For Oil and Country

Does competition for oil lead to war? A look at the debate and what it means for four regions of potential conflict.
Blog Post
Flickr: Lietmotiv
June 15, 2016

Oil is one of the most precious natural resources on the planet, both as a source of fuel for consumers and a source of income for exporters. Because of its strategic and economic value, oil has also been a source of international conflict from World War II to the Persian Gulf War. But do countries actually go to war because of oil?

A new article titled “Dismantling the Oil Wars Myth” by Emily Meierding, a professor at the Naval Postgraduate School, argues that the pursuit of greater oil resources is rarely the primary driver of international conflict. Dr. Meierding writes that “oil wars, as conventionally conceived, do not exist” and that “a territory’s petroleum endowments are a poor predictor of its ability to inspire interstate conflict” because the costs associated with invading, occupying, investing in, and distributing foreign oil make wars for oil an unprofitable and prohibitively difficult venture.

To counter the “oil war hypothesis,” Meierding studies four cases regularly described as oil wars – Japan’s invasion of the Dutch East Indies in 1941, Iraq’s invasion of Kuwait in 1990, the Iran-Iraq War of the 1980s, and Chaco War between Bolivia and Paraguay in the 1930s – and concludes that while oil may be an important factor in international conflict, oil considerations usually play a secondary role to issues such as regime survival, long-standing territorial grievances, or regional competition for power.

Meierding’s conclusions may be a sign of hope for current tensions in the South China Sea, East China Sea, Eastern Mediterranean, and Arctic, where international competition for oil has the potential to spiral into military conflict. But while oil is rarely ever the direct cause for war, three caveats about the “oil wars myth” mean these geopolitical hotspots will remain a cause for concern.

First, Meierding’s “oil wars myth” only refers to cases where profit motives, and not strategic considerations are the primary driver. The prohibitive costs outlined in the paper are unlikely to deter a country that believes increased access to oil reserves is crucial to regime survival – such as WWII-era Japan after the U.S.-led embargo. For a country like China, with an economy whose energy demands have grown rapidly over the past decade and a government whose political legitimacy is dependent on strong economic performance, securing unfettered access to sources of energy, such as the South China Sea’s estimated 11 billion barrels of oil, is an existential question more than an economic one.

Second, all four historical cases focus on wars of invasion to capture foreign oil resources, but the majority of potential oil conflicts involve disputed territory or otherwise unclaimed energy reserves. The costs of conquering oil-rich territory in foreign lands – particularly the destruction of existing oil infrastructure during the invasion and armed resistance by the conquered population – are not present in the competition for oil reserves in international waters. Simply put, the Russians won’t have to deal with an insurgency if they claim oil in the Arctic.

Finally, some of the supply-side factors that mitigate the potential for oil-driven conflict do not exist for other energy resources, such as natural gas. Meierding notes that it’s usually more cost efficient to purchase oil on the global market – even when prices are high – than to seize oil reserves through military force. This is true due to the relative fungibility of oil: for the most part, oil is bought and sold on the global market at a market-driven price and is relatively easy to transport worldwide. By comparison, natural gas is difficult to transport long distances, making price and quantity dependent on the geographic proximity and bargaining power of suppliers, in addition to the degree to which the consumer can substitute toward other sources of energy. As a result, the control of natural gas supplies can be a more powerful geopolitical tool to curry favor and pressure countries than the control of oil supplies, particularly if the end user has limited options for storage and substitution.

In each of the major oil hotspots – the South China Sea, the East China Sea, the Eastern Mediterranean, and the Arctic Circle – natural gas reserves are also a major factor, sometimes even more so than the oil reserves in each region. While the costs may outweigh the benefits of an oil war, the same cannot necessarily be said about the cost-benefit analysis of a natural gas war.

Nations rarely go to war for any single reason, and oil is no exception. While oil may not be the singular impetus for war it is often made out to be in popular narratives, oil continues to be a factor that fosters international competition, and on occasion conflict. From the rapidly melting Arctic Circle to the increasingly congested South China Sea, oil and other energy resources continue to have the potential to spark a dangerous confrontation between some of the world’s most powerful militaries.