The Troika of Energy, Politics And Media In The Oil Debate

In early March 2012, Iranian media incorrectly reported an explosion on one of the main crude oil pipelines in the Kingdom of Saudi Arabia (MEES, 5 March 2012). International news agencies reported the Iranian claim, which led to a $7/B increase in the price of oil in one day.

In putting out this fake news, Iran had a political motive. At the start of 2012, the international community was trying to prevent Iran from developing a nuclear weapon and had imposed economic and energy sanctions on Tehran. Iran, for its part, wanted to make that boycott costly, including through high oil prices.

The relationship between the petroleum industry, politics and the media has become increasingly important. With the rise in the use of petroleum at the beginning of the twentieth century, this troika deserves special attention on the political, economic and media levels.

A CENTURY OF MEDIA RELATIONS

At the start of the 20th century, John Rockefeller established a company that effectively controlled the petroleum industry, the Standard Oil Trust. In order to break this monopoly, US journalist Aida Tarbell launched a media attack on Rockefeller and his company, claiming that the company’s monopoly was not in the interest of citizens. Her argument received great support from some American politicians, and later a Supreme Court decision was issued in 1911 to break up the monopoly and transfer it to a multitude of companies, including the forerunners of modern-day IOCs ExxonMobil, Chevron and ConocoPhillips.

In the decades that followed, oil gained in importance and consumption grew rapidly throughout the world, and with it its political clout. The petroleum companies became the largest and most important players in the global economy for several decades – a role that is now held by the technology and information sector.

Post-Standard Oil, the Western petroleum companies known as the Seven Sisters had absolute power in the petroleum market. In early 1959, the companies decided to reduce oil prices by about 10 percent, negatively affecting the income of the producing countries. Here began the story of the establishment of the Organization of the Petroleum Exporting Countries (Opec). US journalist Wanda Jablonsky played an important role in bringing about the rapprochement between Abdullah al-Tariqi, the Saudi Minister of Petroleum at the time, and his Venezuelan counterpart, Juan Pablo Perez Alfonzo, during the Arab Petroleum Conference in Cairo in 1959.

It was during that period that we saw the emergence of specialist energy publications, starting in 1957 with the Middle East Economic Survey, now MEES, established by Fouad Itayim with the support of Aramco, which at the time was owned and managed by US companies. It was followed in 1967 by Petroleum Intelligence, one of the most important publications of its kind.

In the 1970s and the decades that followed, the connection between oil and international political developments increased, and this included, for example: the 1973 Arab-Israeli war, the Arab oil boycott of countries supporting Israel, and later the Iranian revolution, and the Iraqi invasion of Kuwait, all of which were ostensibly triggered by oil issues.

Among recent events that have had profound impacts on oil markets was the Covid-19 pandemic, which caused a collapse in oil prices in 2020. This was followed by the Russian-Ukrainian war of 2022 and the ensuing western boycott of Russian oil, and in 2023 by the Israeli war on Gaza and Houthi attack on ships in the Red Sea, all of which elevated oil prices.

In the 1970s and the decades that followed, there was an explosion in the energy reporting sector in terms of quantity and quality, and there was a close connection between the media and research and study centers. For example, price reporting agency Platts acquired US industry analyst Pira Energy Group, was in turn acquired by S&P, which subsequently acquired IHS Markit, a leading commodities and financial information provider. Established international news agencies such as Reuters and Bloomberg also have energy reporting departments, while social media has become a party to oil issues. In July 2018, using Twitter (now X), US President Donald Trump began attacking Opec, and after one of his messages, prices fell by about $8 in one day.

GROWING ROLE TO PLAY

The media serves several purposes, the most important being perhaps building a positive self-image, sending messages indirectly, and influencing the market and prices.

In the future, these interconnections will become even more important. In addition to traditional topics such as energy security and the role of energy in international conflicts, there are two important and interconnected aspects that have special importance:

The first is climate change. There is a consensus among scientists that the earth’s temperature is rising constantly as a result of man-made emissions, most notably carbon dioxide, leading to major negative effects on the climate. This theory is supported by governments across the globe, which have signed up to the 2015 Paris Agreement to limit emissions.

The second, which is related to the first, but is more important and different, is the shift in energy use from fossil fuels to renewable energy, in order to reach carbon neutrality (the transition to an economy with net zero carbon emissions).

How this is best achieved is disputed. Some, like the International Energy Agency (IEA), believe that this can be done by gradually reducing the use of fossil fuels, and not investing in new oil and gas exploration or building additional production capacities.

On the other side of the argument, parties such as Opec see a continued increase in demand for oil, which requires more exploration and production during the coming decades. They argue that without such investments, there will be a scarcity of supplies and a rise in prices, which will negatively affect the global economy. They believe that the best way to deal with the issue is to reduce emissions through several methods, such as collecting and storing carbon, and nature-based solutions such as planting more trees that absorb carbon dioxide.

So what is the solution? The differences between the two groups have widened globally and internally. In the United States, the Democratic Party calls for reducing the use of fossil fuels, while the Republican Party stands against this trend. The media has become an arena for these differences, and at the beginning of this century the anti-fossil fuel side was already gaining ground. But these views are changing as the focus has returned to energy security rather than a rush to adopt policies that may have a negative impact on the global economy.

As a result, the interconnection between the three pillars (oil, politics, and the media) will increase and gain more importance in terms of both quantity and quality in the coming years and decades.

*Dr Ibrahim al-Muhanna is Vice Chairman of the Saudi Association for Energy Economics and author of Oil Leaders. This opinion piece was first published in Arabic in Asharq al-Awsat on April 8.