[EAI Briefing 27-2] The Political Economy of High Oil Prices and Global Public Opinion

Topic 2. The Political Economy of High Oil Prices and Global Public Opinion



• Global opinion: fears of oil depletion lead to forecasts of high oil prices

• Korean public: highest global concern about oil depletion at 97%

• Concern over oil depletion: 70% believe "oil resources will be depleted," higher in consuming nations than producing nations.

The long-term outlook for rising oil prices appears to be driven not only by the recent sustained surge but fundamentally by concerns over the depletion of oil resources. On average, 70% of respondents across 16 countries believe that "oil resources will be depleted," while only 22% believe that "sufficient undeveloped oil reserves exist." Consequently, it is anticipated that oil will struggle to maintain its position as the primary global energy source in its current form.

Similar to the international oil price outlook, concerns about oil resource depletion were high in countries that are primarily oil consumers, while the intensity was relatively lower among oil-producing and exporting nations. Notably, South Korea, with its high dependence on foreign trade and significant manufacturing exports, shows a staggering 97% concern about oil resource depletion. France follows at 91%, the UK at 85%, Mexico at 83%, and the US at 76%. All OECD countries participating in this survey significantly exceeded the average. Even in China, which is actively pursuing resource diplomacy, 80% of the public expressed high concern about oil depletion.

However, in OPEC member nations such as Nigeria (45%), Indonesia (59%), and Iran (68%), the percentage of concern regarding oil resource depletion fell significantly below the international average. Citizens of former Soviet Union countries, including Russia (the second-largest oil exporter by country) as well as Azerbaijan and Ukraine, also experienced less intensity regarding oil depletion issues compared to oil-consuming nations.

[Figure 2] Assessment of Oil Resource Reserves: Percentage of "Will be Depleted" Responses (%)

Note: Percentage of responses indicating "will be depleted" among the choices of "will be depleted" and "sufficient undeveloped oil reserves exist."

• Opinions are divided on government policies to prepare for oil shocks; 53% believe "the government is preparing."

• Citizens of oil-exporting countries and the US/Mexico point to insufficient government preparation for oil depletion.

• Mechanism through which public opinion and high oil prices exert pressure:
Public calls for measures against oil depletion → Factors suppressing supply expansion by oil-producing nations → Sustained high oil prices.

The perception that oil resource depletion is imminent is spreading, and competition is intensifying regarding the assessment of national governments' resource diplomacy policies. What is the assessment of each country's citizens regarding their government's oil policies? Considering the increasing role of public opinion in major national policy decisions, this provides an indicator of how national energy policies might unfold. Examining the results of the question asking whether national governments are adequately preparing for oil resource depletion reveals several noteworthy findings.

In most surveyed countries, public opinion is divided on whether governments are preparing for the era of oil depletion, despite a common concern (70% overall) that depletion is approaching. Only 53% of respondents across the 16 countries believe their governments are currently preparing, while 35% believe policies are still being formulated under the assumption of sufficient oil reserves.

Citizens in countries with higher concerns about oil resource depletion were more likely to believe their governments were preparing compared to citizens in countries with lower concerns. South Korean citizens, who expressed the highest level of concern, showed the highest rate (79%) among surveyed nations in believing their government is implementing policies to prepare for oil energy depletion. Citizens in OECD countries like the UK and France, as well as China and Egypt, believe their governments are taking measures commensurate with the perceived threat of oil. Notably, in Iran and Indonesia, which are major oil exporters but also showed relatively high concern about oil resource risks, a significant proportion of the public believed their governments were making preparations. 63% of Iranian citizens and 61% of Indonesian citizens assessed that their national governments are preparing for an era of oil depletion.

The most striking finding in the assessment of national oil policies is that citizens in the United States, which significantly influences the global economy, and in net oil-exporting countries (countries that do not import any oil) believe their governments' preparations for oil resource depletion are insufficient. Among US citizens, only 41% assessed that their government is preparing for oil energy depletion, while 57% believed policies are being pursued under the assumption of sufficient reserves. In net oil-exporting countries such as Azerbaijan (31%), Nigeria (32%), Russia (34%), and Mexico (49%), the proportion of respondents who believe their governments are adequately addressing this issue falls significantly below the international average.

These countries exert a direct influence on international oil price formation. Whether these nations adopt policies to increase oil supply or not can lead to significant fluctuations in international oil prices. Therefore, the prevailing negative perception among the public in these countries regarding their governments' oil energy policies implies that if these governments consider public opinion in their decision-making, they will face difficulties in pursuing policies to expand oil supply. This, in turn, could act as a factor for further price increases.

As observed, in major oil-producing countries like Russia and Nigeria, citizens themselves have relatively low concerns about oil depletion, so the government's lack of preparation does not immediately result in negative repercussions for the government. However, in countries like the United States and Mexico, where public concern about an impending oil shock is high, but assessments of government policy are negative, the political burden on the government can be significantly greater.

In summary, global perspectives on the current surge in high oil prices, which are setting record highs daily and causing tension in the global and national economies, are quite grim. If we consider only the survey results indicating that oil resource depletion is imminent and oil prices are expected to rise, oil-producing and exporting nations have little incentive to increase supply and stabilize prices. Particularly in countries like the United States and Mexico, where public concern about oil energy shortages is strong but there are significant worries that governments are not adequately preparing, public opinion is expected to act as a factor suppressing energy supply expansion policies. However, in most oil-exporting countries, represented by Russia and Nigeria, public concern about oil depletion is relatively weak, so public opinion in these countries is unlikely to directly pressure the government to reduce oil supply.

[Figure 3] Percentage of Responses Indicating "My Government is Preparing for Oil Depletion" (%)

Note: 1. The government is pursuing energy policies based on the judgment that sufficient undeveloped oil reserves exist. 2. The government is pursuing policies from the stance that oil resources will be depleted and efforts should focus on developing alternative energy. Percentage of response 2.