Today, Securing America’s Future Energy released its quarterly update to the Energy Security Fact Pack, a data-driven overview of the latest trends in energy security. The Fact Pack includes charts on domestic and global oil production and consumption patterns, oil market dynamics and prices, and up-to-date information on fuel efficiency and advanced fuel vehicles.
Although inventory overhang has blunted price impacts, global geopolitical supply risks abound and ongoing tensions with oil producing countries continue to dominate news headlines. The U.S. reliance on oil links a vital input of the economy to the politics of oil-exporting countries. Many of the United States priorities abroad are governed by oil’s strategic influence to meet the United States’ domestic transportation needs. Geopolitical supply disruptions, unstable political environments, and social unrest create distortions in the oil market that threaten global oil supply security and hamstring U.S. foreign policy options. These uncertainties create vulnerabilities for domestic producers, manufacturers, and consumers who are subject to market disruptions in unstable countries.
Here are four charts that illustrate the links between petrostate activities, U.S. foreign policy interests, and oil supply security.
- Oil prices and export revenues have helped expand Russia’s military capabilities
Oil prices have largely contributed to Russian military expansion and support the country’s export-dependent economy. Between 1998 and 2013, the Kremlin’s military expenditures increased 374 percent, thanks to an 863 percent increase in its oil export revenue. However, the sharp decline in oil prices since 2014 hasn’t had an impact on military spending in Russia. Moreover, Russia has increased its military activities over the past few years, including the annexation of Crimea and the intervention in Syria, that make cuts to military spending difficult. As of 2016, Russian military expenditure remains high, but oil revenue is still falling, which means the country will have to make up for the lack of revenue elsewhere.
- Terrorists target oil and gas facilities and installations
Oil and gas facilities and pipeline infrastructure can be high-impact targets for criminals and terrorist organizations looking to disrupt supplies. In 2014, worldwide attacks on oil and gas facilities and infrastructure peaked at 379, a number that fell to 216 last year. Despite the reduction, the number of terrorist attacks registered in 2016 remains much higher than the average of 62 attacks per year registered over the past 20 years.
- The cyber-infrastructure of oil-producing countries remains vulnerable
Because of the size and scale of state-controlled oil production and reserves, attacks on virtual networks and facilities can be devastating. In 2016, more than 44 mbd was produced in countries that scored below 75 percent on a United Nations cyber-readiness index. Especially worrying is the group of OPEC countries that rank from 40 to 60 percent in the cyber-readiness index, but control large shares of the oil production.
- Oil is often used to support military and defense budgets
Oil-producing countries sometimes expand military spending programs as oil export revenues grow. A 35 percent year-over-year rise in 2011 export revenues helped OPEC increase military spending by a net $21 billion in 2012, ramping up in 2013 due to new security threats. In contrast, as oil prices fell sharply beginning in 2014, oil revenues followed, causing cuts in blockwide military budgets. In 2016, Saudi Arabia cut military expenditure by over $25 billion, offsetting three previous years of spending increases.