Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 1

Abstract

The international oil markets had been functioning for decades. Many European states at least

partially divested their national oil companies and underwent relatively rapid oil market liberalization

concomitantly with the development of these markets. Asian net oil importing states, however,

continue to play a much more noticeable role in the oil supply of their economies. This paper puts

forward a vulnerability-interaction theory to explain different levels of strategic oil supply measures

adopted by these states in 2013. The theory is found to provide a probable explanation of the relative

levels of strategic oil supply measures adopted by nine major Asian net oil importing economies.

The state continues to play a relatively large role in the oil supply of many Asian net oil

importing economies despite the increasing sophistication and trading volume in the international oil

markets over the last few decades. This phenomenon has yet to be systemically investigated in studies

on energy politics. This paper puts forward a vulnerability-interaction theory to explain the variations

of the levels of strategic oil measures adopted in net oil importing states, specifically nine in Asia in

2013: China, India, Indonesia, Japan, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

The preliminary study conducted to probe the cross-state plausibility of the theory shows it provides a

probable explanation of such variations.

This paper will proceed as follows. Section One situates this paper among existing literature on

oil importing states’ intervention in their economies’ oil supply and enumerates contribution this

paper may make to studies on oil politics. Section Two explains the deductive reasoning of the

vulnerability-interaction theory, the rationales behind the explanatory variables, and the causal

relations among them, and between them and the dependent variable (DV) -- the level of strategic oil

supply measured adopted at a particular point in time. This section also lists the hypotheses generated

from the theory. Section Three explains the methods used to facilitate cross-state comparisons in this

preliminary study and presents data on how the values of the variables in 2013 are determined.

Section Four summarizes the results of the findings and evaluates the validity of the hypotheses

generate from the theory. Section Five concludes and suggests areas where further research is needed.

1. Niche and Contribution

The two analytical waves of literature on the politics of oil -- between the mid-1970s and late-

1980s and since 2008 -- may be divided into two major strands: normative or “prescriptive” and

“positive.” 1 Writings based on neoclassical economic theories and those seeing a strong link between

oil supply and national security and foreign policymaking form the prescriptive literature. The former

focuses on explicating the futility of such measures and that states should refrain from adopting

them;2 the latter advocates the opposite.3 As a whole, prescriptive literature hardly explains cross-state

1 Llewelyn Hughes and Phillip Y. Lipscy, “The Politics of Energy,” Annual Review of Political Science 16

(2013), 453. 2 Some examples include: Ikenberry, G. John. “The Irony of State Strength: Comparative Responses to the Oil

Shocks in the 1970s.” International Organization 40-1 (1986): 105-137; William Nordhaus, “The Economics of

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 2

or temporal variations in the actual levels of oil supply measures net oil importing states adopted, and

so has a fundamentally different purpose and nature than the theory proposed theory in this paper.4

The current project is mainly positive in nature: trying to explain states’ actions and inaction by

making logical deductions as well as from actual observations.5 The positive literature has a wide

range of scopes and emphases on its explanatory function. Some, especially writings on net oil

importing countries in Asia, remain largely descriptive and atheoretical.6

Phillip Andrews-Speed, Xuanli Liao, and Roland Dannreuther’s 2002 study,7 and its “follow-

up” study in 2011,8 and Øystein Tunsjø’s 2013 study9 offer some theoretical frameworks, but they

only focus on China. Richard J. Samuels advances the concept of “reciprocal consent” to explain

different levels of state intervention across Japan’s energy, including oil, sectors.10 It also includes

some cross-state comparisons, but only with non-Asian economies.

The vulnerability-interaction theory put forward in this paper assigns greater emphasis on

understanding the generalized causes to variations in state intervention in oil supply over time and

across oil importing states, especially the under-studied Asia, even if this paper only focuses on the

cross-state variation and comparative dimension of the theory. This goal is similar to Llewelyn

Hughes’ 2014 study.11 Nonetheless, although more updated, Hughes, like Samuels, only includes one

Asian economy, Japan, in his survey. On the other hand, Jeffrey D. Wilson explains what he sees as

an Integrated World Oil Market” (keynote address, International Energy Workshop, Venice, Italy, June 17-19

2009), 12-13; and M. A. Adelman, The World Petroleum Market (Baltimore, MD: The Johns Hopkins

University Press, 1972). 3 Examples of such works include: Joan Edelman Spero, “Energy Self-Sufficiency and National Security,”

Proceedings of the Academy of Political Science 31-2, 123-136; Charles K. Ebinger, The Critical Link: Energy

and National Security in the 1980s (Cambridge: Ballinger Publishing Co., 1982); and Bruce Andre Beaubouef,

Strategic Petroleum Reserve: U.S. Energy Security and Oil Politics (College Station, TX: Texas A&M

University Press, 2007). 4 The vulnerability-interaction theory proposes to explain both cross-state and cross-temporal variations of

levels of state intervention in oil supply. It also proposal three unique causal pathways that would lead to the

adoption of a high level of strategic oil supply measures in absolute terms. This paper only covers the cross-state

comparative dimension. 5 For a brief definition and discussion of the difference normative and positive theories in economics, political

science and other disciplines, see Manuel Velasquez, “Normative Theory Versus Positive Theory,” in

Encyclopaedias of Business Ethics and Society, ed. Robert W. Kolb (Thousand Oaks, CA: Sage Publications,

2015), 1524-1525. 6 Some examples of this literature include: Kang Wu et al, “The Asia-Pacific Energy Dilemma,” in Asia’s

Energy Future – Regional Dynamics and Global Implications, ed. Kang Wu et al, Honolulu: East-West Center,

2007:1-14;Tanvi Madan, “India’s ONGC: Balancing Different Roles, Different Goals,” Joint Baker

Institute/Japan Petroleum Energy Center Policy Report (March 2007); Mikkal E. Herberg, “The Rise of Asia’s

National Oil Companies,” NBR Special Reports#14 (December 2007):1-7; Ashok Sharma, “India and Energy

Security,” Asian Affairs 38:2 (2007):158-172; and Bo Kong, China’s International Petroleum Policy (Santa

Barbara, Calif: Praeger Security International, 2010). 7 The Strategic Implications of China’s Energy Needs (Oxford: Oxford University Press, 2002). 8 Andrews-Speed and Dannreuther, China, Oil and Global Politics (London: Routledge, 2011). 9 Security and Profit in China’s Energy Policy: Hedging Against Risk (New York, Columbia University Press,

2013). 10 The Business of the Japanese State: Energy Markets in Comparative and Historical Perspective (Ithaca:

Cornell University Press, 1987). 11 Globalizing Oil: Firms and Oil Market Governance in France, Japan, and the United States (Cambridge:

Cambridge University Press. 2014).

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 3

similarly “mercantilist” resource, including oil, security strategies employed by China, Japan, and

South Korea over the last decade with the process of “competitive policy emulation.”12

This paper covers a broader scope than most existing literature on similar subjects. In the

preliminary cross-state study presented in this paper, two major strategic oil supply measures are

uniformly examined across nine Asian net oil importing economies in 2013. This would expand the

empirical understanding of oil supply strategies of importing states beyond traditional industrial

democracies and at a time when the international oil markets has already been well established.

The vulnerability-interaction theory also puts forward an explicit analytical framework to

explain and compare the levels of intervention in the oil supply of net importing states. This is not

commonly found in the existing literature. Hughes’ is the only study I have come across that examines

both temporal and cross-country differences in oil market governance with a clear analytical

framework – that of historical institutionalism, similar to but more assertive, materialist, and

parsimonious than Samuels.’ Andrews-Speed and Dannreuther’s study also loosely adopts a historical

and institutionalist approach, but with more emphasis on the role of ideas and perception, contingency,

and feedback effects. Of course, theirs is not a cross-case study, and is only implicit in explaining any

temporal variations of policies in China. Tunsjø also puts forward a clear analytical framework – that

of hedging between risks associated with the market and the strategic approaches to energy/oil

security. He suggests that states other than China may also use the hedging strategy to manage their

energy security risks, but investigating that possibility is beyond the scope of his study.13

As the brief review above shows, the Asian focus of this paper would fill some of them the

theoretical and empirical gaps in the studies of oil politics. It may also provide insights in the oil

supply policymaking process of Asian net oil importing states, four of which were among the world’s

top five net oil importers in 2013: China, Japan, India, and South Korea. Since September 2013,

China has overtaken the United States as the world’s top net oil importing country.14 The “shale

revolution” in the United States has contributed to this and widened the difference in the oil

vulnerability (OV) of the two countries. This may have intriguing IR implications as China is

considered by some to be challenging the U.S. hegemony in the region. Non-OECD Asia, most

prominently China and India, will account for more than three-quarters of the net global increase in

oil demand by 2030.15 With the niche and possible contribution of this paper clarified, the next section

explicates the reasoning and variables of the vulnerability-interaction theory.

12 “Northeast Asian Resource Security Strategies and International Resource Politics in Asia,” Asian Studies

Review 38:1 (2014), 17. 13 Tunsjø, Security and Profit in China’s Energy Policy, 17. 14 “China is now the world’s largest net importer of petroleum and other liquid fuels,” U.S. Energy Information

Agency, accessed August 14, 2014, http://www.eia.gov/todayinenergy/detail.cfm?id=15531. 15 Mark Finley, “The Oil Market to 2030—Implications for Investment and Policy,” Economic of Energy &

Environment Policy (Vol. 1, No. 1) 2012: 29, http://www.bp.com/content/dam/bp/pdf/statistical-

review/The_Oil_Market_2030.pdf.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 4

2. Beyond Oil Vulnerability

The central objective of this paper is to understand what cause net oil importing states to adopt

the different levels of strategic oil supply measures they do at a given period with functioning

international oil markets. The vulnerability-interaction theory proposed in this paper conceptualizes

OV as a sufficient but not necessary condition that motivates the desire to adopt strategic oil supply

measures, and hence the independent variable (IV) of the theory. In line with this project’s focus on

oil supply measures and their IR implications, OV is used in this theory to mean ‘oil supply

vulnerability.’ Parallel to the two key components of oil supply security, physical availability and

affordability, the components of OV formulated in this theory are supply risks and economic risks.

Supply risks mean the likelihood that a country’s oil supply would not be physically available at any

given time. Economic risks mean the likelihood that the prices and the costs associated with oil

imports become unaffordable to an economy. The actual level of strategic oil supply measures

adopted, however, would be conditioned by three major intervening variables (ITVs).

2.1 Trust in Oil Markets

The first ITV that boosts or restrains a state’s desire to adopt strategic oil supply measures is

theorized to be decision-makers’ trust that the international and domestic oil markets can adequately

provide oil security to people in their countries. The very uneven geographic distribution of oil and its

heavy reliance on a few shipping “chokepoints” further erode this trust.16 Although most oil importing

countries in the Asia Pacific are heavily dependent on oil that has to be shipped through at least some

of the same chokepoints, they are not subjected to the same degree of potential threat of having their

oil supply physically cut off. The United States possesses concentrated naval power to control the

physical flow of oil along maritime shipping routes.17 Llewelyn Hughes and Austin Long conclude

this may be “the most important long-term security problem in the international oil market,”

especially for non-U.S. ally oil importing countries in the Asia Pacific, such as China.18 On the whole,

trust in the oil markets is theorized to be made up of both more tangible and more subjective

components. The preliminary study presented below, however, only focuses on the more tangible

components.

16 Almost 48% of the world’s proven oil reserves are found in the Middle East (BP Statistical Review of World

Energy 2014 Workbook, 6. Accessed 22 August 2014, http://www.bp.com/content/dam/bp/pdf/Energy-

economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf). For an analysis

of maritime oil shipping “chokepoints,” see “World Oil Transit Chokepoints,” U.S. Energy Information Agency

(EIA), accessed 10 August 2015, http://www.eia.gov/beta/international/regions-

topics.cfm?RegionTopicID=WOTC. 17 Llewelyn Hughes and Austin Long, “Is There an Oil Weapon?: Security Implications of Changes in the

Structure of the International Oil Market,” International Security, 39-3 (Winter 2014/2015), 173-180. 18 Ibid., 188. Of course, if hydrocarbons of marketable quality and prices can be produced in the South China

Sea, a new dynamic may develop. This development, however, appears to be rather distant in the future and its

effect cannot be accurately estimated at this juncture.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 5

Relationship with the United States as discussed above is a tangible component that makes up

the trust in the oil markets. Another such component is the length of time a state and/or its oil firm(s)

have actively participated in the international oil markets. The more experience a country has in using

the international oil markets, the more trust it would have in them, provided that its experience has

been positive, or at least not negative during most of that period.19

The last tangible component proposed by the vulnerability-interaction theory is linked to how

uneven the country’s overall development is in geographic as well as economic terms. If a country is

of continental size and home to a large rural and poor population, private oil firms may concentrate on

supplying oil to the more profitable urban areas, thus leaving the majority of people underserved. This

would have a negligible impact on countries that are evenly developed and/or whose population

mostly has reached a high standard of living. Not attending to the basic needs of a large vulnerable

population is inducive to electoral setbacks in democracies and unrest in non-democracies.

The overall trust in the oil markets to adequately ensure oil security is theorized as negatively

correlated to the DV, meaning the higher the level of trust, the lower the DV would be if all other

factors remain the same and vice versa.

2.2 Implementation Capability

The second ITV that conditions the actual level of strategic oil supply measures adopted is

states’ overall capability to implement such measures. This factor is theorized to positively correlate

to the DV, meaning the higher the capability, the higher the DV would be if all other factors remain

the same and vice versa. A country’s financial, technical, diplomatic, and bureaucratic capabilities can

all act as either a constraint or boost to adopting strategic oil supply measures. Many of these

measures, such as establishing or administering national oil companies (NOCs) or strategic petroleum

reserves (SPRs), are capital-intensive, and require technical as well as organizational skills. Some

others, such as backing a pariah oil producing state at the United Nations, call for considerable

political or diplomatic capital.

2.3 Overall Economic Freedom

19 This is akin to the concept of “causal beliefs” affecting decision-making through the pathway of “institutional

persistence” hypothesized by Judith Goldstein and Robert O. Keohane. If decision-makers believe the

(international) oil market can provide or even improve oil supply security through their experience of using it

(causal belief), they would adopt a lower level of strategic oil supply measures. This would call for the repeated

use of the (international) oil market with positive results to the specific state (both government officials and

private companies) in question, which would establish an “institution” within the state for using and trusting the

market. See “Introduction and Intellectual History,” in Ideas and Foreign Policy – Beliefs, Institutions, and

Political Change, ed. Judith Goldstein and Robert O. Keohane (Ithaca, New York: Cornell University Press,

1993), 8 – 25. This is also in line with institutional theories that understand trust in an institution (in this case oil

markets) derives from the “expected utility of institutions performing satisfactorily.” See William Mishler and

Richard Rose, “What are the Origins of Political Trust? Testing Institutional and Cultural Theories in Post-

Communist Societies,” Comparative Political Studies 34-1 (2001): 31.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 6

The last ITV that interacts with OV to determine the actual level of strategic oil measures

adopted is the degree of a country’s overall economic freedom. The proposed theory posits that the

freer and more open a country’s overall economy is at any given time, the more resistance there

would be for the state to adopt a higher level of strategic oil supply measures. This would in turn

result in fewer such measures actually being adopted and vice versa, if all other factors remain equal.

The rationale for the negative correlation between this ITV and the DV is that most strategic oil

supply measures pose competitions to or impinge on the freedom of actions of private firms.20

A country’s overall economic freedom is in fact used as a proxy for two often intertwining

strands of explanations for variations in the degree of state intervention in the economy. The first is

the historical institutionalist approach. This takes into account such factors as the timing of a

country’s industrialization and its political and economic institutions at critical junctures in the

country’s political and economic development.21 The degree of a country’s overall economic freedom

and openness at any given time is the manifestation of the sum of all its economic policies

implemented to date, along with the country’s political culture and longstanding ideological postures.

These existing policies and cultures create a path dependency that limits the policy choices in the near

future unless a great exogenous shock emerges. Therefore, a snapshot of a state’s level of economic

freedom summarizes its institutional and historical constrains pertinent to the causal relationship

being investigated in this project.

The second strand of explanation focuses on the magnitude of impact societal forces have on a

state, which is theorized as affecting what is called “state capacity” or “state structure” in

(independent) economic and other policymaking. 22 The degree of overall economic freedom and

openness of a country reflects the power equilibrium between various interest groups and stakeholders

and the state. It is very difficult to adopt policy measures that go totally against the grain of the

prevailing trend in the short to medium term due to institutional inertia as well as possible

infringement on the established interests of these groups. Some of the relevant literature actually

20 Both private and public oil firms would welcome oil diplomacy measures if they are expected to further their

operations. If there are both NOC(s) and private oil firms based in the country, however, the state would more

likely engage in oil diplomacy to assist NOC(s). Even if the benefit of the oil diplomacy measure is universal to

both types of companies, NOCs are still competitors to private oil firms operating in the country. Overall, oil

diplomacy would have a neutral, if not an affirming effect on the causal relationship between this ITV and the

level of DV expounded here. 21 See Alexander Gerschenkron, “Economic Backwardness in Historical Perspective,” in Economic

Backwardness in Historical Perspective – A Book of Essays (Cambridge: Harvard University Press, 1962), 5-30;

James Kurth, “The Political Consequences of the Product Cycle: Industrial History and Comparative Politics,”

International Organization, 33-1 (1979), 1-34; and Peter Gourevitch, “The Second Image Reversed: The

International Sources of Domestic Politics,” International Organization, 32-4 (1978), 885-888. 22 See The Business of the Japanese State, 5-7; Stephen D. Krasner, Defending the National Interest: Raw

Materials Investments and U.S. Foreign Policy (Princeton, NJ: Princeton University Press, 1984), 55-57; and G.

John Ikenberry, “The Irony of State Strength: Comparative Responses to the Oil Shocks in the 1970s,”

International Organization, 40-1 (1986), 122, 133-135.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 7

merges these two approaches.23 Accordingly, it is reasonable to use this one proxy to capture ideas of

both strands.

2.4 Strategic Oil Supply Measures

The level of strategic oil supply measures adopted is the DV of the vulnerability-interaction

theory. These measures are defined as those mandated, administered, or funded by the government

that may have a direct and especially more than short-term effect on the oil supply of the economy.

After the end of the Cold War, almost all countries in the world have a mixed economy in which

states play some role in the provision of goods and services. In mixed economies, the state and the

market are not necessarily two diametrically opposing concepts. How “market-oriented” a particular

strategic oil supply measure is has to be judged by the extent to which it permits, distorts, or promotes

the functioning of the pricing mechanism and open and fair competition. Samuels, for example, labels

the two major categories of state intervention in the energy sector as “market-displacing” and

“market-conforming,”24 the former obviously less “market-oriented” or more distorting than the latter.

Both of these types of strategic oil supply measures are taken into consideration in this project.

Having examined all the explanatory variables, the following section formally states the causal

relationships among these variables and between them and the outcomes put forward by the theory

proposed in this project. It also introduces the hypotheses generated by the theory.

2.5 Hypotheses of Vulnerability-Interaction Theory

To summarize, the vulnerability-interaction theory posits that all other things being equal, the

DV would be higher if: 1. there is higher OV; or 2. a lower level of trust that oil markets can

adequately provide oil security; or 3. a higher capability to implement the measures; or 4. a less free

and open overall economy. To facilitate deduction and render hypothesizing manageable, all these

factors as well as the DV, originally conceptualized as continuous, are converted into trichotomous

ordinal variables.

The logic of the theory explained above enables the explanation of the variations of the levels

of strategic oil supply measures adopted in different countries in relative terms. Two hypotheses flow

from this relative logic. They will be tested in the preliminary study in Section Three without the need

to set arbitrary thresholds of the levels of the variables:25

H1: If the levels of all four factors (IV & ITVs) are similar in two or more cases, their

corresponding DVs should also be similar; and

23 Ibid. 24 The Business of the Japanese State, 13. 25 The more complete version of the theory has a separate layer with fixed thresholds of the levels of variables to

theorize combinations of different levels of the same explanatory factors that would lead to the adoption of a

high level of DV in more absolute terms. This layer, with its own two hypotheses, is not covered in this paper.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 8

H2: If the levels of three factors are similar in two or more cases, but their corresponding

DVs are very different, the direction of difference in the levels of the fourth factor should be

congruent with the logic of the proposed theory.

If the only real difference in the levels of the four factors between two cases is their OV, for

example, the economy with a noticeably higher OV should have a higher DV. The following section

presents the 2013 data on these variables from the nine case study economies according to the

understanding of the vulnerability-interaction theory.

3. Structured, Focused Comparison of Nine Net Oil Importing States

The structured, focused comparison method is the major method used to conduct the

preliminary nine-state study to probe the plausibility of the vulnerability-interaction theory. The

essence of this method is uniformity and theory-centric. The same set of questions is asked in each

and every case study, with the expressed purpose of probing critical aspects of a theory having a

clearly delineated research objective. 26 The method is developed to facilitate systematic and

transparent comparison of cases leading to the accumulation of theory-oriented knowledge.27 The

paucity of theories that are available to answer the research questions of this project has prompted an

effort here to build the vulnerability-interaction theory. Adopting this method contributes to laying a

foundation for the future testing and development.

This study probes the cross-state and relative dimension of the theory in 2013. This year is

chosen because it has ended a decade of mostly rising oil prices.28 The uniform set of questions asked

is: what was the level of strategic oil supply measures adopted by the state in 2013? What was the

country’s OV in 2013? What was the country’s degree of overall economic freedom and openness in

2013? What was the decision-makers’ level of trust that oil markets can adequately provide oil

security? Lastly, in 2013 what was the state’s capability to implement strategic oil supply measures?

Each of these questions is asked with the goal of understanding the value of one variable of all cases.

3.1 Strategic Oil Supply Indicator

The strategic oil supply indicator is created to answer the first standardized question: what

was the level of strategic oil supply measures adopted by the state in 2013? Two measures that are

considered important and relatively easy to quantify are chosen to make up this composite indicator: 1.

Percentage of government control of the country’s crude oil supply, typically through funding of or

26 George and Bennett, 67-69. 27 Ibid., 68. 28 For graphs showing the dramatic drop of the prices of both the Brent crude and the West Texas Intermediate

crude in 2014, especially in the fourth quarter, see “Crude oil prices down sharply in fourth quarter of 2014,”

U.S. EIA website, assessed 1 April 2016, https://www.eia.gov/todayinenergy/detail.cfm?id=19451. For an

annotated graph showing the history of crude oil prices, including the twenty-year period covered in this study,

see “An Annotated History of Oil Prices Since 1981,” 20 December 2014, Business Insider Australia website,

assessed 1 April 2016, http://www.businessinsider.com.au/annotated-history-crude-oil-prices-since-1861-2014-

12?r=US&IR=T.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

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Gail Ma 9

guaranteeing funding to companies or projects to explore, produce, or procure crude oil; and 2. Size of

the economy’s SPR.

The easiest cases of ascertaining state control of crude oil supply by funding companies or

projects are states without any such companies or projects. Singapore was the only among the case

studies that did not have a NOC in 2013, nor did it fund or guaranteeing funds to such projects by

private oil companies as in Japan.29 The Philippines does have a Philippine National Oil Company

(PNOC), but it did not produce or procure any crude oil for the country in 2013.30 Oil exploration

service contracts the Philippine government signed with E&P companies to develop the country’s

small but still available indigenous resources, however, stipulate a 60/40 ratio of division (after costs)

in the government’s favour.31 That is how the Philippine government still has certain control over the

country’s crude oil supply.32

China and Indonesia are also relatively easy cases. In China, the state still controlled almost

100 percent of the country’s crude oil supply in 2013.33 Indigenous oil E&P was overwhelmingly

dominated by 100 percent state-owned NOCs and their subsidiaries. 34 Although three such

subsidiaries have been publicly traded since the turn of this century, the parent NOCs still held

29 Despite its NOC-sounding name, the Singapore Petroleum Company (or more commonly known as SPC) is

not owned by the government of Singapore. Instead, its 45% shareholder is PetroChina, an oil firm majority-

owned by the largest Chinese NOC, China National Petroleum Corporation. See “PetroChina Acquires Keppel’s

Entire Stake in Singapore Petroleum Company,” accessed 19 August 2015,

http://www.petrochina.com.cn/ptr/xwxx/201404/b5b2d5b3773c4fe49d06294928a0c366.shtml.

It should also be noted that oil produced by companies sovereign wealth funds invested in are not counted in this

first component as typically investment decisions of these funds are not made by regular national decision-

makers. Singapore’s sovereign wealth fund Temasek did and does invest in upstream oil firms, but “[u]nder

Singapore’s Constitution and laws, neither the President of the Republic of Singapore nor the Singapore

Minister for Finance, our shareholder, is involved in our investment, divestment or other business decisions,”

“Corporate Governance,” Temasek, accessed 20 September 2015,

http://www.temasek.com.sg/abouttemasek/corporategovernance. 30 The exploration entity of the company only conducted seismic data acquisition and other studies “in

preparation for well drilling activities.” Philippine National Oil Company 2013 Annual Report, 4. 31 Teodoro M. Santos, “Philippine Energy Policy and Problems in a Changing World,” in Energy Market and

Policies in ASEAN, ed. Shankar Sharma and Fereidun Fesharaki (Singapore: Institute of Southeast Asian Studies,

1991), 142. 32 The default is for the government to take the oil developed in proceeds from the 60 percent of oil developed

and marketed by the oil firm, but it can also elect to receive its share in kind, too. It is through this way that the

Philippine government can control the supply of the crude oil in the country. See a model oil service contract on

the Philippine Department of Energy website, accessed 30 March 2016,

http://www.doe.gov.ph/pecr5/index.php/petroleum/petroleum-model-contracts. 33 The first private energy firm that applied for and obtained a relatively small crude oil importing license in

China was Guanghui Energy in 2012. See Tim Daiss, “China State-Owned Oil Monopoly System to Slowly

Change,” The Energy Tribune website, 4 July2013, accessed 12 August 2015,

http://www.energytribune.com/77959/china-state-owned-oil-monopoly-system-to-slowly-

change#sthash.o2zlnfLm.dpbs. Also see “China Opens up crude oil import to private refineries,” Xinhua News

Agency website, 24 July 2015, accessed 11 August 2015, http://www.chinadaily.com.cn/business/2015-

07/24/content_21393937.htm. 34 CNPC, the biggest 100% state-owned NOC, and its 86% owned subsidiary PetroChina together account for

about 54% of China’s crude oil output and IOCs are only taken on as minority partners in technically offshore

oil and gas E&P projects. See U.S. Energy Information Administration report on China, last updated 14 May

2015, 5.

Paper for ISA Asia-Pacific Region Conference 2016 – Variations in State Intervention in Asian

Economies’ Oil Supply

Gail Ma 10

between 65 to 86 percent of these companies’ shares and a tight grip on their management.35 In

addition, all five companies that held licenses to import crude oil into China were 100% state-owned

and the situation only began to change in 2014.36

In Indonesia, the state can be said to control 100% of the crude supply of the country. Although

the 100% state-owned NOC Pertamina only produced about 17% of the indigenous crude through

2012,37 it “owns and operates eight of the country’s nine oil refineries (the ninth is owned by the

Research and Development Agency of the Agency of Department of Energy and Mineral

Resources).”38 Therefore, all the crude supply to feed the refineries in Indonesia (from either domestic

or overseas sources) was acquired by state controlled or funded entities.

The calculation of the first component of the strategic oil supply indicator for four of the

remaining five case study countries follows a two-step process. First, the percentage(s) of shares the

state owns in NOC(s) is obtained (a). Then the crude oil produced and imported by these compan(ies)

in 2013 as a percentage of total oil consumption of the country in the same year is calculated (b). The

final figure of the percentage of state control of the country’s crude oil supply is obtained by

multiplying (a) with (b).

The case of Japan is somewhat different. As of 2013, it did not have a “regular” NOC

comparable to those of its Asian peers. Japan Oil, Gas and Metals National Corporation, a public

entity tasked to “ensure a stable, inexpensive supply of oil” 39 does not engage in oil E&P or

procurement directly. Instead, it provides financial assistance to oil E&P projects of Japanese oil firms

in the form of equity capital and liability guarantees.40 Therefore, literature on Japanese oil security

normally uses the term “self-developed oil” or “equity oil” to describe oil produced as a result of such

financial assistance. The amount of this self-developed oil “has hovered between 10 and 15 per cent

[of Japan’s total import] over the past decade.”41As Japan practically imports all of its crude oil, this

35 2013 annual reports of these three subsidiaries. The shareholdings of these companies by their 100% state-

owned parents were (listed in descending order of the companies’ crude production): PetroChina - 86.51% (page

15), Sinopec Corp. – 73.96% (page 6), and CNOOC Ltd. – 64.66% (page 57). 36 “China Approves Crude Import Licenses for Two Independent Refineries,” Platts 25 August 2015,

http://www.platts.com/latest-news/oil/singapore/china-approves-crude-import-licenses-for-two-27740362. 37 For the shareholding percentage of the state, see Pertamina EP Integrated Annual Report 2013, 14. For the

company’s domestic crude production share, see “Indonesia Country Report,” U.S. Energy Information

Administration (EIA) website, last updated March 5, 2014. 38 “Oil and Gas in Indonesia – Investment and Taxation Guide May 2014 – 6th edition” Pricewaterhouse Cooper

Indonesia (page 13), assessed 10 August 2015,

http://www.pwc.com/id/en/publications/assets/oil_and_gas_guide_2014.pdf 39 “History of JOGMEC,” JOGMEC website, accessed 20 September 2015,

http://www.jogmec.go.jp/english/about/about003.html. 40 The other three main roles of JOGMEC listed on its website are: Technology Development,

Gathering/Providing Information, and Geological Surveys. Accessed 20 September 2015,

http://www.jogmec.go.jp/english/oil/index.html. 41 Vlado Vivoda, Energy Security in Japan: Challenges After Fukushima (Farnham, Surrey, GBR: Ashgate

Publishing Ltd, 2014), 59. The Japanese Agency for Natural Resources and Energy gives the amount of self-

developed oil and gas as 23.28 percent of total import in 2013 without any disaggregation between oil and gas.

The figure given is 24.72% for 2014 and it says it is 1.44% higher than the previous year and that is how the

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also equals the percentage of its consumption. Using the historical figure for the last decade as a guide,

this project will adopt 11 percent as the amount of crude oil supply “controlled” by the state.

Details of the calculation of for this first component of the indicator for the India, South Korea,

Taiwan, and Thailand may be provided on request. Table 1 below summarizes the results of all case

study states:

Economy % of government control of crude oil supply in 2013

China 99

India 43

Indonesia 100

Japan 11

Philippines 5

Singapore 0

South Korea 9

Taiwan 44

Thailand 42

Table 1 Percentage of State Control of Crude Oil Supply in 2013

The second component of the strategic oil supply indicator is the size of economies’ SPR.

Unlike the method used by the IEA, this indicator only counts the days of net oil import equivalent of

specific SPR held by the state or a public entity and stocks held by NOC(s). The minimum stocks

private oil firms in the country are mandated to hold, and commercial stocks voluntarily maintained

by private firms are excluded.42 Establishing and maintaining an SPR as a strategic oil supply measure

calls for considerable material capability from the state. Therefore, counting it is more parsimonious

as well as more in line with the logic of this study’s proposed theory. Table 1.2 below summarizes the

result of the size of SPR of the case study economies:

Economy Number of oil import equivalent of days of SPR & NOC stock in 2013

China 17

India 1

Indonesia 47

Japan 84

Philippines 0

Singapore 0

South Korea 122

Taiwan 90

Thailand 23

Table 2 Size of SPR in 2013

The numbers of days of SPR above are converted to percentages by using the IEA 90-day

figure as 100%. Before the two components of the strategic oil supply indicator are aggregated,

23.28% comes from. Accessed 20 September 2015,

http://www.meti.go.jp/english/press/2015/0824_01.html. 42 The IEA requirement is as follows: “This commitment can be met through stocks held exclusively for

emergency purposes and stocks held for commercial or operational use, including stocks held at refineries, port

facilities and in tankers in ports.” Energy Supply Security 2014 (Paris: IEA, 2014), 30. For a discussion

distinguishing between the two and related issues, see Giacomo Luciani and François-Loïc Henry, Strategic Oil

Stocks and Security of Supply, CEPS Working Document, No. 353, June 2011.

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however, the different natures of strategic oil supply measures have to be considered. The first

component of the strategic oils supply indicator is mostly marketing-displacing in nature, while the

second is mostly “marketing-conforming.” Therefore, the issue of weighting arises. Table 3 below

summarizes the scores of the strategic oil supply indicator of all nine case-study states in 2013 using

different ways of aggregation, 100 being the highest level of strategic oil supply measures adopted

and 0 the lowest:

Economy

equal

weight

equal weight,

SPR capped

at 100%

SPR 75%

weight

SPR 75%,

capped at

100%

SPR 50%

weight

SPR 50%,

capped at

100%

China 58.94 58.94 56.58 56.58 54.22 54.22

India 22.00 22.00 21.86 21.86 21.72 21.72 Indonesia 76.11 76.11 69.58 69.58 63.06 63.06

Japan 52.17 52.17 40.50 40.50 28.83 28.83

Philippines 2.50 2.50 2.50 2.50 2.50 2.50

Singapore 0.00 0.00 0.00 0.00 0.00 0.00

S. Korea 72.28 54.50 55.33 42.00 38.39 29.50

Taiwan 72.00 72.00 59.50 59.50 47.00 47.00

Thailand 33.78 33.78 30.58 30.58 27.39 27.39

Table 3 Nine-State Strategic Oil Supply Indicator Scores in 2013

Since the layer of the vulnerability-interaction theory presented in this paper is comparative in

nature, the actual strategic oil supply scores may not matter as much as the relative levels of the case-

studies among themselves. The three types of weighting, each with one capping the SPR at 100% or

not, illustrated in Table 3 may not actually result in differences of the relative levels among the

countries or their trichomotous DV levels. Table 4 below summarizes the impact on the DV levels of

the three weightings employed:43

Economy

equal

weight

equal weight,

SPR capped

at 100%

SPR 75%

weight

SPR 75%,

capped at

100%

SPR 50%

weight

SPR 50%,

capped at

100%

China High High High High High High

India Low Low Low Low Medium Medium

Indonesia High High High High High High

Japan Medium Medium Medium Medium Medium Medium

Philippines Low Low Low Low Low Low

Singapore Low Low Low Low Low Low

S. Korea High Medium High Medium Medium Medium

Taiwan High High High High High High

Thailand Medium Medium Medium Medium Medium Medium

Table 4 Nine-State Strategic Oil Supply (DV) Levels in 2013

43 Details of how this table is generated may be provided by request. As a rule for all weighting methods, DV

scores within one standard deviation of the average (falling within 0.5 above and 0.5 below the mean DV score

of the nine in the weighting method in question) are considered having a medium level. DV Scores more than

0.5 standard deviation above the average are considered having a high level and 0.5 or more below are

considered having a low level.

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I argue that the 50% weighting method, without capping the SPR at 100% best represents the

much less market-displacing nature of SPR and the logic of decision-makers in the real world.44 In an

event, the comparative results among the nine case-studies for 2013 remain same regardless if the

SPR are kept at 100%. Therefore, results from the two columns at the far right are adopted in this

paper.

3.2 Oil Vulnerability Indicator

The OV indicator is created to answer the second of the standardized questions: What was the

country’s OV in 2013? It is made up of market risks and supply risks.45

Market risks relate to the effect of fluctuations of oil prices on national economies, such as

inflation. In this project, they are measured by: (1) per capita cost of imported oil as a percentage of

the country’s per capita GDP (all in US$); and (2) oil consumption as a percentage of the total

primary energy consumption. Supply risks relate to a country’s vulnerability to oil supply disruptions.

The supply-risk measures chosen are: (1) oil self-sufficiency rate; and (2) the amount of crude an

economy imported as a percentage of the global crude imported of the same period. The logic for this

second measure is that the higher this percentage is, the more difficult it would be to acquire the

amount needed due to market liquidity issue during supply disruption situations. Equal weights are

given to all four measures, which are normalized so that a higher overall score means a higher OV.46

Table 5 below summarizes the 2013 OV of all nine case-study economies, 100 being the highest and 0

being the lowest and their competitive levels:47

Economy Oil Vulnerability in 2013 Comparative OV Level

China 23.18 Low

India 28.15 Low

Indonesia 21.90 Low

Japan 38.80 High

Philippines 33.91 Medium

Singapore 47.66 High

South Korea 36.44 Medium

Taiwan 35.36 Medium

Thailand 28.11 Low

44 I argue that the equal weighting method is not reasonable as it does not distinguish market displacing from

market confirming measures at all. Instead, assigning 50% weight to the amount of SPR kept is more reasonable

given SPR’s much more market-conforming nature. In addition, capping the SPR at 100% does not comport

with common sense as states would likely not keep an SPR over 100 percent if they believe it does not make any

difference to their oil supply security at all. 45 The OV index developed by Eshita Gupta, which the OV indicator in this project is simplified and adapted

from, has four different measures or each of the two types of risks. See “Oil Vulnerability Index of Oil-

Importing Countries,” Energy Policy 36 ((2008); 1198-1200. 46 In a natural setting, the higher the value of the first supply risk measure (oil self-sufficiency rate), the lower

the OV. So this indicator will be normalized to reflect the same direction as the other three indicators: Higher

values indicate higher OV. 47 Details of the calculation of these OV in 2013 may be provided upon request. The same principle of how the

trichotomous levels are devised described in footnote 43iis applies here and in the rest of this paper except noted

otherwise.

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Table 5 Oil Vulnerability of Nine Asian Economies in 2013

3.3 Degree of Overall Economic Freedom and Openness

To answer the question of the degree of economies’ overall economic freedom and openness in

2013, “off-the-shelf” indicators are used: the Index of Economic Freedom (IEF) put out by the

Heritage Foundation and the Wall Street Journal and the Economic Freedom of the World (EFW)

Annual Reports released by the Fraser Institute. Both assign an annual overall score of economic

freedom to each country surveyed. While the methodologies used to compute the two indexes are

somewhat different, the components that make them up are rather similar.

The IEF scores range from 0 to 100, 100 being the freest while the EFW ones from 0 to 10.

Since the scores of the other two indicators in this project range from 0 to 100 and to facilitate

comparison, the EFW scores are adjusted to the same scale. The two scores of each economy are then

averaged to gauge the overall economic freedom of the nine case studies in this project.48 Table 6

below presents these scores and the competitive levels of the case-study economies for 2013:

Economy

IEF with 2013

Data

EFW with 2013

Data (adjusted)

Combined

Average Economic

Freedom Scores

Comparative

Economic Freedom

Level

China 52.5 64.4 58.45 Low

India 55.7 66.1 60.90 Low

Indonesia 58.5 71.7 65.10 Medium

Japan 72.4 75.0 73.70 High

Philippines 60.1 70.7 65.40 Medium

Singapore 89.4 83.9 86.65 High

South Korea 71.2 71.9 71.55 Medium

Taiwan 73.9 78.4 76.15 High

Thailand 63.3 65.9 64.60 Low

Table 6 Economic Freedom Scores and Levels of Nine Case-Studies in 2013

3.4 Trust in Oil Markets

To answer the question of what was decision-makers’ overall level of trust that oil markets can

adequately provide oil security for their respective economy in 2013, three relatively concrete

components are examined in this preliminary study. They are each case study state’s relationships

with the United States, experience in the international oil markets, and evenness and degree of

economic development.

3.4.1 Relationships With United States

48 This means I simply multiply the original EFW scores by 10. The IEF scores are from the 2014 index, which

covers data from the second half of 2012 and the first half of 2013. See “About Index” and “Explore the Data”

pages, accessed 10 November 2014, http://www.heritage.org/index/about. For the actual IEF scores, see Terry

Miller, Anthony B. Kim, and Kim R. Holmes, “Highlights of the 2014 Index of Economic Freedom,” accessed 1

December 2015, http://thf_media.s3.amazonaws.com/2014/pdf/Index2014_Highlights.pdf. The EFW scores are

drawn from the 2015 report which covers 2013 data. See James Gwartney, Robert Lawson, and Joshua Hall

Economic Freedom of the World 2015 Report (Fraser Institute, 2015), 17-20.

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The United States has been the only country that has overwhelming naval power to impede the

physical flow of maritime oil supply to the Asia Pacific.49 Since there has been no traditional warfare

between the United States and any country in the Asia Pacific in 2013, their relationships may be

categorized in three descending levels of closeness as: formal allies or U.S. military protective

commitment to the state in question, friendly-neutral, and neutral-conflictual.

China does not belong to the first category, but while some scholar may put it in the second

category, others would designate it as belonging to the third category. This study classified the

relations of China and the United States as the least close of the three categories. It is because in spite

of cooperation between the two countries in domains such as reduction in carbon emission, the

prospect of resolving a number of contentious issues seems rather dim in the near future, such as

China’s assertiveness in the South China Sea.

India is only categorized as having an overall friendly-neutral relationship with the United

States in 2013. The “New Framework for the U.S.-India Defence Relationship” installed in 2005

between the two countries indicates friendly relationships in the military and other domains, but are

qualitatively different than actual mutual defence treaties some Asian countries have with the United

States, which entail concrete obligations and benefits, not just voluntary cooperation.50

Indonesia and Singapore are also put in the friendly-neutral category. The United States

considers these two countries “strategic partners,” but not “major non-NATO allies (MNNAs).”51

Japan, the Philippines, and South Korea are both MNNAs and formal allies and enjoy the closest type

of relationship with the United States in the Asia Pacific. The formal defence treaties between the

United States and Japan and with the Philippines were both first signed in 1951, and the one with

South Korea was signed in 1953.52

Thailand, too, is both a MNNA and a formal ally.53 The relationship between the two, however,

has drifted. This has become obvious even to casual observers after Thailand’s latest coup in May

2014,54 but the decline of the relationship appears to have started gradually as far back as the final

49 Hughes and Long, 172-173. 50 Chidanand Raighatta, “India, US Sign Defence Pact,” Times of India, 29 June 2005, accessed 5 November

2015, http://timesofindia.indiatimes.com/world/us/India-US-sign-defence-pact/articleshow/1155838.cms. 51 On U.S. “strategic partners” in the Asia-Pacific, see Bruce Vaughn, “U.S. Strategic and Defense Relationships

in the Asia-Pacific Region,” CRS Report for Congress, January 22, 2007, accessed 20 November 2015, 24,

https://www.fas.org/sgp/crs/row/RL33821.pdf. On the list of U.S. major non-NATO allies, see “22 CFR 120.32

- Major non-NATO ally,” Legal Information Institute, Cornell University website, accessed 20 November 2015,

https://www.law.cornell.edu/cfr/text/22/120.32. 52 Vaughn, 15. 53 Ibid. 54 For a quick review of the U.S.-Thai relationship after the 2014 coup, see Prashantha Parameswaran,

“Exclusive: Managing the Strained U.S. Thailand Alliance – A look at ongoing efforts to manage Washington’s

oldest Asian alliance,” The Diplomat, 16 December 2015, accessed 10 accessed 2016,

http://thediplomat.com/2015/12/exclusive-managing-the-strained-us-thailand-alliance/.

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years of the Cold War.55 Therefore, this study categorizes Thailand as having a friendly-neutral

relationship with the United States as of 2013.

Taiwan is a special case. The United States is not a formal ally or has even maintained an

official diplomatic relationship with Taiwan since 1979. In the same year, however, the Taiwan

Relations Act was enacted, which assures no non-peaceful resolution of the future of Taiwan, and U.S.

arms sales and defence services to Taiwan. 56 In addition, Taiwan is treated “as though it were

designated a MNNA.”57 Therefore, it too is put in the first category of relationship with the United

States.58 Table 7 below summarizes the relationships between the case study states and the United

States as of 2013:

State Relationship with the United States as of 2013

China neutral-conflictual

India friendly-neutral

Indonesia friendly-neutral

Japan formal ally equivalent

Philippines formal ally equivalent

Singapore friendly-neutral

South Korea formal ally equivalent

Taiwan formal ally equivalent

Thailand friendly-neutral

Table 7 Relationship with the United States as of 2013

3.4.2 Experience in International Oil Markets

The second component contributing to the overall trust in oil markets’ capability to adequately

provide oil security is the length and nature of experience states. The emphasis on the experience in

the international oil markets is justified due to their relative recent emergence and because eight of the

nine case-study states imported over half of their oil supply in 2013. Only Indonesia still produced

about 58% of the oil it consumed that year.59

Japan, Singapore, South Korea, and Taiwan had almost been totally dependent on imported

crude oil for decades and had no choice but to engage at least indirectly with the international oil

markets through “market-related pricing” since the 1980s.60 If we use 1986, the year the market-

55 For a study on the beginning of the changing U.S.-Thai military and broader relationship at the beginning of

the 1990s, see Kenneth Standley Harbin, “The Expanding Sino-Thai Military Relationship: Implications for U.S.

Policy in Thailand” (Master Thesis, Naval Postgraduate School, 1990). For a report on the drift in the last years

of the 2000s, see Shawn W. Crispin, “When allies drift apart,” 14 February 2009, The Asia Times, accessed 10

April 2016, http://www.atimes.com/atimes/Southeast_Asia/KB14Ae01.html. 56 Alexander Chieh-cheng Huang, “The United States and Taiwan’s Defence Transformation,” Brookings

website, February 2010, accessed 20 November 2015,

http://www.brookings.edu/research/opinions/2010/02/taiwan-defense-huang. 57 “22 CFR 120.32 - Major non-NATO ally.” 58 In spite of the fact that Vaughn’s CRF report only describes Taiwan as having a “key strategic relationship”

with the United States like Singapore, India, and Indonesia. 59 Calculated with data on the BP Statistical Review of World Energy Workbooks 2014. 60 The New York Mercantile Exchange established the heating oil futures trading market in 1978, introduced a

gasoline futures contract in 1981, and crude oil futures in 1983. See Robert R. Copaken, “Oil as a Strategic

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related pricing system was introduced as the starting point,61 these states should have had plenty of

experience in the functioning of the international oil markets for 26 years by 2013. Japan, South

Korea, and Taiwan have had some form of NOCs since at least 1979.62

The Philippines discovered oil in 1976 in the Province of Palawan in the southwest and the

country began to produce a small amount of oil since 1979.63 Although the PNOC did not succeed in

producing any crude oil during the period studied, it was involved in its import, refining, distribution,

and sales at least up to the early 1990s.64 The Philippine Department of Energy continues to be in

charge of managing oil service contracts for the E&P of indigenous petroleum resources, while PNOC

and its oil E&P subsidiary are still almost 100 percent government-owned.65 Therefore, it is safe to

consider the Philippines as having the same length and nothing-out-of-the-ordinary experience with

the international oil markets as Japan, South Korea, and Taiwan.

Singapore has had an intimate and positive experience with the international oil markets for

decades although it does not have an NOC anymore. Oil refining, bunkering, trading, and offshore

E&P support service have continuously played a pivotal role in and intricately linked with the

country’s economy since it gained independence in 1965.66 The Singapore remains the undisputed oil

trading hub in Asia with the government’s active promotion.67

Thailand has also been importing oil for decades. The long search for crude oil paid off in 1981

when Shell discovered onshore crude oil in Sirit Field in Kamphaeng Phet Province. 68 The Thai

Petroleum Authority of Thailand (PTT) was set up during the oil price shock in December 1978 to

expedite oil procurement for domestic consumption and seek additional indigenous resources and its

Commodity” in The Global Oil Market: Understanding Energy Issues in the World Economy, ed. by Siamack

Shojai (Westport: Praeger, 1995), 217. The International Petroleum Exchange in London was introduced by

energy traders in 1980, launched its first gas oil futures contract in 1981, and Brent crude futures in 1988. See

Carol A. Dahl, International Energy Markets – Understanding Pricing, Policies, and Profits, second edition

(Tulsa: Oklahoma, 2015), 469. 61 “Market-related pricing” of oil was first introduced by the Mexican NOC PEMEX in 1986 and gained wide

acceptance by 1988. See Fattouh Bassam, An Anatomy of the Crude Oil Pricing System – WPM40, The Oxford

Institute for Energy Studies, January 2011, 6. 62 The latest NOC among the three states to be established was the Korean National Oil Company in 1979. 63 The Philippine National Oil Company 2013 Annual Report, 2 and Santos, Philippine Energy Policy, 127. 64 Santos, 144-145. 65 PNOC Exploration Corporation, the PNOC’s subsidiary that is in charge of oil E&P, among other projects, is

99.79% owned by PNOC and 0.21% by public shareholders. See “PNOC-EC’s Mandate and Functions,” PNOC

Exploration Corporation website, assessed 10 April 2016, http://pnoc-ec.com.ph/pnoc-ecs-mandate-and-

functions/. 66 Weng Hoong Ng, Singapore, the Energy Economy – From the first refinery to the end of cheap oil, 1960-

2010 (New York: Routledge, 2012), 1-109. 67 For example, the government launched the “Global Trader Programme” in 2001, which offers concessionary

tax rate on income from international trade on approved commodities, including oil. See “Guide to Singapore’s

Global Trader Scheme,” Hawksford website, accessed 22 November 2015,

http://www.guidemesingapore.com/industry-guides/trade/singapore-global-trader-scheme. 68 “Thailand Petroleum Concessions,” Chandler & Thong-ek Law Offices Ltd., Bangkok, 14 December 2015, 2.

Acessed 12 April 2016

https://seven02.s3.amazonaws.com/96V5/1454373545.caaa88e9f22a2207af3e0f19220d3113.pdf. Also see

Tienchai Chongpeerapien, “Development of the Energy Policy in Thailand,” in Energy Market and Policies in ASEAN, ed. Shankar Sharma and Fereidun Fesharaki (Singapore: Institute of Southeast Asian Studies, 1991),

219-221.

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E&P subsidiary was established in 1985.69 The granting and management of indigenous petroleum

concessions in Thailand has been assigned the responsibilities of different government departments or

ministries. In short, the Thai government has had had similar, if somewhat less extensive, experience

in the international oil markets as those of Japan, South Korea, Taiwan. In view of the fact that both

Thailand and the Philippines possess small but still available oil resources discovered around the same

time, these two countries would have the closest experience with the international oil markets.

India, too, has long been a net oil importing country. However, the government of India’s

involvement with the international oil markets was less intense or direct during the 1980s than the six

examined above. India had been developing its indigenous oil resources for decades,70 and in 1986, it

produced almost 70 percent of the oil it consumed.71 Between the outbreak of the Iran-Iraq war in

1980 and its dissolution in 1991, the Soviet Union has been a major oil supplier to India.72 The

situation, however, rapidly deteriorated by 1990. The Soviet Union’s own economic and political

turmoils by the end of the decade rendered it unable to take in Indian exports in exchange for oil.

Meanwhile, oil prices spiked at the eve of the first Gulf War in August 1990, which further

aggravated India’s current account deficits and hence its ability to pay for imported oil. All these

greatly contributed to India’s currency crisis in mid-1991.73

The economic reforms resulting from the crisis, many mandated by external non-state actors

such as International Monetary Fund (IMF) and the World Bank as conditions for emergency loans,

ushered in the era of widespread and sustained economic liberalization in India.74That country’s New

Industrial Policy implemented in July 1991 eliminated most import control, including petroleum, and

public sector monopoly in many sectors, including various oil sectors.75 Therefore, it is reasonable to

start counting India’s engagement with the international oil markets from 1991 onward up until 2013.

Indonesia only became a net oil importer around 2003 after having been a net exporter since its

colonial days. 76 The government set up its own oil company soon after independence in 1947.

69 “Background,” PTT website, accessed 15 September 2015,

http://www.pttplc.com/EN/About/pages/Background.aspx; “PTT P Milestone,” PTTEP website, accessed 25,

2015, https://www.pttep.com/en/About%20PTTEP/PTTEP%20Milestone.aspx. 70 The largest of these, the Oil and Natural Gas Corporation Limited was founded in 1956. See Varun Rai,

“Fading Star: explaining the evolution of the India’s ONGC,” in Oil and Governance: State-Owned Enterprises

and the World Energy Supply, ed. David G. Victor et al (New York: Cambridge University Press, 2012), 753. 71 BP Statistical Review of World Energy Workbooks 2014. 72 Before the outbreak of the war, Iran and Iraq together supplied about 70 percent of India’s imported oil needs.

The Soviet Union and Saudi Arabia together supplied about half of India’s imported oil by the mid-1980s. See

Raju G.C. Thomas, Indian Security Policy (Princeton, New Jersey, 1986), 43. 73 Ibid., 403. Also see Bernard Weinraub, “Economic Crisis Forcing Once Self-Reliant India to Seek Aid,” The

New York Times, June 29, 1991, accessed 12 November, 2015,

http://www.nytimes.com/1991/06/29/world/economic-crisis-forcing-once-self-reliant-india-to-seek-aid.html. 74 Ajai Chopra et al, India: Economic Reform and Growth – Occasional Paper #134 (Washington, D.C.: IMF,

1995), 15. Also see Arvind Panagariya, India in the 1980s and 1990s: A Triumph of Reforms (IMF Working

Paper 2004-2043), 23. 75 Panagariya, India in the 1980s and 1990s, 23. 76 BP Statistical Review of World Energy Workbooks 2014. Also see Philip Barnes, Indonesia: The Political

Economy of Energy (Oxford: Oxford University Press, 1995).

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Indonesia established a consolidated NOC in 1968, but international oil firms have continued to

dominate its E&P sector. Volatile oil prices experienced during the 1970s and early 1980s brought

windfall venues to the Indonesian government.77 The development of the international oil markets in

the 1980s coincided with lower oil prices in Indonesia. By the time prices began to rise in 2003, the

country’s oil production had been in decline for a couple of years. On balance, Indonesian decision-

makers have had relatively positive experience with the international markets, and the Indonesian

state would have the same, if not greater, depth of knowledge in the markets’ functioning as the “no-

oil” states.

Soon after the discovery of the Daqing oilfield, China became oil self-sufficient in 1963,78 and

remained so until 1993. Declining production led to petroleum industry reforms which began with the

decentralization of oil pricing, production, and administration in 1981.79 By the early 2000s, NOCs

and various central level agencies and commissions together form what Bo Kong calls the co-

governance of China’s oil sector today. From 1994, the year after China became a net importer, the

Chinese state would have 20 years of experience in engaging in the international oil market by 2013.

No significant negative incident stands out during this period of engagement.80

3.4.3 Evenness and Degree of Development

The last component of states’ overall trust in the oil markets that this study looks at is the

degree of economies’ development and how even the development is throughout the economy

spatially. These two aspects are related to states’ trust in the oil markets because they have a great

effect on the equality of access to energy and oil products. For the geographical evenness of

development, the percentage of the country’s urban population is a good proxy. A larger urban

population usually indicates a more even and higher degree of development across the economy.

While there are urban slums with great poverty, the concentration of people itself would facilitate

ready markets for private firms, and induces greater trust that the masses can access the oil they need

without government intervention. Table 8 below shows that this percentage tracks rather closely with

77 Sudarsono, “Energy as a Development Resource – The Indonesian Experience,” 61. 78 The Daqing oilfield was discovered in 1959 and began production in 1960. See Tai Wei Lim, Oil in China –

From Self-Reliance to Internationalization (Singapore: World Scientific Publishing, 2010), 16-17. See Kong for

the year of oil self-sufficiency, 9. See BP Statistical Review of World Energy Workbooks 2014 for year of loss in

oil self-sufficiency. 79 Kong, 9. 80 A negative incident did occur related to oil trading in Singapore in 2004, but it involved insider trading and

fraud by the head of the China Aviation Oil, China’s biggest and state-owned jet-fuel trader. This was related to

the international oil market’s ability to supply crude oil and oil products. The company tattered at the brink of

bankruptcy as a result of the incident. See Sue Ling Chan, “China’s Aviation’s Chen Gets 4 Years, 3 Months in

Jail,” Bloomberg News, 21 March 2006, accessed 1 December 2015,

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_zU0hwJZ7GI&refer=top_world_news.

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the state’s degree of economic development as represented by its per capita gross domestic products

(GDP) based on purchasing power parity (PPP) in U.S. dollars:81

Economy

Percentage of Urban

Population 201382

Comparative

Level of

Urbanization

Per Capita

GDP (PPP)

201383

Comparative

Level of Economic

Development

China 53 Medium 12,196 Low

India 32 Low 5,302 Low

Indonesia 52 Low 10,051 Low

Japan 92 High 36,223 Medium

Philippines 45 Low 6,535 Low

Singapore 100 High 80,295 High

South Korea 82 High 33,089 Medium

Taiwan 70 Medium 43,600 High

Thailand 48 Low 14,393 Low

Table 8 Urban Population Percentage, Per Capita GDP, and comparative ranks and levels

of Nine Case-Study Economies in 2013

3.4.4 Overall Trust in Oil Markets

To obtain an answer to the fourth standardize question, a score is assigned to approximate the

discussions of each of the component that makes up the overall trust in oil markets. Three is given to

the condition that engenders the highest trust according to the reasoning of the vulnerability-

interaction theory and “1” the least trust. For example, a formal U.S. ally, a state having the longest

good experience in the international oil market among the case-study countries, and a country that is

highly urbanized and reaches a high level of economic development will get a “3” in each of the

respective component. Table 9 below summarizes the results:

State

Relationship

with U.S.A.

Market

Experience

Degree of

Urbanization

Per

capita

GDP

Overall

Trust

Score

Comparative

Level of Trust

China 1 1 2 1 5 Low

India 2 1 1 1 5 Low

Indonesia 2 2 1 1 6 Low

Japan 3 3 3 2 11 High

Philippines 3 2 1 1 7 Medium

Singapore 2 3 3 3 11 High

South Korea 3 3 3 2 11 High

Taiwan 3 3 2 3 11 High

Thailand 2 2 1 1 6 Low

81 The same procedure of using the mean and standard deviation of the respective data to determine the

trichotomous levels of urbanization and economic development is used as explained in footnote 43 above. 82 The data source, except that of Taiwan, is from the World Bank website, accessed 11 November 2015,

http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS. The data for Taiwan is the latest I can find (year

2010). See Social Indicators 2012 (Taipei, Taiwan: The Chinese Statistical Association, 2013), 280. 83 The data source, except that of Taiwan, is from the World Bank website, accessed 11 November 2015,

http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?order=wbapi_data_value_2012+wbapi_data_value+

wbapi_data_value-last&sort=desc. The data source for Taiwan is from “The World Factbook,” CIA website

(estimated 2014 figure), accessed 8 October, https://www.cia.gov/library/publications/the-world-

factbook/rankorder/2004rank.html

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Table 9 Numeric Representation and Level of Comparative Trust in Oil Markets in 2013

The comparative trust levels shown in Table 9 are obtained by following the same averaging

and standardizing procedure used in earlier sub-sections with the overall trust scores. It provides an

imperfect, but worthy answer to the fourth standardized question, shown on the far right column.

3.5 Implementation Capability

This section addresses the question of what were the case-study states’ capabilities to

implement strategic oil supply measures in 2013, especially the market displacing type that is the

focus of this thesis. To do this, pertinent financial and diplomatic capabilities of each case study state

will be examined.84

3.5.1 Financial Capability

States need financial capability to implement both market displacing and market conforming

strategic oil supply measures. Since almost all international oil transactions during the period studied

are denominated in U.S. dollars, the size of states’ foreign exchange reserves, especially those in U.S.

dollars, would be a good way to gauge states’ financial capability to implement strategic oil supply

measures.85

Table 10 below lists the foreign exchange reserves of the nine case-study economies and their

comparative levels:

Economy Foreign Exchange Reserves in 201386 Comparative Level

China $3,880,368,275,099 High

India $298,092,483,487 Medium

Indonesia $99,386,827,825 Low

Japan $1,266,851,419,539 Medium

Philippines $83,182,371,931 Low

Singapore $277,797,712,875 Medium

South Korea $345,694,101,316 Medium

84 In the current globalized and relatively liberalized era, this study simplifies this analytical task by not

investigating countries’ technical capabilities separately as countries with enough financial capabilities would be

able to acquire the technology needed through means such as hiring foreign experts or setting up joint ventures

with foreign companies which possess the technology. 85 China have settled oil transactions with Iran in renminbi before 2013, and both India and China acquired oil

from the Soviet Union and Eastern European countries that were not paid in U.S. dollars during the Cold War.

However, the overwhelming majority of oil supplied to the case-study countries during the period studied,

including 2013, was denominated in U.S. dollars. See “China Buying Oil from Iran with Yuan,” BBC website, 8

May 2012, accessed 10 February 2016, http://www.bbc.com/news/business-17988142; Also see Alastair Crooke,

“The Non-Dollar Trading Is Killing the Petrodollar – And the Foundation of U.S.-Saudi Policy in the Middle

East,” The Huffington Post, 2 December 2014, accessed 10 February, http://www.huffingtonpost.com/alastair-

crooke/petrodollar-us-saudi-policy_b_6245914.html. 86The data source, except that of Taiwan, is from the World Bank website, accessed 11 February 2016,

http://data.worldbank.org/indicator/FI.RES.TOTL.CD. The data source for Taiwan is from “The World

Factbook,” CIA website (estimated 2014 figure), accessed 11 February 2016,

https://www.cia.gov/library/publications/the-world-factbook/fields/2188.html. Both websites stay that they

count “gold, special drawing rights, reserves of IMF members held by the IMF, and holdings of foreign

exchange under the control of monetary authorities” in “current U.S. dollars” in tallying the reserves amount.

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Taiwan $423,900,000,000 Medium

Thailand $167,230,224,743 Medium

Table 10 Case-Study Economies’ Foreign Exchange Reserves in 2013

Short of quantitative easing or printing more money, two other common sources of finance a

national government may draw on to implement strategic oil supply measures are various types of

internal revenue and issuing sovereign bonds or borrowing. 87 Therefore, this project also uses

countries’ performance in these areas to gauge their financial capability. The actual internal revenue

available to the national government through taxation, fees, and even from its the sale of indigenous

oil resources still available is closely linked to the size of the country’s economy in absolute terms,

that is, its normal GDP. Therefore, it is used as a proxy of states’ financial capability through internal

revenue. Table 11 below lists the nominal GDP of the case study economies and their comparative

levels:

Economy Nominal GDP in U.S. Dollars in 201388 Comparative Level

China $9,490,602,600,148 High

India $1,861,801,615,478 Medium

Indonesia $910,478,729,099 Medium

Japan $4,919,563,108,373 High

Philippines $271,927,428,133 Low

Singapore $302,245,904,260 Low

South Korea $1,305,604,981,272 Medium

Taiwan $484,700,000,000 Low

Thailand $420,166,569,029 Low

Table 11 Case-Study Economies’ Nominal GDP in 2013

Apart from internal revenue and reserves, a particular country’s government can also issue

sovereign bonds to raise funds. The absolute amount as well as the ease and cost a national

government can borrow are contingent upon both the size of its economy and its credit worthiness,

which is generated by taking into consideration a whole host of factors by a number of credit rating

companies.89 Table 12 below summarizes the overall credit worthiness of the case-study economies

87 Printing more money is likely to devalue the currency and discount the actual financial capability of the

country down the road anyway. 88 The data source, except that of Taiwan, is from the World Bank website, accessed 12 February 2016,

http://data.worldbank.org/indicator/NY.GDP.MKTP.CD. The data source for Taiwan is from “The World

Factbook,” CIA website (estimated 2013 figure), accessed 31 February 2016

http://factbook.lincon.com/geos/print/country/countrypdf_tw.pdf. 89 For a comprehensive understanding of these factors by major credit rating companies, the methodologies used,

their pitfalls etc., see Ashok Vir Bhatia, “Sovereign Credit Ratings Methodologies: An Evaluation,” IMF

PWP02/170, October 2002, accessed 12 February 2016,

https://www.imf.org/external/pubs/ft/wp/2002/wp02170.pdf.

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by averaging the ratings given to them by three major companies, S&P, Moody’s, and Fitch.”90 These

ratings are then translated numerically according to the IMF 24-point “transposition scale.”91

Economy

S&P

Rating

Moody's

rating

Fitch

Rating IMF Scale

Comparative Overall Credit

Worthiness Level92

China AA- Aa3 A+ 4.3 High

India BBB- Baa3 BBB- 10.0 Low

Indonesia BB+ Baa3 BBB- 10.3 Low

Japan AA- Aa3 A+ 4.3 High

Philippines BB+ Ba1 BB+ 11.0 Low

Singapore AAA Aaa AAA 1.0 High

S. Korea A+ Aa3 4.5 Medium

Taiwan AA- Aa3 A+ 4.3 High

Thailand BBB+ Baa1 BBB 8.3 Medium

Table 12 Case-Study Economies’ Credit-Worthiness as of 2013

At this point, states’ internal financial capability and the capability to obtain funds externally

are combined to form their overall financial capability. Similar to the method used to obtain the

overall trust in the oil market’s capability to adequately supply oil to these same countries, three is

assigned to each capability component to denote a high level among those in this study, “2” a medium

level, and “1” a low level. Table 13 below shows the score each economy receives in each of the four

components, which add up to the overall financial capability score, and the comparative overall

financial capability among the nine case-study economies in 2013.

Economy Forex

Reserve

Nominal

GDP

Credit

Worthiness

Overall Financial

Capability Score

Comparative Overall

Financial Capability

China 3 3 3 9 High

India 2 2 1 5 Low

Indonesia 1 2 2 5 Low

Japan 2 3 3 8 High

Philippines 1 1 1 3 Low

Singapore 2 1 3 6 Medium

S. Korea 2 2 2 6 Medium

Taiwan 2 1 3 6 Medium

Thailand 2 1 2 5 Low

Table 13 Case-Study Economies’ Financial Capabilities in 2013

3.5.2 Diplomatic Capability

90 The source of credit ratings by the three major rating companies is from “Credit ratings: how Fitch, Moody’s

and S&P rate each country,” The Guardian website, last updated 3 January 2013, accessed 12 February 2016,

http://www.theguardian.com/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard. 91 Bhati, 8. The table on this page gives a “translation” of the different letter grades with the – or + signs to 24

whole number grades. I have averaged out the grades if they are not totally equivalent to each other according to

this IMF formulation, and hence resulting in some countries having a non-whole number grade. 92 While the same averaging and standardizing procedure is followed to generate these comparative levels, the

medium level covers those 0.6 instead of 0.5 standardize deviation above and below the average IMF scale score.

If this minor adjustment is not made, none of the nine economies would be considered having a medium level of

credit worthiness.

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In the context of implementing strategic oil supply measures, one diplomatic capability that

stands out is the ability of a state to facilitate an oil exporting state’s diplomatic or political objectives

in major international or regional fora either by supporting or withholding support to resolutions or

other collective decisions. The United Nations (UN) Security Council “rests at the heart of the

international architecture.” 93 UN Security Council membership is, therefore, used as a proxy of

diplomatic capability in this study. States which are permanent members of the UN Security Council

stay on the council for the indefinite future and possess what is termed the “double the veto” power.94

Therefore, they are deemed possessing the greatest diplomatic capability. States that are non-

permanent or rotating UN Security Council members only serve a term of two years at a time,95 but

they do possess more power over general members of UN during their tenure. States which are not

UN general members have the least diplomatic clout. Table 14 below summarizes the results for the

nine case study states in 2013, “4” denoting the greatest and “1” the least capability:

State

UN Security

Membership

Diplomatic Capability

Score

Comparative Diplomatic

Capability

China Permanent 4 High

India None96 2 Medium

Indonesia None 2 Medium

Japan None 2 Medium

Philippines None 2 Medium

Singapore None 2 Medium

South Korea Non-Permanent97 3 High

Taiwan Non-UN Member 98 1 Low

Thailand None 2 Medium

Table 14 Case-Study States’ Overall Diplomatic Capability in 2013

3.5.3 Overall Implementation Capability

Table 15 below recaps these scores and show each case-study state’s sum as its overall

implementation capability score in 2013 and its corresponding comparative overall implementation

capability:

93 Fakiha Mahmood, “Power Versus the Sovereign Equality of States: The Veto, the P-5 and United Nations

Security Council Reforms,” Perceptions, 18-4 (Winter 2013), 117. 94 This means they can both veto any “substantive” decisions discussed in the Security Council as well as

determining which decisions are “substantive” or “procedural.” Ibid., 126. Also see Hans Köchler, “The Voting

Procedure in the United Nations Security Council – Examining a Normative Contradiction in the UN Charter

and its Consequences on International Relations," 18-20. Accessed 15 February 2016, http://www.i-p-

o.org/Koechler-Voting_Procedure-UN_Security_Council.pdf. 95 “Charter of the United Nations – Chapter V,” UN websites, accessed 15 February 2016,

http://www.un.org/en/sections/un-charter/chapter-v/. 96 It is not one of the five permanent members (the United States, Russia, Britain, France, and China ), nor is it

on the list of non-permanent membership in 2013. See “Members of the Security Council in 2013,” UN website,

accessed 15 February 2016, http://www.un.org/en/sc/inc/searchres_sc_year_english.asp?year=2013. This

applies to the other six “None” countries in this table. 97 Ibid. 98 Taiwan or the Republic of China has not been a UN member since 1971. For a history of its UN membership

vis-à-vis that of China (People’s Republic) and its diplomatic consequences, see Sigrid Winkler, “Taiwan’s UN

Dilemma: To Be or Not To Be,” Brookings Institute website, accessed 15 February 2016,

http://www.brookings.edu/research/opinions/2012/06/20-taiwan-un-winkler.

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State

Overall

Financial

Capability Score

Diplomatic

Capability

Score

Overall

Implementation

Capability Score

Comparative Overall

Implementation

Capability

China 9 4 13 High

India 5 2 7 Medium

Indonesia 5 2 7 Medium

Japan 8 2 10 High

Philippines 3 2 5 Low

Singapore 6 2 8 Medium

South Korea 6 3 9 Medium

Taiwan 6 1 7 Medium

Thailand 5 2 7 Medium

Table 15 Case-Study States’ Overall Implementation Capability in 2013

4. Results of Preliminary Study

Table 17 below summarizes the trichotomous levels of all the variables of the case study

economies in 2013, as derived from the answers to the standardized questions in the preceding

sections for easy comparison:

Economy DV Level

OV (IV)

Level

Overall

Economic

Freedom

Overall Trust

in Oil

Markets

Overall

Implementation

Capability

China High Low Low Low High

India Medium Low Low Low Medium

Indonesia High Low Medium Low Medium

Japan Medium High High High High

Philippines Low Medium Medium Medium Low

Singapore Low High High High Medium

S. Korea Medium Medium Medium High Medium

Taiwan High Medium High High Medium

Thailand Medium Low Low Low Medium

Table 17 Trichotomous Levels of All Variables for Nine Case-Study Economies in 2013

One pair of economies has all four explanatory factors (IV & ITVs) at exactly the same levels:

India and Thailand. Congruent to the prediction of H1, the two also have the same levels of DV.

Therefore, they match the parameters of H1 perfectly with 2013 data. There are great differences

between India and Thailand, such as the sizes of their populations, land areas, and economies, as well

as many other possible factors that may explain the levels of strategic oil supply measures they have

adopted. Yet, they fit perfectly the parameters and predictions of H1. Therefore, they may be

considered loosely as “the most different” or “least likely” cases.99

The parameters of H2 call for the difference in one of the four explanatory factors only. Of the

36 possible pairs of comparison generated by the nine case-study countries in 2013, there are seven

pairs of economies having a one-level difference in one of the four explanatory factors. They fit the

99 For a discussion of how the “most different” research design expands the applicability of controlled

comparisons, see George and Bennett, 164-165. For a discussion of the “least likely” cases, see John Gerring,

“Is There a (Viable) Crucial-Case Method?” Comparative Political Studies, 40-3 (March 2007), 233-237.

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parameters of H2. Table 18 below summarizes the pertinent information of these seven pairs of

economies:

Seven Pairs of Economies Having One-Level Difference in One Factor Only:

Economies Difference in DV Congruent with theory?

China and India One Level Yes

China and Thailand One Level Yes

India and Indonesia One Level No

Indonesia and Thailand One Level No

Japan and Singapore One Level Yes

Singapore and Taiwan Two Levels No

South Korea and Taiwan One Level No

Table 18 Economies Having One-Level Difference in One Factor Only in 2013

The overall congruence rate of the comparative layer of the vulnerability-interaction theory

preliminarily reaches 50 percent. Out of the eight pairs of states that emerge with the parameters

stipulated in H1 or H2, namely the pair with all variables at the same level and those listed on Table

18, four of them are congruent with the hypotheses prima facie.

5. Conclusion

This paper puts forward the vulnerability-interaction theory to explain variations in the actual

levels of strategic oil measures adopted in net oil importing states, especially those in Asia in 2013. It

uses structured and focused comparisons to uniformly examine all the variables of the proposed

theory in nine case-study economies to probe its plausibility. This preliminary study shows the theory

provides a probable explanation of the comparative levels of strategic oil supply measures adopted by

net oil importing economies.

Yet, much work needs to be done to consolidate the validity of the comparative layer of the

theory, not to mention further explicating its fixed-threshold layer not presented in this paper. First of

all, promising candidates should be selected from the result of the nine-state preliminary study for

more in-depth investigation. This would involve including unique or idiosyncratic strategic oil supply

measures and components of explanatory factors that conform to the spirit of the variables in two-

country comparative studies.

Second, within-case cross-temporal comparisons, especially from a low oil price period during

which the international oil markets has already been established, should be made to investigate the

validity of the theory’ cross-temporal dimension. The period from 1994 to 2003 would be ideal since

it is a decade that immediately precedes the decade of rising oil price period ending in 2013. Finally,

more economies from Asia and beyond can be included to assess the generalizability of the theory.