Friedman's First Law of Petropolitics Is Nonsense

In 2006, Thomas L. Friedman of the New York Times wrote a highly influential and widely cited article in Foreign Policy magazine entitled "The First Law of Petropolitics."

In his article, Friedman makes the following statement:

The First Law of Petropolitics posits the following: The price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states. According to the First Law of Petropolitics, the higher the average global crude oil price rises, the more free speech, free press, free and fair elections, an independent judiciary, the rule of law, and independent political parties are eroded ... Conversely, according to the First Law of Petropolitics, the lower the price of oil, the more petrolist countries are forced to move toward a political system and a society that is more transparent, more sensitive to opposition voices, and more focused on building the legal and educational structures that will maximize their people's ability, both men's and women's, to compete, start new companies, and attract investments from abroad. The lower the price of crude oil falls, the more petrolist leaders are sensitive to what outside forces think of them.

Friedman's so-called "First Law of Petropolitics" is junk science.

Friedman states that he would "define petrolist states as states that are both dependent on oil production for the bulk of their exports or gross domestic product and have weak state institutions or outright authoritarian governments. High on my list of petrolist states would be Azerbaijan, Angola, Chad, Egypt, Equatorial Guinea, Iran, Kazakhstan, Nigeria, Russia, Saudi Arabia, Sudan, Uzbekistan, and Venezuela."

In our study of Friedman's hypothesis, my colleague and I not only looked at these nations, but also considered the following countries that are influential oil-producing and exporting countries: the United Arab Emirates, Kuwait, Algeria, Libya, and Qatar.

In his Foreign Policy piece, Friedman further states the following:

Let me stress again that I know that the correlations suggested by these graphs are not perfect and, no doubt, there are exceptions that readers will surely point out. But I do believe they illustrate a general trend that one can see reflected in the news every day: The rising price of oil clearly has a negative impact on the pace of freedom in many countries, and when you get enough countries with enough negative impacts, you start to poison global politics.

This is contradictory and intellectually nonsensical. How can one posit a so-called "Law" of anything, and then state that the correlations upon which the "Law" is based are "not perfect" and contain "exceptions"?  Intellectually rigorous "Laws" do not contain exceptions.  Some examples are the Laws of Thermodynamics.

Interested readers can refer to our original study for the underlying datasets and figures, but to summarize, we found that -- overall -- there are no generally consistent governance patterns (among a wide range of governance indicators that we considered) related to the price of oil to support any notion of a "First Law of Petropolitics."  We see substantial variance in the presence or absence of a governance trend for the various country/indicator combinations, as well as significant variation in the direction and/or magnitudes of any trends if they are present.  Any proposed "Laws" must have high quality, be without exceptions, and provide rigorous predictability.  Friedman's "First Law of Petropolitics" fails all of these tests.  Our findings were consistent with other work by Townsend and Wacziarg that also failed to reproduce Friedman's claims.

In this same flawed Foreign Policy article, Friedman goes on to state that:

With all due respect to Ronald Reagan, I do not believe he brought down the Soviet Union. There were obviously many factors, but the collapse in global oil prices around the late 1980s and early 1990s surely played a key role. (When the Soviet Union officially dissolved on Christmas Day 1991, the price of a barrel of oil was hovering around $17.)

As we would (unfortunately) expect from the left-wing mainstream media establishment, American history -- particularly of the 1980s and especially surrounding the American victory in the Cold War -- inevitably gets rewritten into an "anything but Reagan" narrative.

Let us look into the facts to see if Friedman's hypothesis holds up on this angle as well.

By 1986, it was becoming clear to most rationally thinking citizens in the West that the Soviet Union was nearing collapse, and that Reagan's commitment to a paradigm shift on domestic and foreign policies was the cause.  The coming to power of the so-called "reformer" Mikhail Gorbachev in 1985 (a sign of major weakness in the traditional communist system), coupled with the introduction of the perestroika policy in 1986, the Chernobyl disaster also in 1986, the Reykjavík Summit in 1986, the ongoing poor performance of the Soviet war in Afghanistan, and the unrelenting nature of Reaganism (notably on defense spending) was a collective burden too great for the "evil empire."

Crude oil prices during Reagan's term were as follows (in U.S. dollars of the day per barrel): 1981, $36; 1982, $33; 1983, $30; 1984, $29; 1985, $28; 1986, $14; 1987, $18; 1988, $15; 1989, $18. By 1990 and 1991, oil prices were back up in the $20 to $24 range.

Between 1981 and 1989, net oil exports from the Soviet Union were approximately constant between 3.0 and 3.5 million barrels per day (bbl/day).  Taking the higher (i.e., more favorable towards Friedman's hypothesis) export rate of 3.5 million bbl/day, a drop in price from a high of $36 per barrel (in 1981) to a low of $14 per barrel (in 1986) would involve a net oil export revenue loss of only $28 billion per year for the Soviet Union (from $46 billion per year at $36 per barrel down to $18 billion per year at $14 per barrel).  Of course, this represents the maximum revenue drop.  Between 1985 and 1986, the revenue decline would have been only about $18 billion.

Now we need some perspective.  According to the CIA's World Factbooks during this period, Soviet GDP increased from $1.4 trillion in 1980 to $2.0T in 1984 to $2.5T in 1988 and $2.7T in 1990.  By 1989, the USSR was still generating $622 billion in government revenues.  Total exports from the USSR increased from $76B in 1980 to $91B in 1984 up to $109B in 1989.

The revenue "loss" from lower oil export revenues between 1986 and 1989 is a trivially low fraction (i.e., <1%) of the overall Soviet economy over this time, only a tiny portion of USSR's government revenues, and only a minor fraction of total exports.  Thus, it seems most unlikely that such a small loss in annual export revenue to the Soviet Union's overall economy was a key role in its collapse.

Dr. Sierra Rayne writes regularly on environment, energy, and national security topics. He can be found on Twitter at @rayne_sierra.