TIME energy

Oil Prices Slide on Iran Nuclear Deal

The end of sanctions means new investments in Iran's oil production

Crude oil prices are testing three-month lows after Iran struck a deal that will lead to the lifting of international sanctions on its struggling economy in return for curbs on its nuclear program.

The benchmark futures contract for U.S. crude fell by over a dollar a barrel in early trade in Europe Tuesday after negotiators confirmed that they had struck an agreement after years of fraught talks.

The gradual end to sanctions foreseen under the deal will allow Iran, which has the world’s third-largest oil and gas reserves, to attract investment into its long-isolated energy sector, adding to world oil supplies at a time when the market is already “massively oversupplied”, according to the Paris-based International Energy Agency.

The Financial Times reported in June that European oil majors such as Royal Dutch/Shell [fortune-stock symbol=”RSDA”] and Italy’s Eni SpA [fortune-stock symbol=”E”] have already visited Tehran, with a view to clearing old debts and paving the way for new deals.

That’s bad news for U.S. shale oil producers, which have struggled to adapt to a world of lower prices since Saudi Arabia pushed the Organization of Petroleum Exporting Countries into a fight for market share at the end of last year.

However, it’s not the Iran deal per se that’s the bad news, but the fact that it adds to a list of factors that have stopped the rebound in oil prices in its tracks in the last couple of weeks.

“Onshore storage space is limited. So is the tanker fleet. New refineries do not get built every day. Something has to give,” the IEA wrote in its latest report on the world oil market. That something, it added, is most likely to be U.S. light, tight oil.

Analysts at Wood Mackenzie estimate as a base case that Iran will only add 120,000 barrels a day by the end of the year to the 2.7 million it currently produces. That’s little more than a drop in the bucket next to the surge in output that’s already happened this year as Saudi Arabia, smaller Gulf producers, Russia and Brazil have pumped furiously to ensure they keep their share of the pie.

WoodMac reckons that it could add a total of 600,000 b/d by the end of 2017, with 260,000 b/d coming next year and another 220,000 b/d the year after. That’s based on the assumption that sanctions are fully lifted by the middle of 2016.

Iran itself wants to increase its oil output to 5 million barrels a day by the end of the decade. That may seem ambitious, but Iraq has managed a similar increase since the toppling of Saddam Hussein despite having to cope with the constant chaos of civil war and, more recently, the rise of Islamic State.

If the deal holds, and Iran can overcome its diplomatic isolation for good, then it seems destined to have a major impact on global supplies in the long term. Over three-quarters of its recoverable reserves are still to be developed–and most can be developed without the state-of-the-art technology required in most new oil producing regions, whether in shale formations or offshore.

That can’t help but have an impact on the math for the U.S. shale industry. So far, the weaker companies in the sector have relied largely on new stock issuance and drastic cutbacks in investment spending to ride out what they hoped would be a temporary setback. If Iran ever starts to realize its full potential as a producer, the sector will have to accept that prices are going to stay lower for longer.


More Low Gas Prices Could Be Coming

A new global forecast illustrates the old law of supply and demand.

TIME psychology

This Is the Power of Full Engagement

Shane Parrish writes Farnam Street

"Energy, not time, is the fundamental currency of high performance”

In The Power of Full Engagement: Managing Energy, Not Time, is the Key to High Performance and Personal Renewal Tony Schwartz and Jim Loehr argue that energy, not time, is the key to managing performance.

We live in a digital time which Schwartz and Loehr capture so eloquently:

We live in digital time. Our rhythms are rushed, rapid fire and relentless, our days carved up into bits and bytes. We celebrate breadth rather than depth, quick reaction more than considered reflection. We skim across the surface, alighting for brief moments at dozens of destinations but rarely remaining for long at any one. We race through our lives without pausing to consider who we really want to be or where we really want to go. We’re wired up but we’re melting down.

Most of us are just trying to do the best that we can. When demand exceeds our capacity, we begin to make expedient choices that get us through our days and nights, but take a toll over time. We survive on too little sleep, wolf down fast foods on the run, fuel up with coffee and cool down with alcohol and sleeping pills. Faced with relentless demands at work, we become short-tempered and easily distracted. We return home from long days at work feeling exhausted and often experience our families not as a source of joy and renewal, but as one more demand in an already overburdened life.

We walk around with day planners and to-do lists, Palm Pilots and BlackBerries, instant pagers and pop-up reminders on our computers— all designed to help us manage our time better. We take pride in our ability to multitask, and we wear our willingness to put in long hours as a badge of honor. The term 24/ 7 describes a world in which work never ends.

Forever starved for time we try to fit everything into each day. But as we know, managing time by itself is not the answer. The energy you bring to the table matters too. Schwartz and Loehr argue that:

“Energy, not time, is the fundamental currency of high performance.”

“Every one of our thoughts, emotions and behaviors has an energy consequence,” they write. “The ultimate measure of our lives is not how much time we spend on the planet, but rather how much energy we invest in the time that we have.”

There are undeniably bad bosses, toxic work environments, difficult relationships and real life crises. Nonetheless, we have far more control over our energy than we ordinarily realize. The number of hours in a day is fixed, but the quantity and quality of energy available to us is not. It is our most precious resource. The more we take responsibility for the energy we bring to the world, the more empowered and productive we become. The more we blame others or external circumstances, the more negative and compromised our energy is likely to be.

To be fully engaged, we need to be fully present. To be fully present we must be “physically energized, emotionally connected, mentally focused and spiritually aligned with a purpose beyond our own immediate self-interest.”

Conventional wisdom holds that if you find talented people and equip them with the right skills for the challenge at hand, they will perform at their best. In our experience that often isn’t so. Energy is the X factor that makes it possible to fully ignite talent and skill.

You Must Become Fully Engaged

Here are the four key energy management principles that drive performance.

Principle 1: Full engagement requires drawing on four separate but related sources of energy: physical, emotional, mental and spiritual.

Human beings are complex energy systems, and full engagement is not simply one-dimensional. The energy that pulses through us is physical, emotional, mental, and spiritual. All four dynamics are critical, none is sufficient by itself and each profoundly influences the others. To perform at our best, we must skillfully manage each of these interconnected dimensions of energy. Subtract any one from the equation and our capacity to fully ignite our talent and skill is diminished, much the way an engine sputters when one of its cylinders misfires.

Energy is the common denominator in all dimensions of our lives. Physical energy capacity is measured in terms of quantity (low to high) and emotional capacity in quality (negative to positive). These are our most fundamental sources of energy because without sufficient high-octane fuel no mission can be accomplished.


The importance of full engagement is most vivid in situations where the consequences of disengagement are profound. Imagine for a moment that you are facing open-heart surgery. Which energy quadrant do you want your surgeon to be in? How would you feel if he entered the operating room feeling angry, frustrated and anxious (high negative)? How about overworked, exhausted and depressed (low negative)? What if he was disengaged, laid back and slightly spacey (low positive)? Obviously, you want your surgeon energized, confident and upbeat (high positive).

Imagine that every time you yelled at someone in frustration or did sloppy work on a project or failed to focus your attention fully on the task at hand, you put someone’s life at risk. Very quickly, you would become less negative, reckless and sloppy in the way you manage your energy. We hold ourselves accountable for the ways that we manage our time, and for that matter our money. We must learn to hold ourselves at least equally accountable for how we manage our energy physically, emotionally, mentally and spiritually.

Principle 2: Because energy capacity diminishes both with overuse and with underuse, we must balance energy expenditure with intermittent energy renewal.

We rarely consider how much energy we are spending because we take it for granted that the energy available to us is limitless. … The richest, happiest and most productive lives are characterized by the ability to fully engage in the challenge at hand, but also to disengage periodically and seek renewal. Instead, many of us live our lives as if we are running in an endless marathon, pushing ourselves far beyond healthy levels of exertion. … We, too, must learn to live our own lives as a series of sprints— fully engaging for periods of time, and then fully disengaging and seeking renewal before jumping back into the fray to face whatever challenges confront us.

Principle 3: To build capacity, we must push beyond our normal limits, training in the same systematic way that elite athletes do.

Stress is not the enemy in our lives. Paradoxically, it is the key to growth. In order to build strength in a muscle we must systematically stress it, expending energy beyond normal levels. … We build emotional, mental and spiritual capacity in precisely the same way that we build physical capacity.

Principle 4: Positive energy rituals—highly specific routines for managing energy— are the key to full engagement and sustained high performance.

Change is difficult. We are creatures of habit. Most of what we do is automatic and nonconscious. What we did yesterday is what we are likely to do today. The problem with most efforts at change is that conscious effort can’t be sustained over the long haul. Will and discipline are far more limited resources than most of us realize. If you have to think about something each time you do it, the likelihood is that you won’t keep doing it for very long. The status quo has a magnetic pull on us.


Look at any part of your life in which you are consistently effective and you will find that certain habits help make that possible. If you eat in a healthy way, it is probably because you have built routines around the food you buy and what you are willing to order at restaurants. If you are fit, it is probably because you have regular days and times for working out. If you are successful in a sales job, you probably have a ritual of mental preparation for calls and ways that you talk to yourself to stay positive in the face of rejection. If you manage others effectively, you likely have a style of giving feedback that leaves people feeling challenged rather than threatened. If you are closely connected to your spouse and your children, you probably have rituals around spending time with them. If you sustain high positive energy despite an extremely demanding job, you almost certainly have predictable ways of insuring that you get intermittent recovery. Creating positive rituals is the most powerful means we have found to effectively manage energy in the service of full engagement.

The Power of Full Engagement: Managing Energy, Not Time, is the Key to High Performance and Personal Renewal is worth your time and energy.

This piece originally appeared on Farnam Street.

Join over 60,000 readers and get a free weekly update via email here.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME biofuels

Your Next United Flight Could Be Powered by Animal Droppings

Chicago's O'Hare Airport Hosts Air Industry's World Route Forum
Scott Olson—Getty Images United jets.

This could be a big step forward for the biofuels industry

Get ready for a slightly ripe scent on your next United flight — the airline is going to power a plane with animal waste, reports the New York Times.

Ok, so you won’t actually be able to smell the fuel — for passengers, in fact, almost nothing will be different when a plane takes off from Los Angeles this summer fueled only by animal’s droppings and oils from animal fats.

It will be a big step, though, for the biofuels industry. The Times notes that companies that make alternative fuels have long seen airlines as potential partners, and this United flight could be a sign of things to come.

For more on how the flight will work, and what it could mean for the industry, head to the Times.

TIME energy

Oil Markets Await Iran Nuclear Talk Outcomes

U.S. Secretary of State John Kerry (L) talks with Iranian Foreign Minister Mohammad Javad Zarif, in Geneva, Switzerland on May 30, 2015.
Susan Walsh—AP U.S. Secretary of State John Kerry (L) talks with Iranian Foreign Minister Mohammad Javad Zarif, in Geneva, Switzerland on May 30, 2015.

Outcomes on June 30 could either make or break the eventual return of Iranian oil

Oil prices have leveled off in recent weeks, but with the negotiations over Iran’s nuclear program bumping up against a deadline, that could change.

After crashing last year and then hitting several peaks and valleys, oil prices have traded within a relatively narrow range, with WTI bouncing around a bit above and below the $60 per barrel mark, and Brent staying near $64 per barrel. Of course, day-to-day there has been volatility as usual, but oil prices have been stable (relatively speaking) since the end of April. Even the OPEC meeting came and went without so much as a shrug from the oil markets.

But the deadline for the Iran negotiations – ostensibly set for June 30 – is only a week away and the outcome could have broad ramifications for the oil market, both in the immediate aftermath and over the long-term.

If a deal can be agreed to by both sides, Iran could bring a wave of oil production online. Western sanctions have knocked 1.2 million barrels per day offline since 2012. Although estimates vary, Iran might be able to bring 400,000 barrels per day online within a few months, perhaps as much as 700,000 barrels per day by the end of the year, growing to well over 1 million barrels per day sometime in 2016.

Also, Iran has somewhere around 40 million barrels of oil sitting in storage, a lot of which could essentially hit the market as soon as sanctions are lifted.

If news breaks that a deal is in hand, oil prices will sink on the expectation of this future volume, potentially dropping by $5 to $10 per barrel. And as Iran actually does ramp up output over time, and the rest of OPEC opts against cutting back to make room, global supplies will increase. That will keep a lid on future price gains and extend the current period of soft pricing.

Of course, supply and demand will have to balance out over time, and more Iranian crude will force a larger adjustment from U.S. shale, so U.S. oil production could see a deeper contraction.

There are reasons to believe a deal will actually be completed. Both western and Iranian officials hinted that they might be willing to go past the June 30 deadline if a deal is within reach. Such a willingness to extend the talks is itself an indication that the parties must be close to overcoming some of their disagreements. Also, Reuters reported that Israel has more or less come to recognize that a deal is likely. If one of the strongest opponents to negotiations with Iran is starting to come to terms with the inevitability of an agreement, that is pretty strong evidence that a final agreement could be in the works.

On the other hand, a deal is not inevitable. There have been very few updates on the state of negotiations, but just because Iran and the P5+1 nations reached a framework deal in April does not mean they can overcome the remaining outstanding differences, which also happen to be some of the thorniest.

Moreover, the tough tone from Iran’s Supreme Leader Ayatollah Khamenei this week does not bode well for the outcome. Khamenei laid out some of Iran’s “red lines” for negotiations in a TV broadcast on June 23, several conditions that appear out of step with U.S. demands. For example, Khamenei says that economic sanctions need to be lifted immediately upon signing a deal, not over time as the U.S. has proposed. Also, he ruled out a 10-year freeze on Iran’s nuclear research program. Furthermore, Khamenei stated his opposition to international inspections of Iran’s nuclear sites, a key western demand.

Iranian President Hassan Rouhani has expressed a willingness and desire to come to an agreement with the West, but the Supreme Leader is the one that is ultimately in charge. Khamenei’s hardline comments throw the outcome of the negotiations into doubt, just days before the deadline.

The collapse of nuclear talks could mean sanctions are not in fact removed, putting off the eventual return of Iranian crude oil.

We will know a lot more next week.

This article originally appeared on Oilprice.com.

More from Oilprice.com:

TIME innovations

Should You Put Solar Panels On Your House?

Views Of Home Solar Panel Installation
Bloomberg—Bloomberg via Getty Images Workers Stephen Janota, left, and Matt Bart, install Solar Service Inc. photovoltaic (PV) solar electric panels on the roof of a home in Park Ridge, Illinois, U.S., on Tuesday, Sept. 10, 2013.

Read our quick guide to going solar

Correction appended Monday, June 30.

This past winter was one of the worst on record for the northeast, but the snow didn’t stop U.S. homeowners from investing in solar paneling. According to the Solar Energy Industries Association (SEIA), 2015’s first quarter broke records, with 66,440 new solar systems getting installed in the first three months of the year. That brings the total U.S. households with solar to approximately 700,000.

“These are not just solar enthusiasts anymore,” says Tom Kimbis, SEIA’s vice president of executive affairs. “The vast majority of residential installations — by a long shot — are done because solar is affordable and it’s saving money.”

Several factors are driving solar’s ever-increasing adoption, from improved technologies and falling installation costs to a generous federal tax credit that’s coming to a close in 2016. As a result, how residential solar power works is more than just the conversion of sunbeams into kilowatts. To truly understand it, you have to follow the light from the solar panel all the way to your wallet.

Step 1: Rack ‘Em Up

Humans have used the sun to heat water for thousands of years, but solar electric power, also called photovoltaic or PV, got its start in the 1950s. Since then, there have been great advances in the technology, which is helping make solar so attractive today.

Solar panels are modules made up of cells, like the kind you see on a solar-powered calculator. A racking system is used to attach the panels to a rooftop. Installers will orient the rack to make sure the module gets the most direct sunlight possible. But if a house’s roof lacks the proper orientation, the modules can be placed in a yard via a ground mounted system instead.

As installers have gained more experience, they’ve become much more efficient at mounting panels. Installations that used to take days now can be done in just hours, one reason the cost of solar has dropped in recent years.

Still, says Kimbis, as with any major home improvement project, you should get bids from multiple installers and compare the results. The solar company should give you an estimate of how much power that system is going to produce based on annual statistics they know from a variety of different factors: the weather in your region, the angle of your roof, and its ordinal orientation, he says. Those factors will determine the size of the system and how much electricity, on average, it will produce every year.

Step 2: Catch Some Rays

“One thing that people notice when they put a solar system on is how silent it is because there aren’t any moving parts,” says Kimbis. The panels and the racking system make up two-thirds of a solar power system; the final piece is the inverter.

An inverter takes the energy captured by the cells and converts it from Direct Current (DC) into Alternating Current (AC). If you think of electrical energy as the movement of electrons, our homes (and the electrical grid) operate on AC because under that standard, electricity can travel for miles without shedding power along the way. On the other hand, DC is much better at storing power, which is why car batteries use it. And soon, homes will be storing their own solar power, too. In February, Tesla CEO Elon Musk announced his company will have home batteries available for installation next summer. Not to be outdone, earlier this month Mercedes-Benz announced it too will be selling home batteries, with deliveries beginning this fall.

But our homes will still require AC power to draw extra energy from and send excess energy back to the grid. So an inverter, which can convert electricity from DC to AC, is required to connect the solar panels to the home’s electrical system. Inverters are typically installed right outside the breaker box, allowing the home to use the solar power first, then if the demand is too high, the home can grab more power off the grid. Conversely, if the solar system is creating more electric energy than the home needs, it can send that power out into the grid, reducing our overall demand on nuclear and fossil fuels. Some places even allow you to sell the excess energy you create back into the grid, an activity known as “net metering” which is attractive to many potential solar customers.

Step 3—Pay Your Bill

In a way, this step should actually come first, but having a good understanding of how solar works will help you better figure out your bill. There are currently three ways homeowners can add solar arrays to their property. The first is by simply purchasing an array and having it installed. The second is by leasing a solar array from a company that installs and maintains it, and the third is through a Power Purchase Agreement. Each method has its own variables and there are many companies operating in the space, so it’s impossible to generalize about which solution is the best one for you.

Purchasing your own solar array typically involves the biggest up-front investment, but can also be the most financially advantageous way to go. Homeowners who buy their own system can receive a federal investment tax credit worth 30% of the cost of their system. Kimbis estimates that a “nice sized system” would cost around $15,000, but for that price, $4,500 would be applied as a credit to the homeowner’s federal tax bill. Still, with this benefit also comes the maintenance and upkeep of the system moving forward. But most panels have a warranty of around 25 years, and the inverter can last up to 30 years — which leads to a very important point: If you have an aging, tired roof, you might want to wait until it’s replaced before you go solar at all.

Leasing takes the sting out of equipment and installation costs, but it spreads them out over a long term deal, similar to an auto lease. “In general the lease option comes in monthly payments to the system, and then whatever electricity is generated is yours to keep,” says Kimbis. But because a company technically owns the panels, this method won’t get you the same direct tax benefits as if you bought your own system. You could reap the benefits of your solar company claiming a 30% federal tax credit, but that depends on the company passing those savings down to you.

Power purchase agreements (PPAs) are very similar to how people pay their electric bills today — the equipment is owned by a third party, and customers are only charged for the kilowatt-hours of solar power that they use. In fact, some companies will simplify your solar and electric billing so you just receive one bill, to save on transaction costs. But overall, the lack of an up-front installation cost makes PPAs a very attractive proposition for solar-seeking homeowners. In fact, says Kimbis, overall, the majority of solar customers enter leases and PPAs instead of buying their own equipment outright.

Whichever setup you select, keep in mind that no two solar setups — just like no two homes — are the same. Even if two homeowners got the same equipment and financing deal from the same company, shadows and geography could create differing solar yields. “People’s usage varies, so their electricity demand varies in their house,” says Kimbis.

The question of whether solar is right for you depends on how much you’re paying for electricity now, and that varies based on where you live — homes near cheap hydro-electric dams or in the heart of coal country may not benefit like more remote homes with higher fuel costs.

But the question is no longer about the technology, says Kimbis. “Home owners should feel comfortable that the technology itself has been proven,” he says. “We have reached sort of a tipping point here with solar being very affordable, being reliable, and a clean energy source.”

Correction: An earlier version of this story misstated the tax credit solar lessees receive. Solar lessees do not receive any tax credits directly.

TIME energy

California Oil Spill Forces Exxon Mobil to Halt Drilling

The company had submitted an emergency request to Santa Barbara County to truck its oil to refineries, which was rejected

Exxon Mobil stopped drilling at three offshore platforms in California last week in the wake of a pipeline’s closure after a big oil spill, the company said Tuesday.


A spokesman said the company had submitted an emergency request to Santa Barbara County to temporarily transport oil via truck, the Associated Press reports, but the County decided the situation didn’t constitute an emergency, leaving Exxon Mobil will little choice but to halt operations. Investigators looking into the cause of last month’s spill—of up to 101,000 gallons of crude onto the coastline—recently found a section of the pipe was extremely corroded.

Before last week, Exxon Mobil had been producing a third of the oil it typically produces from three oil rigs. The oil was stored in an onshore facility that has now reached capacity.


TIME energy

This Is How Much Energy Goes Into the Super Bowl Every Year

NFL logo at Ford Field in Detroit.
Mark Cunningham—Detroit Lions/Getty Images NFL logo at Ford Field in Detroit.

The annual sporting event is huge and more expensive for America than most people realize

In the pantheon of American culture, no event is more iconic and distinctly American than the Super Bowl. Like all things American, the Super Bowl is huge, expensive, and a source of incredible passion for fans. Just running a 30-second commercial to the more than 100 million people that watch the game costs nearly $5 million.

So how much electricity and energy go into putting on the Super Bowl?

There are lots of components here, but the biggest indisputable three are TVs used to watch the game, lighting and possibly climate control in a stadium, and fuel used in traveling to the game (by car or plane).

Worldwide, roughly 30 million televisions watched the five-hour extravaganza, assuming a little over five people per Super Bowl party. The average TV uses around 100 watts per hour. Plasma TVs use more electricity, and presumably people watch the Super Bowl on the biggest brightest TV they have available, so maybe the average TV watching the Super Bowl actually uses more like 125 watts per hour. Add another 125 watts per hour for extra lighting and other electricity use and over five hours then the average TV would use 1.25 kwh, and the 30 million households around the world watching the game would use 37.5 million kilowatt hours of electricity or 37.5 GWh. At an average price across the country of about $0.11 per kwh, that works out to a total cost of roughly $4,125,000.

TVs: 37.5 GWh or $4.125 million

On the football stadium itself, there is a lot of debate and no clear answers. Stadiums use pretty efficient lighting, and certainly air conditioning is not likely to be an issue in the dead of winter. So using the low end of estimates, an average stadium might use 10MW of energy for five hours, or roughly 50 MWh for the game. Compared to the TV use, that’s not a lot, but of course, there are roughly 80,000 people in a stadium watching a game versus hundreds of millions around the world watching. Stadiums are industrial users of power, so they won’t pay standard power rates, but for the sake of simplicity, assuming an average of $0.11 per Kwh again leads to a total cost of $5,500.

Stadium: 50 MWh or $5,500

Finally, transporting 80,000 people to a stadium is going to use some energy. The amount of energy varies based on where the stadium is and where the people are coming from of course. Stadiums are roughly equally spread out across the U.S., while people are not. Given the size of the country (about 3,000 miles across), the average person going to the game probably flies around 1,500 miles or about 2 hours of peak aircraft time. A Boeing 747 carries 500 people and uses 280 MWh for a 2 hour flight. That means about 45 GWh of power for the 160 planes needed to ferry 80,000 people to the stadium. Aircraft, of course, run on jet fuel and at current prices, that fuel will cost around $100,000 for each of those 160 flights or $16 million.

Travel: 280 MWh or $16 million

Overall, the Super Bowl costs more than $20 million in energy every year – quite a bill one football game. It also requires nearly 38 GWh of energy, or more than the equivalent amount of electricity that the entire country of Morocco can generate over the same five-hour period (given their 6.8 GW of capacity that existed in 2012).

The takeaway here is that the Super Bowl is huge and more expensive for America, and perhaps the environment, than most people realize. Still, the Super Bowl has quite a ways to go before it catches up in size and cost to the World Cup.

This article originally appeared on Oilprice.com.

More from Oilprice.com:

TIME world affairs

Don’t Blame the Oil Rigs for Unrest in East China Sea

Getty Images

The risk of regional 'resource wars' has been overstated

A year ago last month, China moved its oil drilling rig, the HD-981, into waters around the Paracel Islands. China’s exploratory drilling provoked a confrontation with Vietnam, which also claims the area. Both countries deployed coast guard vessels and fishing fleets to the drilling site. Ships collided and turned water cannons on each other, sinking a fishing boat. In Vietnam, the incident sparked popular protests; more than 20 people were killed.

The rig withdrew in July, after two months of drilling. But it left an unresolved question in its wake: Is competition over the South China Sea’s oil and natural gas resources a threat to regional security? This question resonates across the region, as the Paracel Islands are not the only area where hydrocarbon exploration could lead to clashes. In addition to its disputes with Vietnam, China is also involved in disagreements over resource authority with Indonesia, Malaysia, and the Philippines. Could these countries’ attempts to exploit oil and gas spiral into outright conflict?

The answer, happily, is probably not. The risk of regional “resource wars” has been overstated. Sure, hydrocarbon competition can inspire international spats, but as the HD-981 incident demonstrated, governments are quick to contain them.

When it comes to maritime disputes, islands, not oil, are the greater threat to international stability. Why? Because resources can be shared but islands cannot. In a winner-takes-all environment, leaders have little choice but to dig in their heels. If one country obtains sovereign control over contested territory, the other loses it. But through joint development, resources can be shared.

Over the last few decades, this difference has been particularly evident in the East China Sea. There, Japan and China are contesting control over a group of islands—known as the Senkakus in Japanese and Diaoyus in Chinese—along with oil and natural gas fields, over 100 nautical miles to the northeast of those islands. The dispute over the islands has generated intense hostility between the two countries. The struggle over oil and gas fields, by contrast, has inspired constructive dialogue.

That path to restraint, admittedly, hasn’t always been linear. Chinese oil companies began operating in the East China Sea in the late 1970s, where they made their first discovery, the Pinghu field, about a decade later. Pinghu’s development was uncontroversial; the field is almost forty miles west of where Japan draws its international boundary. In the late 1990s, Japan even co-financed the construction of pipelines from Pinghu to the Chinese mainland.

But friction increased as China’s search for hydrocarbons moved closer to the border. In 2003, oil companies set up a production platform above the Chunxiao gas field, one mile from the maritime boundary. Japanese authorities demanded access to the field’s geological data to ensure that China wasn’t siphoning off Japanese reserves. When the companies refused, Japan launched its own exploration program. A seismic survey ship was deployed to the border zone in July 2004. Beijing responded by sending in its navy. Surveillance ships harassed the survey vessel and, in November, a Chinese submarine was spotted in Japanese waters. Two months later, two Chinese destroyers moved into the contested area.

Yet, Japanese and Chinese authorities managed to contain the dispute. In October 2004, the countries launched a series of bilateral talks on the East China Sea issue. Four years of negotiations eventually produced an agreement to exploit hydrocarbon resources cooperatively in the border zone.

The agreement has not led to significant resource cooperation, but China and Japan have avoided further confrontations around the fields. This outcome stands in stark contrast to the dispute over the islands, which continues to provoke tensions, as yet unaddressed by bilateral agreements.

The Senkaku/Diaoyu dispute also emerged in the 1970s, when China started challenging Japan’s authority over the islands. It has gone through periods of escalation, as activists from both countries have attempted to land on the uninhabited islands to reinforce their governments’ territorial claims. In 1978 and 1996, Japanese nationalists landed on the islands and erected lighthouses, prompting diplomatic protests from Beijing and deployments of Chinese fishing boats. Activists from Taiwan and Hong Kong attempted their own landings, some of which succeeded, in spite of resistance from Japan’s Coast Guard. In 2004, activists from mainland China reached the islands for the first time.

These incidents did not spiral into militarized clashes. However, they provoked intense hostility and made the islands a flashpoint for nationalist sentiment on both sides. The populations of both countries were primed for further conflict—such as in 2012, when the Japanese government acquired three of the islands from private owners. In China, the nationalization was met with major anti-Japan protests. Beijing also retaliated by increasing its military presence in the area. Violations of Japan’s territorial waters skyrocketed from almost none to over seventeen per month over the next year. In November 2013, China declared an Air Defense Identification Zone (ADIZ) that included the islands.

In the last 18 months, violations have declined, but Japan is still reporting an average of eight per month. Japanese and Chinese officials have also made little progress towards resolving the island dispute. Last November, the countries jointly issued a four-point consensus, aimed at improving bilateral relations. One of the points addressed the Senkakus/Diaoyus, observing that China and Japan had “different views” of the situation, but would attempt to prevent it from escalating. Yet, Japan still refuses to acknowledge the existence of a dispute and neither country has offered concrete proposals for resolving it. Relations between Xi and Abe may be thawing, but a cooperative island agreement is a very long way off.

Chinese and Japanese officials are constrained by their countries’ shared history. The islands issue has acquired enormous symbolic significance in both countries, so attempts to reach a compromise settlement will provoke intense domestic opposition. Consequently, island disputes are likely to remain a thorn in government’s’ sides, persistently at risk of escalation.

Countries have many incentives to compete for authority in the East China Sea and South China Sea, including islands, oil and natural gas, fisheries, sea lanes of communication, and national pride. However, when it comes to inspiring conflict, not all causes are created equal. Hydrocarbon resources, alone, are not a significant threat to regional stability.

Emily Meierding is a Visiting Fellow at the Center for International Environmental Studies (CIES) at the Graduate Institute, Geneva. This piece was originally published in New America’s digital magazine, The Weekly Wonk. Sign up to get it delivered to your inbox each Thursday here, and follow @New America on Twitter.

More from New America:

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

Your browser is out of date. Please update your browser at http://update.microsoft.com