Are doing here and why we are doing it, this is part of an ongoing series sponsored by the center that historical current issues. The center itself is strictly nonpartisan and the purpose of the program its not to advocate for any particular policies, but to provide Historical Context helping inform policymakers as they deal with difficult issues. I want to thank or acknowledge the Financial Support of the mellon foundation, which makes this briefing possible. I also want to thank regional weekly in the back of the room, which is the assistant director that helped organize this. I want to thank the office of gerry connolly, and also alert you to the fact that you all have index cards on your chairs. This is for questions. As the presenters are speaking, feel free to jot down questions. We will collect them. The second half will be devoted to q a. We will collect the questions and go from there. Thank you all for coming. David . Good morning. Thank you for coming. I have been Teaching International history at Georgetown University for 30 years. The rest of it is in the flyer. I didnt mention i worked briefly with the Congressional Research service, the little longer for the department of energy, the conservation of solar, and seven years at the state department and historians office. In the flyer notes, my research and publications focus on the political economy and geopolitics of oil. I want to say a few words about the importance of studying history. There are many ways of understanding the world. Why study history . I would say first, in addition to being intrinsically interesting, it expands a range of experience. Learning from other people in other times and places forces us to think outside our own experiences in time and place. Studying history helps us understand who we are. As individuals, nations, and human beings. Second, in contrast to popular usage, history is not just about the past, but also key to understanding the present and preparing to face the future. Studying history helps to understand how the world got to be the way it is today and then helps us understand the forces that govern its ongoing evolution. As my late teacher michael hunt and his coauthor wrote in the 2012 book, arc of empire, without Historical Perspectives, we flounder in midoceans, the shore with which we came already out of sight, the land we seek will be on the horizon. As a historian pointed out many years ago, history is also a way of learning. The methods historians use to understand the past are the same methods we can and should use to understand the present and to think about the future. I will give you some examples. Historians stressed the importance of context, as dr. Kennedy pointed out. It matters a lot when and where events and decisions are made. Although historians study change over time, they are also sensitive to continuities of change and continuity are very important. Historians research the interconnectedness of human experience. They try to see the world rather than focus only on some factors. Historians place great emphasis on close engagement with facts and primary sources. You have to read a lot. Studying history helps studying history helps us develop the ability to identify relevant sources and it helps us distinguish between types of sources and how to support conclusions with evidence. It helps us learn how to evaluate different interpretations and how to distinguish between evidencebased conclusions and unfounded statements. Our speakers will draw on Knowledge Based on years of research. They will emphasize context. They will examine continuity as well as change. They will analyze interconnection between the many factors that influence the geopolitics of oil. They will strive to provide you with a Historical Perspective on the current crisis. Our speakers today are an associate professor of strategy at the u. S. Naval war college and dr. Nathan citino of rice university. He has written many articles and books on the middle east. His latest book won the book prize from the society of historians. It is a great honor. I will turn this over. No need to go over my background. I am an associate professor at the u. S. Naval war college. I need to add a disclaimer. While i am here on an official capacity, none of the opinions i express should be construed as expressing the official opinion of the United States government or its agencies. This is a talk i give to my students, regarding the oil industry. I will try to keep it to 10 minutes. The aim of this talk is to give you an overview of how the industry operates as informed by the study of history and the second point, to explain how oil influence u. S. Policy and strategy since 1945. The first point, oil is different from other commodities. For most commodities i will give you a brief discussion of macro economics. Not even an economic historian but you need to know, for most commodities lets imagine shoes. The supply of shoes is shaped by the demand for shoes. If there is high demand, you will produce shoes until the supply exceeds the demand, at which point you cut back on supply. That is straightforward. Oil does not operate under those conditions. Demand for oil is inelastic. If oil is two dollars a gallon or three dollars a gallon, you are still driving to work. It does not do a whole lot to affect demand over the short term. The more important factor shaping supply is not the demand, but rather the price of oil. The price determines whether certain supplies are economical to produce or uneconomical. If you have a high price for oil, it makes sense to produce oil in canada. At a low price, that makes no sense. The most important factor behind shaping the supply of oil is not demand, but the price. The second point, lots of economists, including nobel Prize Winners like to tell you that oil is fungible. It is whether or not something can be substituted for another. Theoretically, coke is fungible for pepsi. But a lot of economists like to talk about oil is fungible. They use the analogy of a bathtub. Oil taken from one part of the bathtub is replaceable by oil from the rest of the bathtub. The problem is this is wrong. As anyone who works in the industry can tell you. Oil is not fungible because all types of crude oil are not the same. Oil is usually dominated in two ways. It is sweet or sour that has to do with sulfur content. Or it is heavy or light, depending on gravity. U. S. Shale oil tends to be light, sweet crude. Whereas oil from the middle east tends to be light, but also sour. A high sulfur content. Why does this matter . It means oil of different compositions cannot be refined in the same facility. If you have a refinery there to produce light, sweet crude, it cannot handle heavy, sour crude. The process of converting refineries can take several months to several years. Never think of crude oil as being fungible. If refineries are designed to process oil from the middle east, that is all they can handle. They cannot substitute it for oil from the United States or west africa, which has different chemical compositions. An important fact to bear in mind. Oil is expensive to produce, but not scarce. Oil is not scarce. How much do you pay for a gallon of gasoline . Back home, 2. 50. Think a little bit higher. Lets say it is three dollars a gallon. How many liquids in the world can you buy for three dollars a gallon . Go to the supermarket. How much does a gallon of milk cost . How much would a gallon of pepsi cost . Petroleum is relatively inexpensive considering how much we use. The important thing to bear in mind, there are high barriers to entry in terms of finding oil and producing it and the economy the marginal cost of oil goes down the more you produce. But it is tricky to find and produce oil in the first place. The other point, how much oil is there . If i knew the answer, i would not be here generally two answers. If you ask a geologist how much oil there is, they will tell you, based on the existing state of technology and how much they know about the world at this point in time, they will give you an answer. That answer is only good for that window of time. It is based on their knowledge at that point in time. That is why geologists every 20 or 30 years will tell you, we only have 30 or 40 years of oil given these rates of consumption. Every 30 or 40 years, it turns out we have more oil. That is not because geologists are idiots. Geology is not a predictive science. It studies the earths past, not its future. Economists are probably the people you need to ask when it comes to how much oil is there. They will ask, if you want to know, tell me what the price of oil is. If the price is high, odds are there will be large quantities of oil. If the price is low, that will shrink the amount of Oil Available because it is not economical to produce. What is the position of the u. S. Government regarding prices . We want high or low prices . High prices carry severe economic costs for consuming nations. They inhibit Economic Growth and promote inflation. As we have seen, low prices can cause problems. They discourage efficiency or conservation and will tend to undermine the political stability of oilproducing nations that depend on export. Sorry i have to barrel through this. I want to sketch out, why is oil significant . Why is it significant to u. S. Policy and strategy since 1945 . Control of middle east or gulf oil is at the center of u. S. Strategy since 1945, but not for the reasons you might expect. Both would say it is significant because we need to for ourselves. Strangely, it is not because we needed for ourselves. We import middle east oil in the 1970s, and even then in the 1980s, once western hemispheric production came online, importance of the middle east to u. S. Supplies tended to decline. What is more significant, this oil was vital for european and asian consumption. The oil is not important for the United States, it was important for u. S. Allies. That is a factor probably still continues. In the asiapacific, basically all u. S. Partners and allies will rely on middle east oil. Secure supplies in europe and japan after the Second World War, discourage them from relapsing into economic nationalism by developing synthetic fuel sources domestically or grab resources from neighboring countries. We did not want to have a replay of pearl harbor because japan or germany ran short on gasoline. Development of the gulf center of Oil Production for the most part tended to promote price and supply stability. Which promoted american prosperity even after the United States became a net importer of oil after 1948. Why is the middle east significant . It is not the amount of oil it produces. Lots of places of the world produce a significant quantities of oil, specifically the United States or russia. What is significant about the middle east is, it will in level export markets. There is a small consumption within the region relative to how much it can export. The slack capacity within the middle east. How much they can wrap up production or turn it down depending on under supply or oversupply. This prosperity, which is fueled by middle east oil, facilitated the containment of the soviet union and its allies, and helped win the cold war. I think i have one more minute. What are u. S. Aims regarding the oil industry past and future . I would argue there is not a whole lot of difference from what they were in 1945 and today. The most important factor is control over the global oil trade. Not control over foreign oil fields. The oil is only useful if you have a market. As long as we control access to those markets most of important of which is the developed world who tend to be more oil intensive as long as you control access, you dont need to control the oil fields themselves in the producing world, which makes relations with Oil Producers more amicable if you owned their resources. We want to secure oil for the u. S. And allies at a reasonable cost, which we do by commanding the commons we tend to be ambivalent towards continental powers, which prefer pipelines. There is controversy over the russian pipeline from russia to germany, it is not new. The United States traditionally viewed russian oil and gas exports to europe as a threat to u. S. National security because that is a supply that could not be controlled or intermediated by u. S. Companies and the u. S. Navy. We want to make sure oil revenues go to our partners and not to hostile Oil Producers. That should be selfexplanatory. We want to enhance the economic position in the gulf, if Oil Producers are selling to u. S. Partners and allies and doing so through u. S. Companies, even if we are sending dollars to that part of the world, they will need to recycle those dollars using companies and banks that tend to be american or allies. Recycling those petrol dollars and ameliorating the strain on u. S. Payments. Most importantly, we want to prevent the domination of the gulf by external powers. This means, we wanted to have a Monroe Doctrine for the gulf. The Carter Doctrine of 1980, which was designed to stop a potential soviet a bid to dominated the region and expended by president reagan the following year to include domination by any internal regime specifically iran. I will leave question in your mind. Bearing all i have said, doesnt make sense for the United States to wind up its commitments in the gulf when the overall context that surrounds u. S. Engagement is not so different as it was at the end of the Second World War . U. S. And allies continue to rely on the gulf and control access to that by mediating supplies that travel overseas and controlling access to markets. Thank you. Thank you. Nathan citino from rice university. I would like to thank the National History center for inviting me. I would like to thank all of you for coming to hear this discussion. A few weeks ago, on october 11, the defense secretary, mark esper, announced a new deployment of forces to saudi arabia. At the time, he said, saudi arabia is a Security Partner in the middle east and asked for Additional Support to supplement their own defenses and defend the international rulesbased order. This statement and the deployment itself gives us an entry point in our discussion for talking about the history of the u. S. Saudi relationship and American Foreign policy in the gulf generally. Those phrases, like Security Partnership, or a bargain of security for oil, are frequently used to describe the u. S. Saudi relationship. These descriptions serve to portray that relationship as natural, inevitable, and apolitical. Historical research by me and other people in the field some great work being done shows there was nothing inevitable about the relationship, which developed over time and in a contingent manner. On the basis of conflict, as well as cooperation, and in a way that generated political controversy in both countries. In my remarks, i will give you a sense of the literature by talking about three major themes or topics in talking about the u. S. Saudi relationship. The first has to do with the postwar petroleum order. The idea is the u. S. Saudi relationship emerged not on a bilateral basis, but is part of the system that developed middle eastern oil for fueling western europe and japan after world war ii. We talk about u. S. Saudi relations, we are not just talking a bilateral relationship, but to the place of the relationship within the larger system, that included Major Oil Companies as well as states, oil transit states countries whose territory was crossed by oil on its way to market and oilproducing states that included governments in the region and great powers, like the United States and great britain. U. S. Corporations formed the Arabian American Oil company to develop saudi oil and build the transarabian pipeline across four countries to transport oil from the gulf to the mediterranean. Aramcosaudi relations were based on a deal in 1954 a 50 50 sharing arrangement. Those relations were also based on conflict overpayment and ownership of the company, over the housing promotion and of saudi workers, and aramcos commitment to Economic Development in the kingdom. U. S. Recognition and support for israel complicated this relationship and isolated saudi arabia within the arab world. A second set of topics has to do with the politics of reform, domestic politics within the saudi kingdom. The basic recognition or argument historians make is, from the beginning of this relationship in the 1930s, u. S. Government and american Oil Companies were involved in domestic saudi politics. Strikes among aramco workers in 1945, 1953, and 1956, led to demands for reform and nationalization of aramco by the saudi government. The government suppressed these strikes and arrested or exiled leaders. The groups, such as the National Reform front, formed out of these uprisings. Labor leaders and other dissidents regarded the u. S. Airbase and aramco itself as constituting a colonial presence in saudi arabia. This was the era of anticolonial nationalism, decolonization in the arab world of the authority, influence, and popularity of the egyptian president. A movement for a constitutional monarchy, supported by workers, some government employees, and even some members of the ruling family, was defeated in the 1960s. The u. S. Government closed ranks behind the king, who opposed the constitution, and in 1964 deposed his halfbrother. A third this is the most recent body of scholarship on the relationship has to do with the 1970s and the period subsequent. The scholarship that examines the 197374 oil embargo, its consequences, and the way the relation