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What Happens When America No Longer Needs Middle East Oil?
If you trace your finger on a globe northward over the pole from the U.S. Navys main naval base on the West Coast, youll discover that the entrance to the Persian Gulf is roughly on the opposite side of the world. The Gulf is so far away that prior to World War Two, few Americans thought there was any reason to visit the sparsely populated region, much less establish a permanent military presence there.
But after the war ended, world demand for oil surged while America gradually exhausted most of its easily-tapped domestic reserves. As U.S. oil companies joined the global search for new sources, geologists came to believe that two-thirds of the worlds exploitable oil reserves and one-third of its natural gas lay under a handful of states bordering on the Persian Gulf. As a result, the security of Gulf oil states became of paramount concern to U.S. military planners.
Now, that could be changing. The latest edition of the International Energy Agencys World Energy Outlook says America will surpass Saudi Arabia as the biggest oil producer in 2020 and become self-sufficient in energy by 2030 as new drilling technologies, alternative fuels and declining consumption reduce the need to import oil. The U.S. may continue to use oil from Canada, Venezuela and other nearby countries if prices are competitive, but the IEA predicts Asian nations will end up consuming 90% of the oil produced in the Persian Gulf.
Thats good news for America, however it could have ramifications that are not good for the rest of the world. If the United States no longer needs access to Middle East oil under any foreseeable circumstances, then the priority Washington assigns to the region will plummet. Many analysts believe that a unified global pricing structure for fossil fuels will keep America engaged, but with U.S. spot prices for natural gas currently running at a fraction of what the fuel costs in Europe and East Asia, it appears global pricing isnt so integrated after all.
Even if it were, Washingtons options for insulating U.S. energy markets from global price swings are multiplying as domestic production grows. If you know the history of global oil in the years before World War Two, then you realize there is nothing new about America enjoying energy independence as Asia worries about its own needs. What definitely is new, though, is that in the near future there might be no western nation capable of or willing to police the Persian Gulf.
Britain carried that burden from the late 1700s until World War Two, but its circumstances were so diminished in the wars aftermath that it soon exited all of its military bases East of Suez. As Britain receded in the Middle East, Americas role there grew especially after successive energy crises engineered by members of the Organization of Petroleum Exporting Countries alerted Washington to its growing dependence on foreign oil. So the Pentagon became accustomed to assuring the security of oil passing through the Strait of Hormuz, maintaining a continuous naval presence in and around the Gulf while periodically deploying ground forces to protect fragile oil-producing states.
Nothing lasts forever, though, and now a combination of energy independence and economic necessity may lead Washington to become more insular in its outlook, the same way London did after the war. With less need for foreign oil and an increasingly urgent requirement to rein in federal borrowing, it doesnt take a genius to figure out where the political system will be inclined to cut spending. It will be in distant places that have ceased having an impact on how elections turn out.
With the prospect of OPEC-induced energy shortages off the table, at least in America, political leaders are sure to begin asking why the U.S. Navy is carrying the burden of making sure China has secure sources of oil. The answers they get from Pentagon strategists arent likely to be well received in a nation where economic growth has slowed to a crawl due in no small part to Chinese mercantilism.
So theres a real possibility that Washington will go through the same East-of-Suez debate that London did in the 1960s. The Obama Administrations new Asia-Pacific military posture may be the first, tentative sign that America is losing its enthusiasm for securing Middle East oil supplies. Of course, everyone in the administration will vigorously reject any such interpretation. But just for fun, lets ask the question of who wins and who loses if America decides its had enough of being the policeman on the beat in the Persian Gulf.
(1) The biggest losers would be the Arab oil states grouped in the Gulf Cooperation Council, most of which are monarchies kept in power by a combination oil dollars and American military power. Despite their oil revenues, none of these countries except Saudi Arabia has the wherewithal to defend itself against military pressure from Iran if America leaves the stage or for that matter from Iraq, which has repeatedly laid claim to oil fields in Kuwait and other nearby states. The vacuum created by an American departure would force nations like Bahrain and Qatar to seek new military protectors, either by submitting to the influence of bigger regional powers or by reaching out to China.
(2)The second category of losers would be the economies of East Asia, which the International Energy Agency says will be the main consumers of Persian Gulf oil in the years ahead. China, Japan, South Korea and Taiwan are heavily dependent on the flow of oil passing through the Strait of Hormuz, and yet do little to assure that flow is not disrupted by local tensions. If America pulls out of the Gulf, the nations of East Asia will either have to play a bigger military role in the Middle East, or find other sources of oil. America might have sufficient new-found reserves of fossil fuel to supply Japan and South Korea in an emergency, but concern about access to Persian Gulf oil would undoubtedly exacerbate tensions over who owns contested oil reserves in the South China Sea and elsewhere.
(3) Israel too would likely be a big loser. Washington spends billions of dollars each year subsidizing the security of the Jewish state. The reason that isnt controversial even though Americans usually want to cut foreign aid ahead of every other type of federal spending is because it is hard to separate securing Israel from securing Middle East oil. The same U.S. military forces and programs that help protect Israel from Iranian missiles and Islamist terror groups also protect Arab oil-producing states. But if Americas role in securing the oil were to wane, it would be harder to ignore the cost of defending Israel, and that might force Jerusalem to become more self-sufficient.
There would be plenty of other losers too, from the nations that depend on a steady flow of Middle East oil to stabilize global energy prices to the shippers that count on the Fifth Fleet for protection to the local companies that help sustain U.S. forces in the region. No doubt about it, a lot of players dependent on Americas military presence in and around the Persian Gulf would be hurt if America went home. But there would be winners, too.
(4) One big winner would be Iran, because it would no longer find its regional pretensions blocked by Americas military. Although there are ethnic and religious differences separating Persians from their Arab neighbors on the western side of the Gulf, Irans big population and economic resources over time could come to dominate the region. Homegrown terrorist groups might also thrive in Americas absence, although Arab governments could feel freer to deal with them in the absence of American concepts about freedom and justice. The biggest winner of all, though, might be Chinas Peoples Liberation Army, which would have a compelling reason for extending its presence outside of East Asia in order to secure the Middle Kingdoms most important foreign sources of petroleum.
If youve stayed with me up this point, youre probably thinking something like, Gee, this energy independence thing sure has a lot of potential downside. Well youre right if it becomes an excuse for pulling the joint force out of the Persian Gulf. But that doesnt mean it wont happen, because despite all the possible drawbacks, U.S. taxpayers would still benefit hugely from a scaling back of U.S. security commitments in the Middle East if that were accompanied by real self-sufficiency in energy. How much would they benefit? Potentially by a hundred billion dollars or more in annual budget savings as the military was downsized for a more limited role on the far side of the world.
If that sounds fanciful, then go read what the International Energy Agency says about Americas rapidly improving energy outlook and try to keep in mind that the need for Persian Gulf oil is the main reason why the U.S. military showed up in the Middle East after having almost no role there for the first two centuries of the Republics history.
What Happens When America No Longer Needs Middle East Oil? - Forbes
I believe the article is spot on. Whats your take ?
If you trace your finger on a globe northward over the pole from the U.S. Navys main naval base on the West Coast, youll discover that the entrance to the Persian Gulf is roughly on the opposite side of the world. The Gulf is so far away that prior to World War Two, few Americans thought there was any reason to visit the sparsely populated region, much less establish a permanent military presence there.
But after the war ended, world demand for oil surged while America gradually exhausted most of its easily-tapped domestic reserves. As U.S. oil companies joined the global search for new sources, geologists came to believe that two-thirds of the worlds exploitable oil reserves and one-third of its natural gas lay under a handful of states bordering on the Persian Gulf. As a result, the security of Gulf oil states became of paramount concern to U.S. military planners.
Now, that could be changing. The latest edition of the International Energy Agencys World Energy Outlook says America will surpass Saudi Arabia as the biggest oil producer in 2020 and become self-sufficient in energy by 2030 as new drilling technologies, alternative fuels and declining consumption reduce the need to import oil. The U.S. may continue to use oil from Canada, Venezuela and other nearby countries if prices are competitive, but the IEA predicts Asian nations will end up consuming 90% of the oil produced in the Persian Gulf.
Thats good news for America, however it could have ramifications that are not good for the rest of the world. If the United States no longer needs access to Middle East oil under any foreseeable circumstances, then the priority Washington assigns to the region will plummet. Many analysts believe that a unified global pricing structure for fossil fuels will keep America engaged, but with U.S. spot prices for natural gas currently running at a fraction of what the fuel costs in Europe and East Asia, it appears global pricing isnt so integrated after all.
Even if it were, Washingtons options for insulating U.S. energy markets from global price swings are multiplying as domestic production grows. If you know the history of global oil in the years before World War Two, then you realize there is nothing new about America enjoying energy independence as Asia worries about its own needs. What definitely is new, though, is that in the near future there might be no western nation capable of or willing to police the Persian Gulf.
Britain carried that burden from the late 1700s until World War Two, but its circumstances were so diminished in the wars aftermath that it soon exited all of its military bases East of Suez. As Britain receded in the Middle East, Americas role there grew especially after successive energy crises engineered by members of the Organization of Petroleum Exporting Countries alerted Washington to its growing dependence on foreign oil. So the Pentagon became accustomed to assuring the security of oil passing through the Strait of Hormuz, maintaining a continuous naval presence in and around the Gulf while periodically deploying ground forces to protect fragile oil-producing states.
Nothing lasts forever, though, and now a combination of energy independence and economic necessity may lead Washington to become more insular in its outlook, the same way London did after the war. With less need for foreign oil and an increasingly urgent requirement to rein in federal borrowing, it doesnt take a genius to figure out where the political system will be inclined to cut spending. It will be in distant places that have ceased having an impact on how elections turn out.
With the prospect of OPEC-induced energy shortages off the table, at least in America, political leaders are sure to begin asking why the U.S. Navy is carrying the burden of making sure China has secure sources of oil. The answers they get from Pentagon strategists arent likely to be well received in a nation where economic growth has slowed to a crawl due in no small part to Chinese mercantilism.
So theres a real possibility that Washington will go through the same East-of-Suez debate that London did in the 1960s. The Obama Administrations new Asia-Pacific military posture may be the first, tentative sign that America is losing its enthusiasm for securing Middle East oil supplies. Of course, everyone in the administration will vigorously reject any such interpretation. But just for fun, lets ask the question of who wins and who loses if America decides its had enough of being the policeman on the beat in the Persian Gulf.
(1) The biggest losers would be the Arab oil states grouped in the Gulf Cooperation Council, most of which are monarchies kept in power by a combination oil dollars and American military power. Despite their oil revenues, none of these countries except Saudi Arabia has the wherewithal to defend itself against military pressure from Iran if America leaves the stage or for that matter from Iraq, which has repeatedly laid claim to oil fields in Kuwait and other nearby states. The vacuum created by an American departure would force nations like Bahrain and Qatar to seek new military protectors, either by submitting to the influence of bigger regional powers or by reaching out to China.
(2)The second category of losers would be the economies of East Asia, which the International Energy Agency says will be the main consumers of Persian Gulf oil in the years ahead. China, Japan, South Korea and Taiwan are heavily dependent on the flow of oil passing through the Strait of Hormuz, and yet do little to assure that flow is not disrupted by local tensions. If America pulls out of the Gulf, the nations of East Asia will either have to play a bigger military role in the Middle East, or find other sources of oil. America might have sufficient new-found reserves of fossil fuel to supply Japan and South Korea in an emergency, but concern about access to Persian Gulf oil would undoubtedly exacerbate tensions over who owns contested oil reserves in the South China Sea and elsewhere.
(3) Israel too would likely be a big loser. Washington spends billions of dollars each year subsidizing the security of the Jewish state. The reason that isnt controversial even though Americans usually want to cut foreign aid ahead of every other type of federal spending is because it is hard to separate securing Israel from securing Middle East oil. The same U.S. military forces and programs that help protect Israel from Iranian missiles and Islamist terror groups also protect Arab oil-producing states. But if Americas role in securing the oil were to wane, it would be harder to ignore the cost of defending Israel, and that might force Jerusalem to become more self-sufficient.
There would be plenty of other losers too, from the nations that depend on a steady flow of Middle East oil to stabilize global energy prices to the shippers that count on the Fifth Fleet for protection to the local companies that help sustain U.S. forces in the region. No doubt about it, a lot of players dependent on Americas military presence in and around the Persian Gulf would be hurt if America went home. But there would be winners, too.
(4) One big winner would be Iran, because it would no longer find its regional pretensions blocked by Americas military. Although there are ethnic and religious differences separating Persians from their Arab neighbors on the western side of the Gulf, Irans big population and economic resources over time could come to dominate the region. Homegrown terrorist groups might also thrive in Americas absence, although Arab governments could feel freer to deal with them in the absence of American concepts about freedom and justice. The biggest winner of all, though, might be Chinas Peoples Liberation Army, which would have a compelling reason for extending its presence outside of East Asia in order to secure the Middle Kingdoms most important foreign sources of petroleum.
If youve stayed with me up this point, youre probably thinking something like, Gee, this energy independence thing sure has a lot of potential downside. Well youre right if it becomes an excuse for pulling the joint force out of the Persian Gulf. But that doesnt mean it wont happen, because despite all the possible drawbacks, U.S. taxpayers would still benefit hugely from a scaling back of U.S. security commitments in the Middle East if that were accompanied by real self-sufficiency in energy. How much would they benefit? Potentially by a hundred billion dollars or more in annual budget savings as the military was downsized for a more limited role on the far side of the world.
If that sounds fanciful, then go read what the International Energy Agency says about Americas rapidly improving energy outlook and try to keep in mind that the need for Persian Gulf oil is the main reason why the U.S. military showed up in the Middle East after having almost no role there for the first two centuries of the Republics history.
What Happens When America No Longer Needs Middle East Oil? - Forbes
I believe the article is spot on. Whats your take ?
