CIAO DATE: 02/05/08
The National Interest
A Pipeline Runs Through It
Jonathan Haslam
Abstract
IN THE early 18th century, the great Enlightenment philosopher Baron de Montesquieu pointed out that producers of manufactured goods possess a distinct trade advantage over producers of raw materials. The oil crisis of 1973, however, showed that this is not always true. Recent events underline that fact, the political consequences of which have yet to be fully considered.
Eight years ago the price of oil dropped to $14 a barrel. This turned out to be the best time to buy. A bull market in commodities was under way, and Russia was—and remains—a leading beneficiary. As a resurgent power, Russia may wield its newest and powerful weapon—a growing natural resource monopoly.
An unexpected windfall has descended on states dependent for the greater part of their income on exporting raw materials, including hydrocarbons. The reasons are many and clear. They can be found in China’s burgeoning economy, rising global demand (not least in the Middle East and Africa), failure to sustain investment in further exploration and extraction (due to low prices) and the drying up of long-established wells (the last major find was in 1976 at Cantarell in the Gulf of Mexico, and the Kashagan field in the Caspian Sea has yet to yield an ounce of oil).