Is the green transition one of the reasons for global instability?
As traditional oil and gas-producing countries are losing their leverage, they could resort to violence to keep their place on the global stage.
Dear readers,
The new episode of this (allegedly) quarterly newsletter tries to investigate the connection between energy, foreign policy and security. It is a very long episode, with a controversial hypothesis, yet it is worth exploring. Thanks for reading.
BRUSSELS – Energy, oil, in particular, was the leverage some countries had to steer the policies of the rest of the world. In 1973, for example, Middle Eastern oil producers started an embargo on the U.S. for its filo-Israeli foreign policy. Moreover, traditionally, an indicator of how heightened the political situation around the world and in the Middle East was the price of a barrel of oil. Yet, in this historical period, the price of oil has been consistently below $100 per barrel. The following chart highlights this process well.
The aftermath of September 11 led to a surge in oil prices. The 2008 financial crisis put paid to it. Moreover, the price of oil never exceeded $100 per barrel, going negative for a few days in April 2020, during the COVID-induced economic shutdown. The price of oil did not change much despite the Russian invasion of Ukraine and the latest war in Gaza and all over the Middle East.
Some might argue that this stability in the price of oil comes because there is a lot of oil on the market. After all, in 2022 the world produced 89.6 million barrels per day. Yet, despite OPEC announcing the reduction of the output at the end of 2023, the price of oil did not grow above $100 per barrel. Is it a question of offer or a question of demand? The following charts answer this question.
Here, DaNumbers took the year 2000 as a benchmark for the U.S. GDP (in real terms) and the supply of oil products. The U.S. Energy of Information Administration uses this parameter to measure the demand for oil-related products. The chart shows that the American economy is now 2.5 times bigger than it was in the year 2000, whereas the supply of oil-related products remained constant.
Given that the demand for oil has been constant or declining in the biggest Western economies for more than two decades, every per cent point growth in alternative sources puts a dent in the sales of oil or methane gas. This apparently linear and basic point is undermined by the reality of how the West produces its energy, as the following chart shows.
In 2022, the energy mix saw natural gas as the most relevant source of electricity in the U.S. at 39.9 per cent. Oil is almost irrelevant, whereas fossil fuels like coal and natural gas still represent more than half of the electricity production in the U.S. Yet, the theory we outlined so far is not to be thrown away entirely, as we will find in the following chart.
At the bottom of the visualization, we see renewables. Natural gas, on the other hand, experienced a surge in the U.S. energetic mix. The reason, though, is not because America is more dependent on Russia or Qatar for its energy, but because of a surge in the domestic production of methane gas.
The EIA estimates that in 2023 the U.S. exported 6.9 trillion cubic feet of natural gas importing 3.02 trillion cubic feet. In other words, the U.S. are independent energetically. Moreover, the Biden administrator is investing in clean hydrogen, after announcing the identification of seven hydrogen hubs across the country.
Also, multiple reports are estimating that fossil fuels demand will peak by 2030 or, even better, it has already peaked. In fact, 2023 was the year the world consumed the most fossil fuels ever. The problem is that, at least as far as oil is concerned, we are witnessing a decoupling between the collective West rest of the world. The following chart will help elaborate on that.
The OPEC, the cartel of traditional oil-producing countries, estimates that the demand for oil in China is almost three times the demand of the year 2000. For India, it is almost 2.5 times. Countries like Germany and Japan, on the other hand, already consume less oil than they did in 2000. Does that mean that there is a decoupling between the collective West and the rest of the world? The following chart will help elaborate.
Here we see the share of oil demand by selected countries and its difference between the years 2000 and 2022. Here we see that the U.S. needed little more than one of every four barrels of oil extracted in the world. That share is now down to one in five. China and India significantly grew their share. China, now, represents 14 per cent of the global oil demand; India only has eight. The decline of developed economies’ dependence on oil is clear: Germany and Japan’s shares are one-half of what they were in 2000.
Although the U.S. might still be extremely reliant on fossil fuel, the other pillar of the collective West made significant progress in getting read of oil, coal, and others. The following chart shows that very well.
The E.U. is a renewable energy powerhouse. In 2021, only 41 per cent of Europe’s electricity came from fossil fuels with wind, solar energy, and hydroelectric power counting more than nuclear energy for Europe’s energy mix. This European success was a long time in the making, as the following chart shows.
Here, we see that, since 2000, Europe managed to reduce its reliance on fossil fuels despite a constant reduction in its reliance on nuclear power. The chart shows the explosion of wind as a credible source of energy since 2010. Solar energy, on the other hand, does not seem to gain the share some in the Southern part of the continent wish it had. Despite that, Europe is progressing toward an energy mix which will rely less and less on natural gas, oil, and coal.
This is incredible news: it means that, at the very least, Europe is on the right path toward carbon neutrality, and that the U.S. are no longer reliant on foreign countries for their energy needs. Yet, this decoupling might have unintended consequences, as the following chart will show.
Here we see the number of armed clashes since 2000 as collected by the Uppsala Conflict Data Program. What we see here, is a growth in armed confrontations led by the Russian invasion of Ukraine in 2022. The surge between 2014 and 2018 is about the conflict against the Islamic State, the civil war in Syria, and the first outbursts of violence in Eastern Ukraine. After some time, the situation appeared to stabilize – until COVID, the consequent energy crisis and, most importantly, February 22.
In general, the latest breed of conflicts we saw since 2008, saw the re-emergence of state-based violence. In 2022, the UCDP estimated 76 conflicts involving state actors. This is an unprecedented number, and it helps explain the level of instability the world is facing right now. The following map develops this point further.
In the map, each point here represents an armed clash. The size of the points does not consider the number of casualties. Here, DaNumbers wants to highlight how, since the year 2000, the world experienced different kinds of conflicts, with a plethora of actors waging wars. In the maps, particularly following the green dots, it is very easy to follow the history of terrorism (particularly from Islamic actors), and their progressive disappearance.
From the year 2020, though, things change. Green dots disappear at least from Europe, and blue dots appear all over Ukraine and in other parts of Eurasia. The suspicion that there is something brewing is too big not to assess.
In the last two years, we saw a reassessment of the global conflict trends. Let alone the cartel wars of Mexico or the widespread violence in Southern Asia, conflict – again – brews in an area which includes a circle of circa 1,500 km around the Black Sea.
Ukraine, Nagorno-Karabakh, and Gaza all fit within this circle. Russia, Azerbaijan, and Iran are members of the OPEC+, whereas Qatar left OPEC in 2018. If these countries are failing to steer global and Western foreign policies using oil or methane gas as leverage, what do they have left? Money (Qatargate), soft power (sport washing like organizing a professional golf tour or sponsoring Formula 1), greenwashing (hosting CAP28) or, worst case scenario, hard power, possibly by proxy.
This scenario is even more likely because of China’s push towards renewables. Countries that sell hydrocarbons to the rest of the world risk losing influence unless they do something. And the window of opportunity for them is narrowing down: China wants to be carbon neutral by 2060, and Europe by 2055.
Although this might not fit within the theory of decoupling between the collective West and the rest of the world, it shows that there might not be only one decoupling, but multiple ones happening at the same time forcing countries who enjoyed prestige and influence in the past, to reassess their option.
This is a mechanism which is in place. China is essentially using Russia for cheap energy as a stopgap solution toward carbon neutrality, Azerbaijan and Qatar enjoy a strong position as an alternative source of energy for Europe for the moment, as long as it lasts. This argument will need further evidence, but the interaction of energy and politics is an aspect the global public sphere needs to start questioning.
George W. Bush once said that America was an oil-addicted country. The same goes for the collective West. Detoxicating from fossil fuels is the right thing to do, yet it will be a painful process. It will force change, and it will likely induce more global instability. All because very rich countries are losing their leverage on the rest of the world, and, DaNumbers thinks, they will do whatever it takes to keep it.
Some International Relations scholars on Reddit were not impressed with this theory and thought this was a little more of a conspiracy theory. Data seem to confirm its validity, yet the hope is that this newsletter is completely missing the point.