Trump’s Disaster Aid Rebound – Council on Foreign Relations

Report on the Geopolitics of Oil and Sustainable Development

Executive Summary

Recent geopolitical events, including the conflict in Ukraine and strategic production cuts by OPEC+, have profoundly reshaped the global oil market. This report analyzes the current state of oil geopolitics, emphasizing its direct and indirect impacts on the United Nations Sustainable Development Goals (SDGs). Key findings indicate that while the world’s reliance on oil persists, the volatility in supply and pricing creates significant challenges for achieving SDG 7 (Affordable and Clean Energy), SDG 8 (Decent Work and Economic Growth), and SDG 13 (Climate Action). The ongoing energy transition presents both opportunities and complex equity issues, particularly for developing nations.

Global Oil Market Dynamics and SDG Implications

Current Consumption and Production Landscape

• Global Demand: Daily global oil consumption exceeds 100 million barrels and is projected to increase, driven primarily by demand growth in Asia. This rising demand complicates efforts toward SDG 13 (Climate Action).
• Top Producers: The world’s top three oil producers are the United States, Saudi Arabia, and Russia. Their policies and production levels have a direct impact on global energy security.
• Top Consumers: The United States, China, and India are the largest consumers of oil. China has surpassed the U.S. as the largest importer, making its economic trajectory a critical factor in future global demand.
• Market Control: State-Owned National Oil Companies (NOCs) control over 75% of the world’s oil reserves. Their decisions are often driven by national budget requirements, directly influencing global supply and impacting SDG 8 (Decent Work and Economic Growth) in their respective countries.

Geopolitical Volatility and its Impact on Sustainable Development

1. Russia-Ukraine Conflict: Russia’s invasion of Ukraine has fundamentally remapped global oil flows. While Russia remains a top-three producer, its oil, now sold at a discount, is increasingly flowing east to buyers like China, India, and Turkey. This shift underscores the intersection of energy security and SDG 16 (Peace, Justice, and Strong Institutions).
2. OPEC+ Production Policy: The decision by OPEC+ (which includes Russia) to cut production has tightened the global oil supply, leading to price increases. This directly threatens SDG 7 (Affordable and Clean Energy) by making energy less affordable, particularly for vulnerable, import-dependent economies, and can trigger inflation that undermines SDG 1 (No Poverty).
3. U.S.-Saudi Relations: The relationship between the United States and Saudi Arabia has become increasingly tense. Saudi Arabia’s independent policy decisions, including production cuts and diplomatic engagement with Iran and Russia, signal a shift away from the historical oil-for-security paradigm, creating new uncertainties for global governance and stability.

The Energy Transition and Climate Action (SDG 13)

Challenges to Decarbonization

• Persistent Oil Dependency: Despite climate goals, a significant reduction in oil demand has not materialized. Oil remains critical not only for transportation but also for petrochemicals and fertilizers, linking it to industrial output (SDG 9) and food security (SDG 2).
• Peak Demand Uncertainty: Forecasts for when global oil demand will peak vary, with most estimates placing it around or after 2030. This timeline poses a significant challenge to the goals of the Paris Agreement.
• Emissions from Production: A growing focus is on reducing the carbon intensity of oil production itself. Nations like Saudi Arabia are marketing “low-emission oil,” highlighting a new competitive dimension in the context of SDG 13. However, the heavy, high-emission oil from countries like Venezuela presents a major environmental challenge.

The Role of Alternative and Transitional Energies

• European Green Deal: The conflict in Ukraine has accelerated Europe’s commitment to the energy transition as a matter of energy security. The European Green Deal and related industrial policies aim to fast-track renewable energy development, contributing to SDG 7 and SDG 13.
• Nuclear Energy: Nuclear power is increasingly viewed as a critical zero-emission energy source for decarbonization. Countries like France, Sweden, and Japan are reconsidering or expanding their nuclear capacity to meet climate targets and enhance energy security. However, public opposition and high costs remain significant barriers.

Regional Perspectives and Development Challenges

Energy Equity in the Global South

• Africa’s Development Pathway: Future growth in energy demand is expected to come from Africa. However, the continent faces a critical challenge as many Western governments and financial institutions are divesting from new fossil fuel projects. This raises significant equity concerns, as it may hinder progress on SDG 1 (No Poverty) and SDG 7 (Energy Access) for nations that need energy for economic development.
• India’s Strategic Imperative: As a rapidly growing economy, India has prioritized its national energy security by purchasing discounted Russian oil. This move is aimed at mitigating energy inflation and supporting economic growth (SDG 8), even as it complicates the geopolitical landscape. India is also expanding its refining capacity, positioning itself as a key player in the downstream market.

Challenges in Key Producing and Disputed Regions

1. Venezuela: Despite holding the world’s largest oil reserves, Venezuela’s production is crippled by political instability, sanctions, and decaying infrastructure. Reintegrating Venezuela into the global market would require massive investment and political change, and its high-emission oil poses a challenge to climate goals.
2. South China Sea: Potential petroleum reserves in the South China Sea remain a point of geopolitical tension. Exploration and extraction are complicated by territorial disputes, highlighting the link between resource competition and risks to SDG 16 (Peace, Justice, and Strong Institutions).

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 7: Affordable and Clean Energy

  The core of the article revolves around the geopolitics of oil, energy security, affordability, and the transition to cleaner energy sources. It discusses ensuring an “adequate supply at affordable prices,” the challenges of energy access in developing regions like Africa, and the push towards renewable energy in Europe.

• SDG 8: Decent Work and Economic Growth

  The article explicitly links oil prices and supply to the health of the global economy. It mentions concerns about “energy inflation,” economies “in recessions,” and how supply cuts can impact economic growth, particularly in “vulnerable economies.” The financial health of oil-producing nations, driven by “state budget concerns,” is also a key theme.

• SDG 13: Climate Action

  The discussion is framed within the context of “the ongoing energy transition, coupled with, you know, climate change, and the need to decarbonize.” It references the Paris Climate Agreement and discusses efforts to reduce emissions from fossil fuel production, such as marketing “low-emission oil” and using carbon capture technologies.

• SDG 9: Industry, Innovation, and Infrastructure

  The article highlights the critical role of energy infrastructure, showing a map of the “world’s pipelines” and mentioning the need for significant reinvestment in the infrastructure of countries like Venezuela. It also touches upon innovation in clean energy technologies as part of the energy transition in Europe and the US.

• SDG 12: Responsible Consumption and Production

  The staggering figure that “the world consumes over 100 million barrels a day” directly addresses patterns of consumption. On the production side, the article mentions efforts by countries like Saudi Arabia to market “low-emission oil,” which relates to making production patterns more sustainable.

• SDG 17: Partnerships for the Goals

  The entire discussion is about global partnerships and international relations. It analyzes the dynamics of OPEC+, the tense relationship between the U.S. and Saudi Arabia, the impact of sanctions on Russia, and China’s role as a major importer and diplomatic broker, all of which are central to this goal.

• SDG 10: Reduced Inequalities

  The article touches on inequality by noting how high energy prices “directly hit vulnerable economies.” It also raises the equity issue of Western financial institutions refusing to fund fossil fuel projects in Africa, where energy access is still a major challenge, potentially hindering their development compared to developed nations.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 7: Affordable and Clean Energy

   • Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services. This is addressed in the discussion about the African continent, where there isn’t “100 percent energy access” and countries are “still very much in need of more energy, not less.”
   • Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix. This is highlighted by Europe’s response to the Ukraine war, where it is “seeking to hasten the energy transition, by building out more renewable energy.”
   • Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology. The article mentions the “industrial competition around clean energy technologies” between the U.S. (with its Inflation Reduction Act) and Europe (with its Green Deal), as well as the development of nuclear and hydrogen energy.

2. SDG 8: Decent Work and Economic Growth

   • Target 8.1: Sustain per capita economic growth in accordance with national circumstances. The article’s concern that tight oil markets and high prices could lead to “more energy inflation” and push economies into “recessions” directly relates to this target.

3. SDG 13: Climate Action

   • Target 13.2: Integrate climate change measures into national policies, strategies and planning. The article explicitly mentions the “Paris Climate Agreement of 2015,” the “European Green Deal,” and the U.S. “Inflation Reduction Act” as examples of such policies.

4. SDG 9: Industry, Innovation, and Infrastructure

   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure. This is evident in the discussion of the “two thousand, three hundred, and eighty-one operational oil and gas pipelines” that are crucial for energy transit and the mention that Venezuela’s infrastructure is “really old at this point. And it would need a significant amount of reinvestment.”

5. SDG 12: Responsible Consumption and Production

   • Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources. The article’s emphasis on the world consuming “over 100 million barrels a day” underscores the immense scale of natural resource consumption that needs to be managed.

6. SDG 17: Partnerships for the Goals

   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships. The article highlights the dominance of public entities in the oil market, stating that “over 75 percent of the world’s oil is controlled, managed by state-owned oil companies” like Saudi Aramco, in partnership or competition with international oil companies like ExxonMobil.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For SDG 7 (Affordable and Clean Energy)

   • Indicator: Price of oil. The article frequently mentions the price of oil as a key metric for affordability and economic stability, citing figures like “$80-plus-a-barrel oil.”
   • Indicator: Daily oil production and consumption volumes. The article states, “the world consumes over 100 million barrels a day,” and mentions specific production cuts, such as OPEC’s decision to “reduce production by 1.2 million barrels a day.” These figures measure energy supply and demand.
   • Indicator: Share of renewable energy. This is implied in the discussion of Europe’s goal to “hasten the energy transition, by building out more renewable energy” as a response to energy insecurity.

2. For SDG 8 (Decent Work and Economic Growth)

   • Indicator: Economic growth/recession. The article implies this indicator by discussing the impact of oil prices on economies that are “in recessions, experiencing sort of the beginnings of a recession.”
   • Indicator: Inflation rate. The article directly mentions the risk of “more energy inflation” due to oil production cuts.

3. For SDG 13 (Climate Action)

   • Indicator: Carbon emissions from production. This is implied when discussing how some countries are “competing to state that they have lower emitting carbon in the production of oil” and the challenge that Venezuelan oil “has very large carbon emissions associated with the production.”

4. For SDG 9 (Industry, Innovation, and Infrastructure)

   • Indicator: Investment in infrastructure. This is implied by the need for “a significant amount of reinvestment” in Venezuela’s oil infrastructure and the discussion of funding for new pipeline projects in Africa.

5. For SDG 12 (Responsible Consumption and Production)

   • Indicator: Volume of fossil fuel consumption. The primary indicator mentioned is the global consumption figure of “over 100 million barrels a day.” A reduction in this number would indicate progress.

4. Table of SDGs, Targets, and Indicators

Source: cfr.org