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Middle East Oil: History & Production

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  • 0:04 Oil in the Middle East
  • 0:51 History of Oil
  • 3:53 Oil Production in the…
  • 5:32 Lesson Summary
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Lesson Transcript
Instructor: David Juliao

David has a bachelor's degree in architecture, has done research in architecture, arts and design and has worked in the field for several years.

In this lesson, learn about oil in the Middle East. Explore the history of this profitable industry that transformed poor nations in the desert into prosperous and wealthy economies. Also, take a look at the current oil production and reserves.

Oil in the Middle East

When people think about Saudi Arabia, Kuwait, and other areas of the Middle East, they often think about oil. The association is a reasonable one, as this region is the largest oil producer and holds enormous reserves.

For decades, the Middle East has been supplying a big part of the oil consumed around the world. Much of the economic development and wealth of these countries is thanks to generous income coming from oil exportation.

Saudi Arabia has led the production for decades. Other nations of the region have also become large producers: Iran, Iraq, Kuwait, the United Arab Emirates, and Qatar are some of them. Although Egypt, Libya, and Algeria are geographically in North Africa, they are often considered part of the Middle East when it comes to oil.

History of Oil

Oil continues to be an important energy source despite the fact that it's non-renewable and has negative environmental effects. The history of oil started in the United States in the mid-19th century. It was initially a product for lighting lamps, but its energetic potential was soon discovered. The United States dominated the early market. When Russia found oil in the Caspian Sea, they soon started to pump it into Europe.

Early Fields in the Middle East

The production in the Middle East began in Iran (called Persia back then) by the turn of the 20th century. The British were looking for energy sources and found oil there, making Persia their reliable supplier.

After World War I, oil was seen as a strategic resource. The European powers competed for the control over areas where it was suspected to exist. The Great Depression put Saudi Arabia and other nations of the Persian Gulf in trouble and motivated the search for water sources in the desert. Not much water was found but oil was - and lots of it. American and European companies acquired concessions to exploit this resource. After World War II, the American economic boom and the world recovery from the war pushed the demand, increasing exploration and production in the Middle East.

Nationalization

Iran started the process of nationalization of oil production in the 1950s, meaning the local government assumed control over oil resources. Eventually, most nations did the same, and foreign companies lost the hegemony and had to adapt to the rules of the different governments. However, profits were still high so they carried on, often partnered with newly-established local companies.

The OPEC

Venezuela, in South America, was the largest exporter until the 1950s, when Saudi Arabia took the lead. The Organization of Petroleum Exporting Countries, OPEC, was founded in 1960 by Venezuela, Saudi Arabia, Iran, Iraq, and Kuwait. Today, 14 countries are members. The goal was to unify local policies for keeping market shares stable.

For the Middle East, the OPEC was also an opportunity to ally with the experienced South American producer and reduce the dependence on European and North American companies.

The Energy Crisis

Oil was used as a political instrument during the 1970s, when the OPEC and Middle Eastern nations stopped exporting to the United States, in response to the Israeli attacks on Egypt and Syria. This caused prices to rise and remain high for years, making the oil producers wealthy and providing them with a surplus of money that was often used for transforming poor desert areas into modern nations.

Recent Years

During the last period of high prices between the 2000s and 2014, the main producers in the Middle East began to invest vast resources in the diversification of their economies. Scientific research, agriculture in the desert, tourism, and renewable energies are just some of the developing areas as these nations prepare themselves for a time when oil will no longer fuel the world.

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