Geopolitics of Energy

Energy offers one of the clearest examples a geopolitical issue, that is where the trade relationship between two or more countries is heavily influenced by political factors.

Energy security, where a government has a high level of control over how it safeguards its energy demands, is a key concern for most countries. Imports are of course subject to a number of geopolitical concerns. 

One concern is the need for stability and security in the country producing and exporting the oil. Conflicts in Libya and Iraq have hit production in these countries. A further concern might be the diplomatic relations with certain countries. Both Russia and Iran have recent histories of trade embargos (bans) placed on them by Western countries, including oil and gas exports. Whilst intended to hurt the economies of the embargoed countries, this also forces importing countries to look elsewhere for their energy supplies. 

In a related way, countries such as Russia are perceived to have significant potential influence over European countries due to their control of gas exports. In recent years Russia has stopped its exports of gas to Ukraine to exert influence over political matters in the relationship between the two countries.

An obvious form of international co-operation over energy is the existence of the Organisation of Petroleum Exporting Countries, normally referred to as OPEC. The 12 members of OPEC, consisting chiefly of Middle Eastern countries together with Angola, Ecuador, Nigeria and Venezuela, act together as a cartel. 

A cartel is an organisation seeking to control the production of a commodity, in this case oil, in order to influence the price of that commodity and maximise the income for those member countries. In 2016 OPEC members agreed to cut their production of oil to help raise its falling price.