Scott B. MacDonald & Alejandro Trenchi
Pushed along by geopolitical upheaval increasingly reminiscent of the 1930s, global energy markets are polarizing. Rhetoric between nations is heated, economic disengagement has emerged as a core foreign policy consideration, and governments are being pushed to delineate between their friends and foes. Nowhere is this more evident than in global energy markets, ranging from oil and gas to renewable energy.
On one side of the energy divide is a loose-fitting authoritarian construct driven by China and Russia, including Iran, North Korea, and Venezuela; the other side encompasses North America, Europe, and economically advanced countries of Asia with links to parts of Africa, Asia, and Latin America and the Caribbean. A number of other countries, many of them in the Organization for Petroleum Exporting Countries (OPEC), sit uncomfortably in the middle. The trend toward two different energy market systems is likely to accelerate as geopolitical competition intensifies in the years ahead.
Oil and gas markets are dominated by the United States, China, Russia, and OPEC countries (the chief of which is Saudi Arabia). These countries preside over a complex network of energy exploration, supply chains, industrial products, and major multinational corporations and state-owned companies. Traditional elements of global energy trading are the use of the U.S. dollar for transactions, internationally accepted business standards that provide transparency, and Western-dominated financial institutions. In recent years, this system, which was relatively open and conducive to large energy flows between Russia and Europe and the Persian Gulf and China, has become more politicized and opaque.
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