A region energetically changing

Changes in the global energy economy mean the Middle East becoming less important to the US, while China, Japan and India fill the gap.

The world energy situation is changing with astonishing rapidity:

Mexico is in the process of changing its petroleum laws and the constitution to permit foreign participation in oil, gas and electricity projects

Canadian oil sands production is increasing exponentially and will continue to do so. If the United States government refuses to approve a pipeline to the refineries in Texas the Chinese will be delighted to finance a pipeline to Vancouver and take all the oil Canada can supply.

The United States is in the middle of an energy revolution. New technologies, especially horizontal drilling ("fracking") has already led to natural gas self-sufficiency and similar techniques have increased domestic oil production by over two million barrels a day and rising. Federal dithering on approving additional pipelines has simply led to the movement of the oil by truck and rail. Soon the US will be entirely independent from Middle Eastern oil suppliers, which already only account for 13% of imports.

Environmental concerns have delayed similar developments in Europe, but they will in all likelihood be overcome and Europe will also enjoy a gas and perhaps oil boom.

Israel, of course, because of the offshore finds and new drilling techniques is self-sufficient in natural gas and may also be able to supply its petroleum needs in the not-distant future. Sometimes overlooked is the equally significant fact that, as of the completion of one more giant desalinization plant next year, it will also have abundant fresh water for the first time in history.

In geo-strategic terms what does all this frenetic activity mean for Israel? In the first place abundant domestic supplies of hydrocarbons is an obvious strategic plus, although it must not be forgotten that offshore oil and gas facilities are vulnerable to terrorist attack.

Keeping Gulf oil sources and supply routes open and accessible, which has dominated Western policy in the region since the the first oil price shock in the l970s will become less and less of a priority for the West. OPEC will be finished as a functioning cartel and oil prices will again be determined by market forces. This is already happening with natural gas prices in the US.

The influence of Russia will decline, along with its population. Right now, Russia has two strategic assets: abundant oil and gas for export and a large nuclear arsenal. At some point in the middle term it will be limited to the arsenal and thus, although immune to outside interference, its ability to exercise regional, much less international influence will be severely restricted. This includes the Middle East, where Putin is trying to fill the power vacuum being created by the retreat of the U.S.

The oil-rich countries of the Middle East will find their markets being restricted more and more to the Far East and South Asia, particularly India, Japan and China.

That, in turn, will mean that the influence of those countries, especially China, will increase as its regional economic importance increases.

Finally, the energy situation as well as geo-political factors such as the confrontation between the northern Shi'a arc dominated by Iran, and the southern Sunni arc dominated by Egypt and Saudi Arabia, continue their confrontation. An eventual nuclear weapons capability on the part of Iran will fundamentally affect this precarious balance, but to balance that the southern arc will increasingly include not just Egypt, Jordan and the states of the Arabian peninsula, but also Israel.

Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.

Published by Globes [online], Israel business news - www.globes-online.com - on October 22, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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