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War and the Oil Price Cycle

UCD-ITS-RP-16-10

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Sustainable Transportation Energy Pathways (STEPS)

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Suggested Citation:
Jaffe, Amy Myers and Jareer Elass (2016) War and the Oil Price Cycle. Journal of International Affairs 69 (1), 121 - 137

Complex rivalries for influence among regional powers, most notably between Saudi Arabia and Iran but also including Turkey, Qatar and the United Arab Emirates, are transforming the Middle East. As local borders and ruling institutions have become contested in the aftermath of the Iraq War and the Arab Spring, so has control of the region’s major oil and gas facilities. Warring militias, the Islamic State of Iraq and Syria (ISIS), Al Qaeda and traditional governments are increasingly focusing on maintaining or gaining control of oil production and refining installations. Additionally, regional conflicts, now complicated by the active military involvement of Russia, have spilled over to affect global oil markets as Saudi Arabia and its Gulf allies, seeking to influence regional military and geopolitical outcomes, have initiated a market share war that has brought about a collapse in oil prices. This paper examines how conflicts in the Middle East, including the Syrian civil war and the rise of ISIS, are shifting the geopolitics of oil. These conflicts are raising serious new risks to regional oil facilities, making them both strategic assets and spoils of war. Current diplomacy to resolve the conflict in Syria faces serious challenges. In addition to humanitarian grounds, it is imperative to find a durable solution in order to prevent the continued destruction of major regional oil and gas production and export facilities. The ongoing destruction of such infrastructure may represent a major challenge to global energy security in the three to five year time frame.