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French Version

A world dependent on MENA energy imports

The U.S. and global economies will become steadily more reliant on the Gulf in particular
America can and must find substitutes for petroleum, but this will take decades

The election campaign is over and it is time for both parties, and the administration and the Congress, to be honest about U.S. and global dependence on energy imports.

The United States can and must find substitutes for petroleum, but this will take decades. In the interim, the U.S. and the global economy will actually become steadily more dependent on energy imports, and particularly on energy imports from the Gulf. The Department of Energy estimates that oil will account for some 39 percent of the world's energy consumption through 2015, and that the United States and its major trading partners in developing Asia will account for 60 percent of the increase in world demand through this period.

The Middle East and North Africa (MENA) region has some 63 percent of all the world's proven oil resources, and some 37 percent of its gas. In 2001, the Gulf alone had over 28 percent of all of the world's oil production capacity, and the entire MENA region had 34 percent. These reserves, and low incremental production costs, ensure the region will dominate increases in oil production through at least 2015. The U.S. Energy Information Agency (EIA) estimates that Saudi Arabia alone will account for 4.2 million barrels per day (mbpd) of the total increase, Iraq for 1.6 mbpd. Kuwait for 1.3 mbpd, and the UAE for 1.2 mbpd. These four countries account for 8.3 mbpd out of a worldwide total of 17.9 (46 percent). To put these figures in perspective, Russia will account for an increase of only 1.3 mbpd.

The International Energy Agency (IEA) estimates cover a longer period than those of the U.S. EIA. They predict that total conventional and non-conventional oil production will increase from 77 mbpd in 2002 to 121.3 mbpd in 2030. This is a total increase of 44.3 mbpd worldwide. The Middle East will account for 30.7 mbpd, or 69 percent of this total. The IEA also estimates that the rate of dependence on the Middle East will increase steadily after 2010 as other fields are depleted in areas where new resources cannot be brought on line. It estimates that 29 mbpd, or 94 percent of the total 31 mbpd increase in OPEC production between 2010 and 2030 will come from Middle Eastern members of OPEC.

This dependence will be easier to secure with a friendly and stable Iraq, but the U.S. has no choice. The EIA summarizes the trends in Gulf oil exports as follows in its International Energy Outlook for 2004, and it should be noted that its estimates are based on favorable assumptions about increases in other fuels like gas, coal, nuclear and renewables, and favorable assumptions about increases in conversion and energy efficiency: While quantified estimates of export dependence are uncertain, it's clear that it would take a massive breakthrough(s) in technology or discoveries of reserves outside the MENA region to change these trends.

Moreover, both the military security of the MENA region, and its ability to achieve the necessary investment in new energy production are critical to U.S. strategic interests. For example, some 40 percent of all world oil exports now pass daily through the Strait of Hormuz and both EIA and IEA projections indicate this total will increase to around 60 percent by 2025-2030.

The IEA projections, for example, indicate that Middle Eastern exports will total some 46 mbpd by 2030 and represent more that two-thirds of the world total. This means that the daily traffic in oil tankers will increase from 15 mbpd and 44 percent of global interregional trade in 2002, to 43 mbpd and 66 percent of global interregional trade in 2030. This means the daily traffic in liquefied natural gas (LNG) carriers will increase from 28 billion cubic meters (bcm) and 18 percent of global interregional trade in 2002, to 230 carriers and 34 percent of global interregional trade in 2030. The IEA does, however, estimate that these increases would be some 11 percent lower if oil prices remained consistently high in constant dollars.

The International Energy Agency also estimates that imports will rise from 63 percent of total OECD demand for oil in 2002 to 85 percent in 2030, some $3 trillion dollars must be invested in the oil sector from 2003 to 2030 to meet world demand for oil, and something approaching half of this total must be invested in the Middle East. Some $234 billion will be required for tankers and oil pipelines, and again, a substantial amount must go to the MENA area.

Under most conditions, the normal day-to-day destination of MENA oil exports is strategically irrelevant. Oil is a global commodity, which is distributed to meet the needs of a global market based on process bid by importers acting in global competition. With the exception of differences in price because of crude type and transportation costs, all buyers compete equally for the global supply of available exports, and the direction and flow of exports changes according to marginal price relative to demand. As a result, the percentage of oil that flows from the MENA region to the United States under normal market conditions has little strategic or economic importance. If a crisis occurs, or drastic changes take place in prices, the U.S. will have to pay the same globally determined price as any other nation, and the source of U.S. imports will change accordingly. Moreover, the U.S. is required to share all imports with other OECD countries in a crisis under the monitoring of the IEA.

The size of direct imports of petroleum is also only a partial measure of strategic dependence. The U.S. economy is dependent on energy-intensive imports from Asia and other regions, and what comes around must literally go around. While the EIA and IEA do not make estimates of indirect imports of Middle Eastern oil in terms of the energy required to produce the finished goods, the U.S. imports them from countries that are dependent on Middle Eastern exports. Analysts guess that they would add at least 1 mbpd to total US oil imports. To put this figure in perspective, direct U.S. oil imports increased from an annual average of 7.9 mbpd in 1992 to 11.3 mbpd in 2002, and 2.6 mbpd worth of U.S. petroleum imports came directly from the Middle East in 2002. If indirect U.S. imports, in the form of manufactured goods dependent on imports of Middle Eastern oil were included, the resulting figure might well be 30-40 percent higher than the figure for direct imports.

In short, the practical problem for the foreseeable future is how to ensure that MENA states can obtain the more than $3 trillion the IEA estimates they will need to expand energy production capacity and exports, and to protect growing U.S. and global dependence on MENA energy exports, particularly from the Gulf. There are no meaningful near and mid-term options that will allow the U.S. to reduce dependence in any meaningful strategic sense at anything like today's market prices for energy. The U.S. must shape its security policies accordingly, regardless of what happens in Iraq. It must also shape them in light of U.S. dependence on a global economy - not simply direct U.S. dependence on oil imports.

Dr. Anthony H. Cordesman holds the Arleigh Burke Chair in Strategy at the Center for Strategic and International Studies in Washington,D.C. and is Co-Director of the Center's Middle East Program. He is also a Professor of National Security Studies at Georgetown University. He directs the assessment of global military balance, strategic energy developments, and CSIS' Dynamic Net Assessment of the Middle East. This analysis is printed with permission in The Daily Star

Beirut 20-12-2004
Anthony H. Cordesman
The Daily Star

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