Oil Trade and Diplomacy
People often think that oil trade might influence the diplomatic or security relationships between producer and consumer countries. This is in part because oil is thought to be special and in some way more important than other traded commodities. Likewise, people assume that consumer countries place great importance on their relationships with producer countries to keep the oil flowing in the right direction.
Based on this logic, there are certain expectations one might have if oil trade between two countries were to rise or fall. An increase in oil trade could spur greater diplomatic affinity, while a decrease in oil trade could negatively impact the diplomatic or security relationship of the countries involved. Furthermore, if declining oil trade with one consumer country forced a producer country to look for new markets elsewhere, it might open the door for another consumer country to increase its trade with the producer country, gaining influence alongside its heightened oil imports.
In the United States, the Shale Revolution has brought this particular concern to the fore: As the United States reduces its oil imports amid rising domestic production, producer countries are shifting their oil exports to other large consumer countries, some of whom are U.S. political rivals, such as China. Many within the United States are worried that these changing trade patterns will result not only in less U.S. influence abroad, but also potentially in greater Chinese sway in other countries’ foreign policies.
In reality, though, there is little evidence to support the assumption that diplomatic or security relationships are significantly affected by changes in oil trade. Many other factors, including shared interests and cultural or political affinity, far outweigh energy trade in determining such relationships. For example, Trinidad and Tobago’s cooperation with the United States on security initiatives in the Caribbean has remained steady despite a dramatic decline in U.S. imports of Trinidadian gas. Similarly, China’s decision to ramp up its imports of Angolan oil in the early 2000s as Angola reduced its exports to the United States did not give China undue influence in Angolan foreign policy, to the detriment of the United States. Instead, ties between Angola and the United States have actually improved, regardless of their diminishing oil trade relationship.
However, this is not to say that no single country matters to the United States when it comes to the energy market. Producer countries matter for their contributions to global oil and gas supplies. Large contributors such as Saudi Arabia are important to any energy consumer in the international market because they can impact global prices; should their output be disrupted, noticeably shrinking available supply worldwide, prices would be driven up. In other words, sudden and significant reductions in oil on the global market can mean price spikes that strain the U.S. economy, at least temporarily.