by NSC 138/1—from the mid-1950s on because of the oil glut.

Although the administration of President Dwight D. Eisenhower pursued an unrealistic plan to control the region by backing some Middle Eastern governments and pushing them to join a North Atlantic Treaty Organization-like military alliance (which the US stayed out of), many American decisions in the aftermath of the Suez crisis endangered oil multinationals' interests in the Middle East and spurred Arab upheaval against American and Western interests in the area. In 1959, for example, Eisenhower imposed import limits on foreign oil in order to secure the survival of small and medium-sized American oil producers, whose domestic production was much more expensive than that in the Middle East by the oil multinationals. Deprived of their most important market, oil majors faced overproduction and declining prices that left them no option but to cut the revenues they guaranteed to the producing countries. Once they took this decision, producers reacted by forming the Organization of Petroleum Exporting Countries in 1960 and by engaging in a new era of struggle that increasingly weakened the position of the majors in the Middle East.

Israel was another highly divisive issue. Growing White House support for Tel Aviv—particularly in the aftermath of the Six Day War in 1967—represented not only a key weakness for US oil interests in the Middle East but also increased the isolation of Saudi Arabia (the main oil ally of the US in the region) within the Arab world. Indeed, fears of becoming a target for Arab radicalism and nationalism because of its pro-American stance forced the country to use the "oil weapon" during the Yom Kippur War in 1973. Finally, at the beginning of the 1970s, the US supported the Shah of Iran Reza Pahlavi's aggressive oil price policy, which it considered a useful tool to enable him to build a strong military pillar in the Persian Gulf. This policy only further undermined multinationals' leverage vis-a-vis Middle Eastern countries. Libya and Iran began to compete in a "leapfrogging" strategy to obtain more-favorable conditions from the oil majors, causing an accelerating erosion of their power. This led to the end of the golden age of the Seven Sisters around 1973 and to the loss of their giant oil concessions in the Middle East.

The reality behind these events came to light as the result of a major investigation by the US Senate in 1974-75¹ at the peak of antioil industry sentiment, which ran deep in the US. Prompted by public outrage at high oil prices and the widespread suspicion that giant oil companies had secretly plotted the first oil shock in alliance with the Arab countries (a suspicion seemingly corroborated by their apparent compliance with Arab oil's selective embargo and their windfall profits that followed it), US senators intensely scrutinized postwar connections between oil and American foreign policy, which they tried to prove had been influenced by US oil multinationals, resulting in the country's dependence on Middle East petroleum.

Contrary to most people's expectations and to the attitudes of leading investigators, the final report by the US Senate presented another tale: In the aftermath of World War II, the US government had pushed oil majors to develop Middle Eastern oil under its umbrella but left them alone shortly thereafter as it pursued policies that heavily damaged their interests in the region. Thus the perceived influence of oil multinationals on American foreign policy was largely a myth.

The two paradoxes outlined here indicate that bad Western habits together with contradictory policies made a dramatic contribution to causing the prerequisites that led to the oil shocks of the 1970s. Of course, there were peculiar circumstances that favored Arab oil countries as well. Cheap oil was their major source of strength—Arab oil had the lowest costs in the world, and this factor discouraged oil exploration and production outside the Middle East, leaving no immediate alternative to Arab oil. At the same time, the major lack of relevant information fed the price panic in the 1970s; there were no reliable figures on effective consumption or the impact of cutbacks and their geographical distribution. Thus, although the size of the Arab oil embargo was not great, ignorance greatly amplified its effects. This phenomenon was largely responsible for the second oil shock in 1979-81 as well.

In addition, the cost of substitution for oil as a transportation fuel—the equivalent of $50-60/bbl—made shifting to other sources (even if it was possible to substitute oil in electricity generation at a lower price) an impossible proposition.

Demography was also on the side of Arab producers; their populations were relatively small, which allowed oil revenues to apparently cover all social needs while sustaining the cost of new international power politics.

Finally, the Soviet Union had ominously stepped into the Middle East arena and represented a political and military counterbalance to any Western reaction.

Oil security obsession

All of these factors converged to create a unique and unrepeatable situation that gave rise to the enduring Western obsession with oil security. Unfortunately, this obsession eclipsed the real causes of oil vulnerability—primarily cheap oil and contradictory policies—and persisted in Westem collective psychology long after the brief supremacy of OPEC ended.

Indeed, when the second oil shock (1979-81) hit and panic once again spread, many forces were already in motion to dramatically reduce OPEC power. Basically, it sufficed to adopt policies to encourage energy efficiency, exploit new oil fields worldwide (with higher costs but more political security), and promote other sources of energy (nuclear and natural gas) in order to provoke a fall in Western oil demand (about 4-5 million b/d during 1980-83), a dramatic drop in oil prices, and the birth of a competitive oil market.

OPEC, meanwhile, was experiencing difficulty maintaining internal discipline as far as production quotas were concerned. Dazzled by the high prices they were artificially feeding, many members of the cartel began to cheat on their output in order to sell more oil, even breaking long-term contracts in order to take advantage of spot sales, whose prices were increasing too much too rapidly.

This deconstruction of the traditional oil order shadowed the silent but growing oil market glut that emerged clearly only in 1983—and which has caused a continuous decline in oil prices since then.

The day of reckoning came in 1986, triggered by the Saudi decision not to sustain the burden of OPEC indiscipline anymore and to flood the world with its own oil to regain market share. Oil prices plummeted to below $10/bbl, and OPEC suddenly awakened from its illusion of endless power and learned its lesson: that the medium to long-term effects of using the oil weapon always would be devastating for the oil producers, not just for the Western countries.

Since 1986, the oil market has functioned smoothly, and OPEC has constantly tried to ensure oil price stability, promptly intervening to supply more oil in times of temporary disruption. More than political issues, it has been market factors (quality of crude oil, rigidity of the US refining system, the proliferation of quality requirements for oil products, stock levels, etc.) that have spurred price hikes and volatility in recent years.

Nonetheless, the dark shadow of the 1970s and its distorted perception by the Western public have survived the changes in oil markets and perpetuated a collective myth of oil insecurity and scarcity that invariably surfaces in times of high prices.

Myths and realities

The most frequently recurring fears in the world oil market since its inception have been the phantoms of scarcity and security; yet in reality its most enduring characteristic has been abundance. The basic reason is apparently complex and requires a short digression.

Prof. Morris Adelman explained, "No mineral, including oil, will ever be exhausted."² Although oil is an exhaustible resource, it's completely misleading to assume that there is a fixed stock of oil that declines year after year, because the available quantity of oil depends only on time, technology, cost, and price. Time favors a greater knowledge of existing oil fields and always allows for an upgrading of their reserves. An example from Adelman's book is illuminating:

"In California, the Kern River field was discovered in 1899. In 1942, after 43 years of depletion, 'remaining' reserves were 54 million bbl. But in the next 44 years, it produced not 54 but 736 million bbl, and it had another 970 million bbl 'remaining' in 1986. The field had not changed, but knowledge hadU ."³

Technological improvements essentially may reduce the cost of extracting oil (thus transfoming generic resources into proven reserves), enhance techniques for exploration (thus revealing more reserves than previously recognized), or increase the recovery rate of existing oil fields. In 1980, the average world recovery rate from existing oil reserves was about 22%; today it's 35%.

Given current oil consumption levels, every additional percentage point of recovery means 2 more years in terms of the life-index of existing reserves. Overall, cost and price are the pivotal variables for increasing reserves. Cheap oil (i.e., oil with a price that does not significantly exceed the breakeven cost of producing and marketing oil in the long term) leads to a reduction of investment in both new exploration and technology, thus undermining future additions to existing reserves.

All of these factors may explain why the life-index of world reserves has constantly improved, even as major new oil discoveries have been decreasing since the 1960s. In 1948, the ratio between proven oil reserves and current production indicated a remaining life of 20 years for existing reserves; in 1972, the life index rose to 35 years; today it stands at about 43 years.

The prophets of "oil exhaustion," however, don't want to deal with these realities, which are basically moved by economics and technology, not by geology. Thus it is comprehensible why a school of geological thought—drawing on the observations made by geologist M. King Hubbert in the 1950s—periodically "cries wolf." The problem with this school is that for 40 years it's been predicting that oil reserves will be exhausted within a few years and then has to stay the final curtain once its predictions appear to be wrong. But no one remembers past mistakes, so its credibility has not been tarnished.

Thus the issue of oil scarcity is a phantom problem. Oil abundance has been the recurring curse of the oil industry since John D. Rockefeller's times, and it remains so today. In the 1990s, the average growth rate of world oil demand was less than 2%/year. It rose between 1979 and 2002 by a modest 30%. This consumption growth pattern will remain stable over the next 15 years, reflecting the end of the Golden Age of Oil—whose main feature was huge annual increases in oil requirements—and marking the degree of semimaturity attained by the current oil market.

Today, the world's structural spare oil capacity is more than 4 million b/d, which is maintained by OPEC countries—and particularly Saudi Arabia—in order not to flood the market. But it's very important to bear in mind that the overall oil supply capacity has been limited thus far by peculiar circumstances. Above all, major producing countries have substantially minimized their oil investments in the last 20 years in an attempt to avoid creating permanent excess capacity like that of the 1948-72 period. Nonetheless, their expansion potential is huge. For example, the 10-year plan of Saudi Aramco in 1973 (before the oil crisis) targeted 20 million b/d of production in 1983, more than double Saudi Arabia's current output. It's also true, according to Saudi Oil Minister Ali al-Naimi, that Saudi Arabia is still producing oil from only 9-10 of the country's 80-plus oil fields, and 8 of these were discovered more than 40-50 years ago.

On the other hand, international oil companies are also impeded in their expansion by two main factors: inaccessibility of the largest and cheapest reserves in the world (i.e., those in the Persian Gulf) to foreign investments; and the dictates of the financial markets, which measure the return on capital of companies' plans according to a long-term oil price of about $16/bbl and require a substantial premium with respect to weighted cost on capital for the oil sector (which is generally considered 8%).

Hence oil companies are obliged to dismiss many investment opportunities worldwide because they do not fit these very tight requirements. And the larger a company's production, the larger the challenge, because higher production requires higher replacement ratios. Thus financial discipline puts oil majors under considerable stress as far as reserve replacement is concerned, reducing their options for sustaining future production. Basically, the financial markets' prudent approach (maybe too prudent) depends on the assumption of oil depreciation in the long term; oil is considered a semimature commodity whose fate is closely connected with that of most raw minerals, all affected by a rise-and-fall consumption pattern in modern economic history. According to this pattern, just as the Stone Age did not end for the lack of stones, the Oil Age will not end because of the scarcity of oil. Rather oil will inevitably be surpassed in convenience by a new source of energy in the future.

Only OPEC production ceilings can sustain oil prices so as to allow new investments to flow in non-OPEC areas, where oil costs are higher. This is another paradox of the oil market—and an effective subversion of economic doctrine. But it's a fundamental support for many countries—such as the US, UK, Canada, Norway, Russia, and many others—whose output would be partially displaced with oil below $16-18/bbl.

Take Russia, for example. In 1998, the Russian Federation was on the verge of financial collapse—partly because of plummeting energy prices. Russian oil production, which had been falling since 1990, dropped to 5 million b/d. Since then oil (and natural gas) price recovery has completely reversed the situation, boosting oil output and revenues. This sudden change has led many observers to envisage a new role for Russia in the future as main supplier of Western oil needs, an alternative to Saudi Arabia. But this is a misleading impression. Over the last 3 years, Russian oil companies have pumped all the oil they could, exploiting high oil prices and the possibility of exporting more than that allowed by law—which obliges every company to sell a large part of Russian oil on the domestic market at a very low price.

With flat domestic demand for oil, the quest for high-revenue exports has propelled Russian companies to boost production without replacing reserves. According to Russian Energy Minister Igor Yusufov, during 2000-02 Russia produced more than 7.3 billion bbl but replaced only a little more than 6.1 billion bbl with new discoveries. Considering that the Russian Federation has only one fifth of the oil reserves owned by the Saudis and that old Soviet techniques have damaged many oil fields, it's reasonable to assume that current Russian oil production is inflated by specific circumstances that cannot last forever.

In addition, Russian consumption will recover, thus absorbing a growing part of domestic production. Overall, a return to low oil prices would dampen any major leap forward by the Russian oil sector and thwart investments in its export infrastructure system, which needs to be upgraded and developed.

Although Russia remains an excellent long-term opportunity for oil and gas companies—particularly once the current inflated outlook vanishes and legislation improves—it is misleading to compare its potential role on world oil market with that of the Saudis.

In short, the world is not running out of oil, and there's no current problem of oil security in today's world market. However, the problem is that many Western observers speak about "oil security" when what they have in mind is "stable and cheap oil supplies," thus confusing two very different things—a confusion that usually stems from public hysteria when oil prices soar; then, when prices drop, oil matters are completely forgotten. Few remember that in 1998-99, when oil prices plummeted below $10/bbl, the general refrain was "bad for oil companies and producing countries, good for everyone else." No one spoke about problems such as oil security, energy alternatives to oil, etc., back then.

Hysteria aside, cheap oil has always been and remains a curse for industrialized countries and the most elusive enemy of oil security. It hampers any possibility of dealing with new energy alternatives to oil—which are all very expensive—or with the development of new oil regions. It maintains Western habits—and particular those of the US—of not promoting any form of energy-saving. Finally, it increases consumer dependence on a limited group of countries with the lowest production costs, which today still are those in the Persian Gulf. However, cheap oil is a curse for them too.

Islam and oil

Today 65% of the world's proven oil reserves are concentrated in five countries (in order of the quantity of reserves, Saudi Arabia, Iraq, UAE, Kuwait, and Iran), whose current production is less than 30% of global production.

In a way, Saudi Arabia is the Central Bank of the world oil market, because the kingdom can give liquidity or take it away from the market to stabilize it, thanks to its spare capacity. All of these countries, as do other OPEC members, need decent oil prices, and since 1999 they have finally managed a certain degree of internal discipline in order to limit output and regulate prices.

This policy has few alternatives, particularly for the great Persian Gulf producers, since their economics remain heavily oil-based while their demography has dramatically changed. Countries such as Saudi Arabia have doubled their population in 12 years. Sixty percent of the gulf countries' population is less than 21 years old. This demographic explosion has created expectations and frustrations to which stagnant and monocultural economies cannot give a credible answer. Only sustained oil revenues allow these countries to temper social unrest by preserving huge social assistance programs. Gulf countries' oil revenues are already much lower today than 20 years ago, and cheap oil prices mean a dramatic dip in per capita oil income. Therefore, frustration and violent revolt may erupt whenever the minimum needs for living are endangered by decreasing oil prices, particularly among people who already live in poverty and cannot permit themselves the luxury of hoping for a different future. Clearly, fundamentalism today—like socialist pan-Arabism of yesterday—is finding fertile ground in these hopeless people. Indeed, this is the cause of its strength and its diffusion.

Seen in this context, the idea that Saudi Arabia has played a pivotal role in nurturing fundamentalism for the sake of long-term expansion of Islam is politically misleading and historically unfair. Saudi Arabia began to promote and finance the spread of conservative Sunni teaching worldwide in 1962 as a means of counterbalancing the enormous appeal of socialist pan-Arabism to the Arab masses. At that time and for many years after, fundamentalism—which pan-Arabist icon and Egyptian President Gamel Nasser strongly repressed—was deemed a useful political tool for resisting socialist and communist penetration of the Arab world. The US supported this policy, backed pro-Islamic regimes in Malaysia and Pakistan in the 1970s, and fed fundamentalist mujaheddin against the former Union of Soviet Socialist Republics in Afghanistan in the 1980s. The problem is that a policy based on the principle that "the enemy of my enemy is my friend" is always shortsighted and produces long-term effects that are difficult to cope with.

Whereas the US progressively abandoned this policy during the 1990s, it's quite impossible for the Saudi elite to follow suit. Today as yesterday, the country would risk isolation within the Arab and Islamic world, which could prove to be critical for the survival of the House of Saud. Its error has been the illusion of controlling and shaping the political evolution of radical movements by financing them, but this is a common mistake that has shaped the realpolitik of many Westem countries too. So, it's unfair to raise the question "Is Saudi Arabia today an ally or a foe?" when for so many years Saudi policies have been endorsed by the Western world.

Islamic fundamentalists are everywhere, but only a small part of them are violent or determined to launch a jihad against the West. Essentially, fundamentalism is an attempt to recover old values and identities in order to formulate an original political model—the search for which was a major effort (and a regular failure) for many decolonized or "new" countries in the 20th Century.

In this perspective, it's the revival of an unfulfilled quest for autonomy and independence that has swept and bloodied the Middle East since World War II and that the West has already faced in a much more dangerous framework: the Cold War. Like pan-Arabism, fundamentalism is not a monolithic doctrine but the expression of a highy fragmented universe with many faces and political options; the violent or terrorist fringes of fundamentalism are only a small part of this universe, and probably their appeal to Arab and Islamic societies is already declining after it peaked in the mid-1990s.

At that time, many Arab countries were militarized in response to frequent terrorist attacks, which alienated any support from frightened civil society, the first victim of radical fundamentalist fury.

Within the various Arab societies, divisive visions nourished by specific national interests doom any effort to achieve integration to failure. The reality is that there is neither one Arab world, nor one Islamic universe.

Divisions make it impossible for a single fundamentalist leader to emerge as the undisputed father of a single pan-Arab or Islamic nation, just as it was impossible for Nasser, no matter how much genuine support he could rely on among the Arab masses. The only real centripetal force in these societies is a common uneasiness or distaste with what is perceived to be an attempt by external powers to rule or influence their existence. While at times this argument is artificially framed by propaganda, its substance remains. That's why any direct Western involvement in the shaping of a Middle East future has always failed and will continue to fail.

How does all this affect the world of oil? So far, and whatever their problems, Arab governments—Saudi Arabia above all—and even fundamentalist Iran always have made every effort to ensure oil-price stability, and they are still trying to pursue this objective. One could argue that this policy conforms to their own interests, and they have learned well the lesson of the 1970s. This is true, but price stability is in the long-term interest of the West as well. And surely it's not an easy task to maintain price stability, given the potential oil competition that silently underlies relations among OPEC countries, particularly the Persian Gulf states.

There are two main forms of competition that may always come to the surface. The most common one is the attempt by any major producer to break free from OPEC rules in order to sell more oil and win greater market share. Historically, this has been a recurring cause of OPEC instability and lack of discipline, and only decisive action by Saudi Arabia has succeeded in diverting its most dangerous effects. The latter may involve only the Persian Gulf countries, given their potential impact on world oil markets. If one of them were to open its oil fields to foreign investment again, this would oblige its neighbors to react in order not to lose future market share and revenues. In short, they would be compelled to overproduce and accept plummeting oil prices.

The only alternative to this policy would be for "closed" countries to reduce their own production to accommodate the new output of the "heretical" producer, thus preserving oil price stability. But this would be suicide and not a viable option.

As a consequence, the result of such a competitive move would be the disruption of oil order and the impoverishment of oil producers, because in the short-to-medium term, output maximization cannot offset plummeting margins. That is the hypothetical challenge that tomorrow's Iraq could impose on its neighbors, but it would be a shortsighted policy for the country to usher in an era of oil market deconstruction; Iraq will need financial resources for rebuilding, for its stability, and for ensuring a better future for its people. All these requirements would be imperiled by an oil-to-oil competition among major producers.

Paradoxically, only a radical fundamentalist regime could be interested in launching such an output-and-price-war in order to destabilize vested interests in the region and throughout the world. Such a regime could impose on its people hardships and privation (brought about by lower prices) for the sake of a final victory over the unholy enemies.

Think, for example, of the devastating effects such a scenario could have in Saudi Arabia: It could lead to the attrition of oil production in the US, Russia, and many other countries; endanger future prospects for the Caspian basin; and stop efforts to explore new areas of the world and to adopt new and more-sophisticated technologies. At the same time, it would endanger many investments that international oil companies already have made worldwide. In short, in 5-7 years, the world would be far more dependent on the Persian Gulf than it is today, with no immediate way out—an outcome that could seem like a real victory for a radical regime.

But it should be remembered that the same outcome could be caused by blind Western policies designed to undermine OPEC and introduce competition among its members.

Elusive oil market

The oil market behaves like an elusive Proteus, always escaping any form of control. In sharp contrast to recurring myths, any effort to politically manipulate the course of oil matters is not only difficult but absolutely useless. The concentration of oil reserves in a highly sensitive and ambiguous region of the world makes any such effort dangerous as well, because it entails long-term political consequences that are impossible to manage.

Indeed, the Western search for oil security through control of oil resources would perpetuate the Arab and Islamic perception of a looming threat to their future, thereby increasing their anti-Western sentiments and allowing them to avoid confronting their own problems.

Western countries have been historically unable to sustain a long-term foreign policy designed around energy objectives, which vanish once prices drop and often conflict with broader diplomatic goals. Moreover, history has proven—even without taking ethics into account—that it is impossible to exert long-lasting control over Middle Eastern oil countries because of the unmanageable chain reactions set in motion by exerting foreign influence in such a sensitive environment.

Yet history has also shown major oil-producing countries that they are vulnerable to future price drops if alternative energy sources are developed in response to fears of rising energy prices. Given the full range of contrasting forces at play in any oil scenario, the wisest approach is simply to allow it to find its own equilibrium.

Oil security and control are no more than divisive and confusing myths. They feed the public perception that oil is the ultimate goal behind many international crises, although waging a war for oil is simply nonsense—both for clever governments and for the interests of oil companies. Therefore, Western governments must debunk these myths and explain clearly to their citizens that oil is prone to price volatility and thus occasionally high prices are unavoidable, while preparing them not to expect an everlasting bonanza and promoting different consumption habits and investment in new energy technology. Only by overcoming their obsession with oil security can they impartially cope with the Middle East's problems, which require neither emotionally driven decisions, an overestimation of fundamentalist strength, nor the acceptance of an ineluctable confrontation with Islamic culture.

The West—particularly the US—given its pivotal role in contemporary international affairs, must commit itself to a long-term strategy of containment and rollback of any violent or terrorist mutations of Islamic doctrine, without confusing them with Islam.

This sustained and long-term effort must be accompanied by dialogue with Middle Eastern civil societies, whose search for a different future must not be frustrated by the sense it must choose between two extremes: the adoption of a Western social model that is not part of their culture, and the adoption of any authoritarian model that does not accommodate their needs for freedom and individual self-determination.

This dialogue needs to be reinforced by the West's willingness to invest public money in foreign aid in order to support the development of economic activities other than oil.

Throughout the 1990s, this task was relegated to private companies or international institutions acting according to excessively restrictive financial and social criteria that only increased Middle Eastern uneasiness and led to the rejection of any Western solidarity.

Of course, there is neither an easy solution to the Middle East dilemma nor an immediate one. Throughout history, the shaping and consolidation of national identities has been a prolonged process involving considerable suffering for the "new" countries—and all the Middle Eastern nations are new, forged mainly after World War I.

This is why the West must ready itself for a long-term process that will require a strong and consistent, far-reaching vision. In this context, to paraphrase George Kennan, the West and the US must neither underestimate their own strength nor exaggerate the threat they are facing. Only by holding to their deepest values, such as freedom, self-determination, tolerance, and, above all, the consciousness that there is no absolute truth in human affairs, can they prevail in these difficult times and prove the effectiveness of these values to the people of the world. And oil is not one of them.

References

1. US Senate hearings, Multinational Oil Corporations and US Foreign Policy, 93rd Congress, Washington, DC, Government Printing Office, 1975.

2. Adelman, Morris. The Genie Out of the Bottle, MIT Press, Cambridge, Mass., l995, p. 11.

3. Ibid, p. 15.