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New Alignments? The Geopolitics of Gas and Oil Cartels and the Changing Middle East

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  • Songying Fang
  • Amy Myers Jaffe
  • Ted Loch-Temzelides

Abstract

The ongoing democratic movements and civil wars in the Middle East have challenged the stability of regimes across the region. On the other hand, the commercial exploitation of large reserves of unconventional oil and gas in the United States is poised to significantly change the current equilibrium in energy markets. What are the implications of these developments on Saudi Arabia's energy policy? Will the long-standing U.S.-Saudi alliance remain the cornerstone of the kingdom's relationship with the outside world? We study these questions using a game-theoretic approach. Specifically, we investigate whether the new political and economic trends may warm the Saudi regime to a workable energy cartel with Russia. We analyze the outcomes from different coalitions that could form among major energy suppliers and show that this is indeed a possibility. We discuss the implications of our results for U.S. policy toward Saudi Arabia.

Suggested Citation

  • Songying Fang & Amy Myers Jaffe & Ted Loch-Temzelides, 2014. "New Alignments? The Geopolitics of Gas and Oil Cartels and the Changing Middle East," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:eeepjl:3-1-a07
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    References listed on IDEAS

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    1. Wagbara, Obindah N., 2007. "How would the gas exporting countries forum influence gas trade?," Energy Policy, Elsevier, vol. 35(2), pages 1224-1237, February.
    2. James L. Smith, 2005. "Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis," The Energy Journal, , vol. 26(1), pages 51-82, January.
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    Cited by:

    1. Krane, Jim, 2017. "Beyond 12.5: The implications of an increase in Saudi crude oil production capacity," Energy Policy, Elsevier, vol. 110(C), pages 542-547.
    2. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.

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    JEL classification:

    • F0 - International Economics - - General

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