The conflicts in West Asia, often referred to as the Middle East, have perpetually kept two critical elements in a state of volatility: oil prices and human lives. While oil prices are susceptible to erratic fluctuations, the fate of human lives remains uncertain, often concluded abruptly. In this tumultuous region, peace is as slippery as crude oil and as incendiary as the precious commodity itself.
Often regarded as the cradle of oil, West Asia is rich in natural resources that significantly shape its geopolitical landscape. The vast oil reserves have made the region a focal point for both international economic interests and military conflicts. Ongoing tensions between Israel and Iran, along with Iran’s three principal proxies—Hamas, Hezbollah, and the Houthis—are already exerting pressure on crude oil prices.
In an interview with BNN Bloomberg, Andrew Lipow, an analyst at Lipow Oil Associates, noted that oil prices are rising due to the market’s anticipation of an increased likelihood of conflict between Israel and Iran. Lipow outlined two potential scenarios that could significantly impact crude prices:
1.
Israeli strike on Iranian export facilities:
This could lead to immediate disruptions in oil supply.2.
Closure of the Strait of Hormuz:
A more consequential scenario, as it would severely limit the global oil supply. Both situations would likely result in a substantial increase in oil prices due to reduced supply.Following Iranian missile strikes—nearly 200 fired at Israel on Tuesday—Israeli Prime Minister Benjamin Netanyahu has promised retaliation, contributing to the upward trend in oil prices. West Texas Intermediate crude rose by almost $2 per barrel on Tuesday, with an additional increase of 50 cents on Wednesday. According to Reuters, oil prices continued to rise in early Thursday trading as investors assessed the escalating conflict and its potential disruptions to crude supplies against the backdrop of a well-supplied global market.
On Wednesday, US President Joe Biden expressed opposition to Israel’s plans for a strike on Iran’s nuclear facilities in retaliation for Tehran’s missile attacks, urging Israel to act “proportionately.” While it is assumed that Israel may refrain from targeting nuclear sites in Iran, Tehran’s oil infrastructure remains vulnerable to Israeli reprisals, which could devastate its economy. Given the current trajectory of hostilities in this latest West Asian crisis, it seems unlikely that Israel will remain passive in the face of missile assaults from its arch-nemesis, Iran.
Should Iranian oil facilities be targeted, it would not mark a new chapter for West Asia. Historically, the motives behind these conflicts have consistently led to significant repercussions for the region’s oil economy. This enduring pattern is well-documented.
Iran
Iran’s journey into the oil industry began in 1908 with the discovery of oil at Masjed Soleiman, leading to the establishment of the Anglo-Persian Oil Company (APOC) in 1909. By the 1970s, Iran was producing around 6 million barrels per day (bpd) and had become a leading oil exporter.
Conflicts impacting oil infrastructure:
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The Iran-Iraq War (1980-1988)
severely damaged Iran’s oil industry. During the war, production levels plummeted from approximately 6 million bpd to about 1 million bpd due to extensive attacks on oil installations. The country lost an estimated $500 billion in oil revenues during this conflict. The average price of oil fluctuated, peaking at around $36 per barrel in 1981 and dropping to $14 per barrel by 1986 due to oversupply and global economic conditions.*
Following the 2015 Joint Comprehensive Plan of Action (JCPOA)
, Iran managed to increase oil exports to approximately 2.5 million bpd by 2018. However, the US withdrawal from the agreement in 2018 led to renewed sanctions that significantly impacted Iranian oil production, which fell to about 300,000 bpd by early 2023. Consequently, oil prices reflected these changes, peaking at around $130 per barrel in March 2022 amid fears of supply disruptions due to geopolitical tensions.Iraq
Iraq possesses one of the largest oil reserves in the world, estimated at approximately 145 billion barrels. The nationalisation of the Iraq Petroleum Company in 1972 marked a significant turning point in its oil policy.
Conflicts impacting oil infrastructure:
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The Iran-Iraq War
severely damaged Iraq’s oil infrastructure, causing production to drop from 3 million bpd to about 1 million bpd by the war’s end.*
The Gulf War (1990-1991)
inflicted further devastation, with coalition forces targeting oil installations, resulting in billions of dollars in damage. During the Gulf War, oil prices spiked, reaching around $40 per barrel in 1991, reflecting fears of supply disruptions. However, after the war, prices fell dramatically, hovering around $15-$20 per barrel throughout the late 1990s.*
After the 2003 US invasion
, Iraq’s oil production capacity was severely compromised, with output dropping to about 1.6 million bpd. By 2015, production had recovered to approximately 4.5 million bpd. However, the rise of the Islamic State resulted in further challenges, with production falling again to around 2.5 million bpd by 2017 due to the loss of control over key oil fields.Saudi Arabia
Saudi Arabia is home to some of the largest oil reserves globally, with proven reserves of around 266 billion barrels. The discovery of oil in 1938 and the formation of the Saudi Arabian Oil Company (ARAMCO) enabled the kingdom to become the world’s largest oil exporter.
Conflicts impacting oil infrastructure:
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The Yemen Civil War (2015-present)
has significantly impacted Saudi Arabia’s oil infrastructure. Houthi rebels have launched drone and missile attacks on oil facilities. The most notable attack occurred in September 2019, targeting ARAMCO facilities in Abqaiq and Khurais, which temporarily halved the country’s oil production from 9.5 million bpd to around 4.5 million bpd. This incident caused oil prices to spike to approximately $70 per barrel.* In 2022, Saudi Arabia’s production was around 10.5 million bpd, with prices fluctuating between $70 and $80 per barrel amid ongoing regional tensions and OPEC+ production agreements.
Kuwait
Kuwait’s oil sector, which began with discoveries in the late 1930s, has been integral to its economy. The country has approximately 100 billion barrels of proven oil reserves.
Conflicts impacting oil infrastructure:
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The Gulf War
caused catastrophic damage to Kuwait’s oil infrastructure, with Iraqi forces setting fire to over 700 oil wells, leading to an environmental disaster and production dropping from 2.3 million bpd to virtually zero. By 1992, Kuwait had restored its production capacity to approximately 1.5 million bpd.Syria
Syria’s oil industry began to take shape in the 1950s, with production peaking at around 600,000 bpd by the late 1970s.
Conflicts impacting oil infrastructure:
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The Syrian Civil War, which began in 2011
, has devastated the country’s oil infrastructure, causing production to plummet to below 30,000 bpd by 2023. Control over oil resources has shifted among various factions, complicating recovery efforts. The war has led to a significant loss of revenue, with estimated production losses costing the Syrian economy around $1 billion annually. Oil prices during the conflict varied but remained low due to the lack of exports and international sanctions.Libya
Libya’s oil sector, which began in 1959, quickly positioned the country as a significant player in the global oil market, with reserves estimated at 48 billion barrels.
Conflicts impacting oil infrastructure:
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The 2011 civil war
led to extensive damage to Libya’s oil infrastructure, with production falling from 1.6 million bpd to around 300,000 bpd during the conflict. In 2022, Libya’s production had recovered to around 1.1 million bpd. However, political instability continues to threaten the sector. The average price of Libyan oil hovered around $75 per barrel in 2022, fluctuating due to ongoing violence and international market trends.Yemen
Yemen’s oil industry began to develop in the late 1980s with production peaking at around 450,000 bpd in 2001.
Conflicts impacting oil infrastructure:
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The ongoing civil war, which escalated in 2014
, has severely impacted Yemen’s oil production capabilities, with output dropping from 400,000 bpd to less than 50,000 bpd by 2023. Due to the conflict, the Yemeni economy has suffered immensely, with oil revenues declining sharply, contributing to a humanitarian crisis. Oil prices fluctuated but generally remained low due to the country’s inability to export.Oil Infrastructure: Always a Soft Target
The history of oil infrastructure in West Asia illustrates a complex interplay of geopolitical conflict, economic interests, and foreign intervention. Each country’s oil sector has faced unique challenges that have shaped its production capabilities and economic potential. The impact of wars and violence continues to affect oil prices, production levels, and overall economic stability in the region. As history shows, the conflicts that arise in this volatile area often have profound implications not only for the countries involved but also for global oil markets and the well-being of countless lives.
