Gas and Oil in Egypt’s Development

Abstract

Oil politics is about a large variety of intertwined global policy challenges, relating to the fact that oil is a global commodity; that it is produced and traded across time and geographical space; and that actions by governments, subnational actors or transnational companies create costs or benefits for third parties. In this, oil politics is about addressing challenges arising in a highly interdependent sector and policy field, in which actions by one party inevitably have repercussions on second or third actors. These interdependencies are obvious. Domestic turmoil in, say, Nigeria, may trigger a rise in oil prices on a global level; energy choices of the Chinese government are decisive for upstream investments made by multinational drilling consortia in Central Asia; and the speculative behaviour of financial market actors may put a premium on forward prices, altering price levels independent from changes in actual supply and demand balances. As argued more extensively elsewhere, current debates on oil politics tend to fall short on properly conceptualizing this interdependence. They tend to centre on states as units of analysis, to ignore global externalities and to frame energy in terms of zero sum games rather than accounting for possible win-win situations (Smith 2010; Bahgat 2003; Barnes and Jaffe 2006; Klare 2008). Evidently, however, ‘oil politics’ is no longer, and in fact has never been, a matter of national governments or nation states alone. Rather, it is about the actions of a myriad of agents involved in financing, producing, trading or consuming oil and about the incentives and constraints they face with regards to the institutional structures they are embedded in, on a national, international or global level. Such a setting can best be grasped by a governance framework. A global governance perspective on oil stresses the importance of policy actors beyond the state, acknowledges the existence of externalities of transnational scope, and conceptualizes oil politics as subject to various levels of policy making. In light of this, the key goal of this chapter is to frame pressing issues in oil as global policy challenges, requiring policy answers in the absence of a global energy authority and rendering oil politics a global governance challenge. The main argument this chapter advances is that challenges in global oil can be dealt with through the market as a key governance mechanism in global oil, flanked by institutional arrangements accounting for shortcomings the market may exhibit in delivering security of supply or demand.