Monday, July 23, 2012

Changing oil equations in Middle East - Who will underwrite the Security?

An ONGC oil platform in sea
A big leap in the production of shale gas in US seems to rewrite the Oil & Gas equations in the Middle East. Until now gas flowing from this part of Asia was indispensible for US economy. This dependency relationship created a security framework in Middle-East underwritten by US. After all, open seas, continuous flow of oil & gas and a stable Middle-East was essential for the health of US economy.

Not any more, even if oil shocks will affect US economy, Middle-Eastern oil is no more indispensible. Increasing production from her shale fields, coupled with new energy efficient machines will enable US to reduce the dependency on Middle Eastern Oil. Reserves of Oil and Gas in Canadian shores as well as in the Brazilian offshore fields will make this position more secure.

If oil shocks won't affect US economy, she may be able to take vital policy changes in this area. She may no longer be compelled to support the regimes she doesn’t like. In other words US may no longer like to underwrite the Middle Eastern security alone.

This will create problems for other big oil and gas importers like China, India, Korea, Japan etc. Europe may have to hug Russia more tightly for energy. Unfortunately the prospectuses for shale gas booms in countries like India in the recent future simply doesn’t exist. Even if there are chances - people already started protesting against drilling shale gas in many European countries, availability of US technologies - like the case in China - for pumping shale gas may not come easily.

This means other countries - who are still desperately depend on Middle East oil - may be forced to contribute to a security framework which till now freely available to everyone. The question is how China, India, Korea, Japan etc will adapt themselves with this reality? In the face of Iranian crisis, continuing protests in Syria, Bahrain etc it may not come cheap.

Without much leverage over the regimes of Middle East and absence of any military resources in the area, will this oil thirsty economies of Asia will be able to sustain the current situation of open sea lines and security framework? In the era of political unrest, uncertainty, continuing crisis in Iran and Syria will these Countries be able to underwrite Middle Eastern security? Only time can tell.


Photo Courtesy: Wikipedia

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