Many has argued that the world is becoming a riskier place to do business based upon the prevailing dynamic environment of political tensions, price volatility, fiscal instability, resource nationalism, strong competition from cash-rich national companies and sovereign wealth fund. Without an appetite for risk and the vision to see a substantial resource opportunities that exist internationally in the oil and gas industry few companies venture far into large international projects along the oil and gas supply chain.
Geopolitics is the study of the effects of geography (both human and physical) on international politics and international relations or the method of foreign policy analysis which seeks to understand, explain, and predict international political behavior primarily in terms of geographical variables.
One important geopolitical consequence of shifts in international political power in the last 15years is the rise of intense political and commercial competition for control of the world’s vast oil and gas resources and infrastructure. Energy resources have in fact reshaped the geopolitical map of the world over the last 60years. The control of the development of oil and gas resources, combined with control and influence in pipeline routings, has and continues to determine the political and economic future of many nations.
Oil is the world’s most important and politically sensitive commodity and without oil and gas, today’s industrial society in developed countries would not be possible. Geopolitical trend continues to have significant impact on petroleum production, prices and trade. Geopolitics, politics and businesses are intimately entwines. Politicians establish the legislation, fiscal terms, rules, guidelines and statutory bodies that control the activities of specific industry in their countries.
Influence of Geopolitics on Policy Designs
It has been established that political instability in oil rich nation influence the price oil of petroleum and this adversely affect the global economy. For example, following the embargo on Arab oil supply to the US, it was faced with reliability of supply from the Middle East and consequently sought to increase reliance on supplies from Western Hemisphere like Venezuela.
Oil and gas being the major primary sources of energy, geopolitics of oil and gas continues to influence on the price and markets. Major exporters leverage on energy resources to influence its foreign policies and political agendas. This has also influence the regulatory structure and the revision of legal frameworks that sometimes created uncertainty atmosphere for investments. In forming energy deals by changing role on geopolitical alliance, factors such as good governance and political stability, facility and infrastructure threats, transit routes, environmental degradation and energy equity are elements that have reshaped the geopolitical landscape.
Russia is a major gas exporter and supplies Europe’s 23% of gas...