Democracies that hamper oil and gas production do their allies no favours
Anyone with even a modest understanding of history will grasp how tyrannies and autocracies interact with democracies when it comes to energy: by using oil and natural gas as a weapon. This is sometimes literal and obvious during wars — tanks and jets do not run on vegetable oil — but also during peacetime.
For example, in 2009, Russia cut natural gas supplies to Ukraine in mid-winter. The public reason was a “dispute” over pricing but the real reason was to exert pressure on Ukraine’s politicians.
To counter that, after 2014 and the overthrow of a Russian -controlled figurehead, Ukraine President Viktor Yanukovych, Ukraine subsequently found other ways to buy less Russian natural gas. As the Atlantic Council’s Daniel Fried notes, Ukraine did so by obtaining supplies from its neighbours rather than directly. As Fried writes, this meant that Ukraine mitigated “much of the Kremlin’s energy leverage over them.”
With that mini-history lesson on the problem of autocracies, dictatorships or outright tyrannies for democracies, now consider world oil and natural gas production over the last four decades. The numbers are useful to keep in mind for anti-oil and gas activists in democracies, i.e., Canada, the U.S., Norway, Great Britain, Australia and elsewhere.
To grasp the potential for democracies here it helps to categorize and track oil and gas producing countries by their degree of freedom. A Washington-DC based think tank has done just this. Freedom House divides countries into Free, Partly Free and Not Free based on measurements of political rights and civil liberties — everything from media and religious freedom to the right to vote and equality before the law.
In our report on tyranny oil and gas — tyranny being shorthand for Not Free countries – we match up Freedom House freedom measurements with oil and natural gas production data from the US Energy Information Agency. Here’s what we found.
For oil production comparisons, we looked at countries with more than half-a-million barrels of daily production (based on annual averages). That allowed us to rank 93 to 96 per cent of all oil production depending on the year.
In 1980, 49 per cent of the world’s oil production occurred in countries that Freedom House ranked as Not Free, compared with 31 per cent in Free countries and 16 per cent in Partly Free countries. Four percent were not classified (by us) given their minimal production.
The low-point for the share of oil production by Not Free countries was in 1990. This was partly due to
the opening of the Soviet Union in the late 1980s and continuing into the 1990s. However, by 2020, world oil production from Not Free countries was back to where it was previous: dominated by Not Free nations, including Saudi Arabia, Russia, China, the United Arab Emirates, Iran, Iraq, and others, producing 49 per cent of the world’s oil.
This was due both to ranking changes for countries (i.e., Russia was Partly Free in 2010, but Not Free in 2020) but also to production declines in some democracies such as Norway and the United Kingdom. In 2020, 33 per cent of the world’s oil came from countries ranked as Free with 10 per cent from those categorized as Partly Free.
The pattern is slightly different for natural gas, with the end year being 2018, the most recent year for which statistics are available for all the countries we surveyed. The majority of natural gas production in 1980 was in Free countries, at 55 per cent, but has since declined to about 38 per cent as of 2018.
Not Free countries produced barely more than a third of the world’s natural gas in 1980 and that dropped to just eight per cent ten years later. However, a of 2010, Not Free countries dominated worldwide natural gas production (at 45 per cent) and reached 48 per cent as of 2018.
As with the oil index, shares attributed to the three categories have risen or fallen due to both changes in country rankings and also changes in production volumes in specific countries where freedom rankings remain constant.
For example, one nation always ranked as Not Free — China — produced 11 times as much natural gas in 2018 when compared with 1980. That increase also helps explain the higher proportion of Not Free countries dominant in natural gas production worldwide.
This matters for a variety of reasons including to citizens in Not Free countries.
For instance, one anti-corruption business group notes that in Russia, “The economy suffers from graft and a misuse of billions of dollars in public revenue from energy sales; however, the government shows little intention of fighting the issue and is oftentimes a beneficiary.” Transparency International reports that for Saudi Arabians, “almost total opacity in public accounting prevents ordinary Saudis from understanding how much of the state income generated by massive oil revenues ends up as private wealth for the royal family and its clients.”
As for Free countries, the working assumption in all this is not that Free countries should ban oil and natural gas imports from Not Free nations. That’s not realistic including for reasons of geography, price, the need for open and free trade wherever possible, and the private sector nature of energy firms and refineries in many countries.
Instead, the point is that in a world that will still need oil and gas for decades to come — and one should assume oil and gas demand will exist long after that — democracies should not self-sabotage oil and natural gas production at home. As German, Ukraine and Polish politicians can attest to, that is a counterproductive strategy.
Democracies with oil and natural gas should make such products relatively easy to extract, including to use domestically and export to each other and the rest of the world. In other words, Free countries — Canada being an obvious example — should stay in the game, and not leave the field only to autocracies, dictatorships and tyrannies.