Considering Geopolitics in a Post-Oil Economy – Florence Conway

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By Florence Conway

Energy – and the power and riches that come with it – is the driving force in our world.  For the second half of the 20th century, the pursuit of oil has been at the centre of the geopolitics of energy. Countries with oil have historically had power, literally and physically. It has granted countries, who would otherwise have taken a back seat on the world stage, a prominent and threatening role. And unsurprisingly, given the power oil holds, it has also been central in triggering many conflicts, from the Gulf War to the Arab Springs. 

However, the energy policy agenda is changing: the looming threat of climate change has prompted widespread decarbonisation policies, and combined with the increasing development of renewable resources, the world now faces a transition to a post-oil economy. Whilst there is little consensus over when this change will occur, it inevitably will, radically impacting global geopolitics.

Undoubtedly, this transition represents a challenge for oil-producing countries. Will the world’s biggest fossil fuel producers lose their crucial influence? Will this lead to an increase in conflicts, both regionally and internationally? And moreover, what will happen nationally? Many of the largest oil-producing states are state-led economies, with fragile, often corrupt governments. Worryingly, it is also those countries who have not yet managed or are failing to diversify their economy, and are thus placed in a more precarious position, ill-equipped to deal with the rapidly changing landscape of energy transition. 

The implications for the Middle East and North Africa (MENA) are the most striking cause for concern. Not only are countries in this region failing in diversification, but they are also the most politically unstable; hence they pose an increased threat of sustained political and economic turbulence in the MENA region, with a potential risk of state failure. Indeed, as Professor Paul Stevens, a distinguished fellow at Chatham House, notes:  

 

“The oil producing government gets revenue; if that revenue falls or disappears, the government is no longer able to sustain the non-oil sector, which means you will have rising unemployment, you will no longer be able to pay subsidies to keep your population happy.  

Many of the large oil and gas exporters are what might politely be described as politically unstable. So the faster the transition [to renewables], the greater the fall in gas and oil revenues, the more disruptive it is going to be and so you are looking at potentially a large number of failed states.” 

 

Thus, failure to deliver stability in the oil industry in these countries will impact their internal stability, which will incite grave consequences, both nationally and globally.

Furthermore, the demographics of the MENA region increase the risks faced – it is characterised by young, rapidly expanding populations, which are predominately urban. Whilst this may suggest a promising level of development at present, many of these populations would face high rates of unemployment and economic collapse in a post-oil world. Civil unrest is almost inevitable and will exacerbate the devastating consequences. This troublesome combination of factors may also foster an environment for extremism, furthering instability and disturbance. Major unrest in these regions then also has the potential to create significant migration problems for mainland Europe, triggering even greater international instability.  

Inextricably linked to this post-oil world is the expansion of renewable energy sources. As the use of oil falls, that of renewables increases. Consequently, minerals such as cobalt and lithium – both vital components in renewable technology – will be increasingly sought after, and this will almost certainly cause geopolitical tensions. 

For example, the majority of these resources are found in the Democratic Republic of the Congo, which already has a weak government, imbued with corruption and incompetency, potentially amplifying any adverse outcomes. China’s ‘neo-colonialism’ in Africa, meanwhile, whereby the former offers billions of dollars in ambiguous loans to the latter in order to access minerals, is already the source of much tension both within the continent and without – particularly with Trump’s America feeling threatened, and citing it as a reason for its trade wars.  

More globally, there are clear risks associated with smart electricity grids, which are progressively becoming more significant in ensuring system stability in solar and wind power. This is namely that terrorist organisations or hostile countries may attempt to access these systems to seek sensitive information, disorder them, and cause economic and social damage. Therefore, the transition to renewable technology, as well as the decline of oil, looks to have the potential to dramatically reshape the balances of power on the world stage.  

There is nothing certain about what lies ahead, and it is indeed daunting. But despite these challenges, the global energy transition is turning the world in the right direction, equipping us to more readily respond to what many already define as the main geopolitical threat of the 21st century: climate change.