TRADE LAW OF CRUDE OIL IN INTERNATIONAL PERSPECTIVE

 INTRODUCTION
A. Background information
The buying and trading of crude oil, which is a fossil fuel produced from the remaining
parts of plants and animals that lived ages ago, is referred to as crude oil commerce or
crude oil trade. It is an essential resource used in a variety of sectors, including
transportation, power generation, and manufacturing.
Crude oil trade is a complex global market, with production and consumption taking
place in various areas around the globe. The US, Saudi Arabia, Russian Countries,
Canada, and also China are the main crude oil suppliers. The leading petroleum oil
consumers are the United States, China, Japan, India, and Russia1.
The price or commercial value of crude oil is affected by a number of facts, such as its
supply around the global, its demand, and also geopolitical force, and economic growth.
The OPEC i.e The Organization of Petroleum Exporting Countries has a substantial
impact on crude oil prices because it controls a large portion of global oil production.
Large tankers, pipelines, and other modes of transportation are commonly used to
transport crude oil by sea. To trade crude oil, futures contracts are used, which are
agreements to purchase or sell a specific quantity of crude oil at a set price and date in the
future.
Crude oil trading has a considerable impact on the world economy since variations in oil
prices can have a big impact on prices of goods and services as well as inflation rates.
Furthermore, the usage of fossil fuels, which is common in the crude oil sector, has an
impact on the environment and contributes to issues like climate change and other
environmental problems2.
B. INTERNATIONAL TRADE LAW'S IMPORTANCE IN THE CRUDE OIL
INDUSTRY
International trade law is essential for the crude oil trade because it establishes the legal
framework for countries to purchase and sell crude oil. This legal structure make it easy
to confirm that business is conducted in a fair, transparent, and predictable manner.
An important part of the international trade law governing crude oil is the regulation of
trade agreements. Through a number of agreements, including the Energy Community
Treaty of the European Union (EU), the North American Free Trade Agreement
(NAFTA), and the Organisation for Economic Co-operation and Development (OECD)
Declaration on International Investment and Multinational Enterprises, the terms and
conditions of international trade, including pricing, quantity, and quality of crude oil, are
established. These agreements significantly affect the global trade in crude oil. 3.
When countries incorporated in the crude oil trade disagree, international trade law sets
rules for dispute resolution. This prevents disputes from escalating and ensures that they
are resolved quickly and fairly. To settle conflicts, international adjudication or mediation
can be used.
The regulation of customs and tariffs is another essential aspect of international trade law
for crude oil. The movement of crude oil across borders is governed by customs
1
Chandra, P., & Kumar, A. (2018). Energy Security: An Interdisciplinary Approach. CRC Press.
2
Mitchell T (2011), “Carbon Democracy: Political Power in the Age of Oil”.
3
Ciuffani, S. (2019), Oil and Gas Contracts: “The Role of Law and Lawyers in the Energy Sector. London”
: Globe Law and Business.
regulations, which include the paperwork needed, the fees charged, and the inspection
and clearance rules. Tariffs are taxes levied on imported or exported items, and they can
have an actual substantial impact on crude oil trade costs4.
Finally, international trade law is important in ensuring that the crude oil trade is
environmentally responsible. This includes rules governing crude oil transit, such as
tanker and pipeline safety, as well as environmental laws governing crude oil extraction
and production.
Overall, international trade law establishes the framework for nations to buy and sell
crude oil, ensuring equitable, transparent, and long-term trade.
Early petroleum oil trade treaties
Trade agreements for crude oil date back to the first decade of the twentieth century. One
of the first contracts for the trade of crude oil was the "Red Line Agreement," which was
signed in 1928 by a consortium of international oil companies, including Standard Oil of
California (now Chevron), Anglo-Persian Oil Company (now BP), and Royal Dutch
Shell.
The Iraq Petroleum Company (IPC) was created as a vehicle for developing the region's
oil resources under the Red Line Agreement, with the goal of dividing the Middle East's
oil reserves among the participating companies. The agreement was named after the red
line drawn on a map to delineate the IPC's coverage region5.
The "Treaty of San Francisco" put an end to the Allies' occupation of Japan after World
War II and allowed Japan to import resources from the Middle East, including oil. As a
result, Japan is now among the biggest oil importers in the world.
In addition to these accords, the Organisation of the Petroleum Exporting Countries
(OPEC) was founded in 1960 to help oil-producing countries coordinate their policies
and negotiate better crude oil export prices. With its members now owning a sizeable
share of the world's oil reserves, OPEC has developed into a key role in the global oil
market since that time6.
 HISTORICAL OVERVIEW
A- FORMATION OF INTERNATIONAL CRUDE OIL TRADE GROUPS
International groups play a critical role in ensuring the stability and equity of the global
crude oil trade. The Organisation of Petroleum Exporting Countries (OPEC) was
established in 1960 to provide fair and stable prices for petroleum producers as well as a
consistent supply of petroleum to countries that use it. In order to ensure energy security,
economic growth, and environmental sustainability through cooperation with its 30
members, largely from industrialised nations, the International Energy Agency (IEA) was
established in 1974. With their futures markets, pricing, and data services, the
Intercontinental Exchange (ICE) and Platts are also key players in the crude oil industry.
There are a number of international agreements and treaties that govern the discovery,
extraction, and trade of crude oil. Crude oil is one of the natural resources that coastal
states have sovereignty over within 200 nautical miles of their shorelines under the

4
Brownlie I (2012), Principles of Public International Law. Oxford University Press.

5
Meyer, T,(2012), Crude Oil, the Law and the Market: “A Legal and Economic Analysis”. Oxford: Oxford
University Press.
6
Ederington, J, & McCalman, P. (2009). The Importance of International Trade Law to the World
Petroleum Market. Journal of World Energy Law & Business, 2(1), 25-40
UnitedUNCLOS, or the Convention on the Law of the Sea. According to the United
Nations Framework Convention on Climate Change (UNFCCC), crude oil is one of the
fossil fuels that contribute to carbon emissions. The Deepwater Horizon oil disaster in
2010 led to the establishment of stricter rules and enforcement procedures for oil spills.
The World Trade Organisation (WTO) is in charge of enforcing the General Agreement
on Tariffs and Trade (GATT) and the Agreement on Subsidies and Countervailing
Measures (Aoscm), which are the international trade laws that control the trade in crude
oil. OPEC and the IEA work together to encourage stability and cooperation on the
international oil market through price and output management. Overall, these institutions
and agreements are essential to preserving the openness, equity, and stability of the world
crude oil trade.
Domestic laws: Each country has its own set of rules and regulations regulating the
extraction, transportation, and selling of crude oil. These can include requirements for
licensing and permits, environmental and safety laws, and taxation rules.
Contractual agreements: Crude oil is commonly traded via long-term contracts between
buyers and sellers, which include price, transportation, quality, and liability conditions.
The oil industry has established a number of voluntary crude oil trade standards and
guidelines, including those relating to quality control, environmental and safety
procedures, and ethical behavior7.
Sanctions: For political or economic reasons, various countries and international
organizations may impose sanctions on other countries or entities engaged in the crude
oil trade. Limitations on trade, investment, and money transactions are instances of these.
different crude oil trade legislation laws from multiple countries
Each country's crude oil trade laws and regulations are unique. Here's a rundown of a few
important examples:
The Energy Policy and Conservation Act, which governs crude oil exports, and the
Foreign Corrupt Practises Act, which outlaws bribery and other unethical business
practises abroad, are two examples of laws and regulations governing the trading of crude
oil in the US.
In the United Kingdom, there is both the Oil taxes Act, which governs the taxes of
revenues from oil and gas production, and the Oil and Gas Authority, which oversees
offshore exploration and production.
The exploration, production, and sale of crude oil are all governed by laws and
regulations in Saudi Arabia, a significant producer of crude oil. Examples include the
General Investment Authority, which oversees foreign investment in the oil business, and
the Saudi Arabian Oil Business Law, which administers the nation's oil industry.
The Oil and Gas Law, which rules the exploration and production of oil and gas
resources, and the Federal Law on International Commerce, which governs international
oil and gas commerce, are two laws and regulations that guide crude oil production and
export in Russia.
In Nigeria, crude oil trade laws and regulations include the Petroleum Act, which governs
crude oil exploration, production, and sale, and the Nigerian National Oil Corporation
Act, which established the national oil company.

7
Lundin, L. (2019). The Evolution of International Oil Pricing Mechanisms: From Administered Prices to Market
Prices. Oxford: Oxford University Press.
The Foreign Trade Law, which governs import and export trade, and the Regulations on
the Administration of Crude Oil Processing, which govern crude oil refining and selling,
are both in existence in China.
The European Union regulates crude oil trade through a variety of laws and regulations,
including the Energy Taxation Directive, which controls the taxation of energy products,
and the EU Emissions Trading System, which creates a cap-and-trade system for
greenhouse gas emissions.
The National Energy Board Act, which regulates the export of such crude oil and natural
gas, and the Canadian Environmental Protection Act, which regulates the environmental
effects of oil and gas activities, are two examples of rules and regulations governing the
trading of crude oil in Canada.
Iran: Oil and gas exploration, production, and sales are governed by the Petroleum
Industry Law, and the Iran Petroleum Contracts specify the conditions for international
oil and gas investment.
The Iraqi National Oil firm Law established the national oil firm, and the Oil and Gas
Law governs its exploration, production, and sale in Iraq.
Venezuela has crude oil trade rules and regulations, such as the Hydrocarbons Law,
which regulates hydrocarbon exploration, production, and sale, and the National Oil
Corporation Law, which created the national oil company8.
Trade agreements between countries or regional organizations, as well as sanctions and
other political or economic variables, can all have an impact on crude oil trade laws.
Understanding the relevant laws and regulations is critical in order to operate lawfully
and effectively in the crude oil trade, which is a complex and highly regulated industry.

 INTERNATIONAL TRADE LAW FRAMEWORK

A- The worth of international and regional crude oil trade agreements
By establishing the terms and conditions for the exchange of crude oil between nations
and regions, bilateral and regional agreements play an essential part in crude oil trade.
Bilateral agreements are between two countries, whereas regional agreements are
between several countries in the same area. These agreements address a variety of topics,
including tariff reduction, investor protection, and technological collaboration.
Bilateral and regional agreements in the context of crude oil commerce can help to
guarantee stable and predictable conditions for the exchange of crude oil. They can set
crude oil pricing guidelines, define delivery conditions, and include dispute resolution
provisions9.
Furthermore, such agreements can enable countries to share technological knowledge and
experience, leading to advancements in crude oil production, transportation, and
refining10.
Furthermore, regional agreements can help to integrate regional oil markets and improve
country collaboration, resulting in increased crude oil trade efficiency and
competitiveness11.
8
Tamvakis, M. (2018), The Crude Oil Industry: The Commodity Economics of Crude Oil. Abingdon:
Routledge
9
Stevens, P. (2018), “The Oil Road: Journeys from the Caspian Sea to the City of London”
10
Serra, P., & Escribano, G. (2019), Trade Agreements and the Petroleum Industry, Journal of International
Economics, 120, 142-156.
11
"The Value of International Oil Agreements" by Frank A. Wolak, published in The Energy Journal.
Overall, bilateral and regional agreements shape crude oil trade terms and conditions and
can help to guarantee the stability, predictability, and efficiency of crude oil exchanges
between nations and regions.
International crude oil commerce regulations for export and import
Export and import regulations are critical in the international commerce of crude oil.
They are intended to guarantee the safe, long-term, and transparent movement of crude
oil between countries.
In order to meet domestic demand, safeguard regional economies, and advance fair and
sustainable trade, both importing and exporting countries must impose laws and
restrictions on one another. Tariffs, quotas, and licencing requirements may be included
in import regulations, whereas export laws may include export quotas, taxes, and
licencing requirements. These regulations may also be used to control costs, promote
domestic refining capacity, or enhance energy security. Setting international standards
and encouraging cooperation in the regulation of the crude oil trade are major roles
played by international organisations like the WTO and OPEC. In the end, these
regulations are essential to maintaining fair and transparent crude oil trade between
nations and promoting economic development.

 KEY LEGAL ISSUES IN INTERNATIONAL TRADE

A- TARIFFS ON IMPORTED PETROLEUM AND NON-TARIFF OBSTACLES
There are two types of trade obstacles that have the potential to influence international
crude oil commerce: tariffs and non-tariff barriers (NTBs).
Tariffs are taxes levied by the importing nation on imported products. Tariffs in crude oil
commerce can raise the cost of importing crude oil, making it more expensive for the
importing country. This may reduce demand for crude oil and have an effect on the
profitability of exporting countries. Tariffs can also be used to safeguard domestic crude
oil output while improving energy security.
Non-tariff barriers are non-tax measures that can stymie international commerce.
Technical standards, sanitary and phytosanitary measures, and licensing regulations are
examples of non-tariff barriers in the crude oil trade. These safeguards can be used to
safeguard domestic businesses while also supporting health and safety standards. They
can, however, obstruct international commerce and raise the cost of importing crude oil.
Tariffs and non-tariff barriers can both have an impact on the flow and cost of crude oil
commerce between countries. While they can be used to protect domestic interests and
support safety and health standards, they can also stymie international commerce and
harm exporting and importing countries' economic interests12.
In the worldwide trade of crude oil, intellectual property rights are protected.
B- Intellectual property rights (IPR) protection
To begin, intellectual property laws may safeguard patented methods or processes used in
crude oil exploration, extraction, refining, or distribution. Companies that developed
these technologies may have exclusive rights to use them, giving them a competitive edge
in the market.
Second, in the crude oil industry, trademarks and branding are critical, with businesses
frequently relying on their brand name to distinguish themselves from rivals. It is critical

12
"International Trade in Crude Oil: Legal and Regulatory Issues", Rafael Leal-Arcas and Anisah Hassan".
to protect these trademarks so that customers are not led astray into purchasing
counterfeit products13.
Third, in the crude oil business, especially in exploration and extraction, trade secrets are
critical. Companies spend a lot of money developing proprietary methods for finding and
extracting oil reserves, which can give them a significant competitive edge. Protecting
these trade secrets can assist in preventing competitors from gaining access to this
valuable knowledge.
Several international treaties regulate the protection of intellectual property, which is
crucial in the crude oil industry. One prestigious organisation that significantly affects
intellectual property services, regulations, information, and collaboration is the World
Intellectual Property Organisation (WIPO). This group promotes the preservation of
intellectual property rights around the world and manages many international treaties
relating to intellectual property, notably those that concern the crude oil industry. These
agreements encourage information sharing and industrial innovation while supporting the
protection and observance of intellectual property rights. The Berne Convention for the
Protection of Literary and Artistic Works, the Madrid Agreement for International
Trademark Registration, and the Patent Cooperation Treaty are all under the control of
WIPO.
C. process for resolving commercial or crude oil disputes
Dispute resolution mechanisms are essential in international trade and crude oil
transactions to help parties in resolving conflicts. There are several methods to resolve
disputes in these areas:
Negotiation: The first step of dispute resolution in which parties attempt to reach an
agreement through discussions and compromise.
Through mediation, a neutral third party helps the parties come to a fair agreement. The
mediator assists the parties in their negotiations rather than making a decision for them.
Arbitration is the process by which a neutral third-party arbitrator or group of arbitrators
hears both sides of a dispute and renders a binding decision. The judgment is legally
binding under international law14.
Litigation is a judicial procedure that takes place in a court of law. It is a more formal and
expensive procedure than the previous dispute resolution mechanisms described.
Contracts between parties in foreign trade and crude oil transactions frequently include
dispute resolution clauses that specify which dispute resolution method will be used if a
dispute arises. Arbitration and litigation are two of the most common ways for these
conflicts to be resolved. The technique chosen will be decided by the facts of the
disagreement, existing contractual agreements, and the parties' preferences15.


ENVIRONMENTAL AND SUSTAINAIBILITITY CONSIDERATIONS IN
INTERNATIONAL CRUDE OIL TRADE
A.THE IMPACTS OF CRUDE OIL TRADE ON THE ENVIRONMENT AND
THE HUMAN BODY
13
World Trade Organization. (2022), Tariffs: Applied Tariffs: Petroleum Oils, Crude. Retrieved from
https://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm.
14
United States International Trade Commission. (2022), Harmonized Tariff Schedule of the United States,
https://hts.usitc.gov/current.
15
Konoplyeva, A., & Ouss, A. (2020). A Review of Non-Tariff Measures Affecting Trade in Petroleum and
Petroleum Products. Journal of International Trade Law and Policy.
Crude oil transit has serious environmental and health consequences in both the countries
where the oil is extracted and the countries where it is refined and used. Some of these
impacts are as follows:
Climate change: The use of fossil fuels, such as crude oil, contributes greatly to
greenhouse gas pollution, which contributes to climate change.
Air pollution: In the process of refining petroleum oil and burning it, a number of air
pollutants, including particles, sulfur dioxide, and nitrogen oxides, can be released into
the atmosphere. These pollutants contribute to an increased risk of developing respiratory
and cardiovascular illnesses. Oil spills can contaminate water sources, endangering
aquatic habitats as well as the health of people and animals that depend on them.
Oil extraction has the potential to degrade soil, cause deforestation, and disrupt local
habitats and animals16.
Effects on workers' health: Workers engaged in crude oil extraction, refining, and
transportation are at risk of being subjected to hazardous compounds and substances,
which can cause a variety of health issues, including respiratory diseases and cancer.
Overall, the environmental and health repercussions of crude oil trade emphasize the
need for more sustainable and cleaner energy sources, as well as improved oil industry
control and monitoring, to mitigate the negative effects on people and the environment.
International environmental treaties and crude oil trade regulations17
Numerous international agreements and pieces of legislation have been created in order
to safeguard the environment and reduce the hazards associated with the trading of crude
oil. These legislation include the International Convention for the Prevention of Pollution
from Ships (MARPOL), the International Oil Pollution Compensation Funds (IOPC
Funds), and the Oil Pollution Act of 1990 (OPA 90), which offer compensation to oil
spill victims. Additionally, the United Nations Convention on the Law of the Sea
(UNCLOS) establishes national obligations and rights with regard to ocean use, and the
International Maritime Organisation (IMO) has developed standards for secure oil
transport. These measures promote environmentally responsible growth while reducing
the likelihood of oil leaks.
The Paris Agreement also establishes targets for lowering greenhouse gas emissions
brought on by the usage of fossil fuels like crude oil in order to slow down global
warming. These laws and agreements enhance long-term development, encourage
environmental responsibility, and lessen the possibility of oil spills.

B. LONG-TERM GROWTH AND CORPORATE SOCIETAL

RESPONSIBILITY18
It is important to take into account sustainable development and social responsibility as
well when conducting business in the crude oil industry. This is since the crude oil trade
has a significant effect on both the natural world and the communities where it operates.
Companies involved in the trading of petroleum oil can contribute to long-term
development and to the fulfillment of their corporate social responsibility obligations by
engaging in the following practices:
16
Gholamreza Ebrahimian and Hamed Mohammadi, The Journal of Cleaner Production,
“Environmental Impacts of Crude Oil Transportation: A Life Cycle Assessment Approach".
17
International Energy Agency. (2022), World Energy Outlook 2021, https://www.iea.org/reports/world-
energy-outlook-2021.
18
Elkington, J. (1998), Cannibals with Forks: “The Triple Bottom Line of 21st Century Business”
Environmental impact assessments: Before starting a company, thorough environmental
impact assessments can be performed to find and mitigate potential environmental risks
and impacts.
Stakeholder engagement: Businesses can work with local communities, Indigenous
peoples, and other stakeholders to better understand and resolve their concerns and needs.
Reduced greenhouse gas emissions can be achieved by improving energy efficiency,
utilizing renewable energy sources, and decreasing flaring19.
Spill prevention and response: Businesses can invest in spill prevention measures such as
improved technology and employee training, as well as have a solid incident response
strategy in place.
Biodiversity conservation: By preserving sensitive ecosystems and wildlife habitats,
businesses can help to conserve biodiversity in the areas where they work.
Human rights: Businesses can ensure that employees', local communities', and
Indigenous peoples' rights are honored in all aspects of their operations.
Companies can report on their progress toward sustainability goals and be open about
their environmental and social performance20.
Companies can minimize their environmental and social impacts while also contributing
to the industry's long-term viability and success by promoting sustainable development
and corporate social responsibility in the crude oil trade21.
The impact of technical advancements on crude oil trade.
 FUTURE DEVELOPMENTS
A- IMPACT OF TECHNOLOGICAL ADVANCEMENTS
Technological advancements have had a significant impact on crude oil commerce in
several ways. The following are some of the most important effects:
Exploration and production: Advances in exploration technology, such as seismic
imaging and drilling techniques, have allowed oil companies to locate and extract oil
from previously inaccessible or uneconomic reserves. This has boosted global oil supply
while lowering prices.
Transportation: Technological advancements have also had a significant effect on the
transportation of crude oil. Oil tanker development has decreased the cost of transporting
oil over long distances. Furthermore, the construction of pipelines and train networks has
opened up new transportation routes, increasing the accessibility of crude oil22.
Refining: Technological advances in refining have enabled refineries to handle heavier
and lower grade crude oils that were previously considered unviable. This has increased
the supply of crude oil available for refining while also increasing the efficiency of
refining operations.
Safety and environmental impact: Technological advancements have improved crude oil
commerce safety while decreasing environmental impact. For example, automated safety
systems on tankers and pipelines have reduced the risk of spills and leaks, while
improved monitoring and response technologies have allowed for quicker and more
effective incident reaction.
19
Eccles, R. G, & Serafeim G,“The Performance Frontier: Innovating for a Sustainable Strategy”.
20
Freeman, R. E, “Strategic Management: A Stakeholder Approach. Pitman”.
21
Mackey, J, Sisodia R & George B, Conscious Capitalism, “New Preface by the Authors: Liberating the
Heroic Spirit of Business”.
22
United States Energy Information Administration, “Technically Recoverable Shale Oil and Shale Gas
Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States”.
Price discovery has become more efficient in the crude oil trade since the advent of
computerized trading platforms and algorithms. This has increased transparency while
decreasing market participants' pricing impact.
Overall, technological advancements have aided the growth and evolution of the crude oil
trade, enabling the industry to increase production, reduce costs, and improve safety and
environmental impact. However, technological developments have created new
challenges, such as cybersecurity risks and the need for ongoing R&D investments23.

 CONCLUSION
To summarize, crude oil international commerce law is complex and multifaceted.
International agreements and regulations have been established to address environmental
and social concerns related to crude oil trade, and companies are increasingly being held
accountable for their actions in this regard. Technological progress has had a significant
impact on the crude oil trade, increasing the accessibility and effectiveness of production,
shipping, refining, and safety measures. On the other hand, technological advancements
have introduced new risks and challenges that must be managed carefully 24. The
international community must cooperate to promote sustainable development and
corporate social responsibility in the crude oil trade as the demand for crude oil increases
while also making sure that the legal framework is current and useful in addressing new
problems and challenges25.

23
",David G. Tuerck, Journal of Energy and Development, “The Impact of Technological Change on Crude
Oil Productiont”
24
O'Sullivan, M. (2017), “The Levelling: What's Next After Globalization. PublicAffairs”
25
Klare M. T, “The Race for What's Left: The Global Scramble for the World's Last Resources.
Metropolitan Books”