Major threats for oil security in Persian Gulf region
Energy Security has become one of the major issues for national governments worldwide, especially since high oil prices, growing terrorism, and the apprehension of instability in oil-exporting regions such as Russia or the Middle East raised the question of supply security in many oil-exporting countries. Even though some states try to reduce their dependency on natural resources, oil and gas remain the pivotal energy carrier for a growing international economy. In his 2006 State of the Union address George Bush, president of the world’s largest oil consumer the United States stated that “breakthroughs on […] new technologies will help us reach another great goal: to replace more than 75 percent of our imports from Middle East by 2025. By applying the talent and technology of America, this country can dramatically improve our environment, move beyond a petroleum-based economy, and make our dependence on Middle Eastern oil a thing of the past” (United States Capitol, 2006). However, it is unlikely that this ambitious goal can be reached, in fact “projections show that 25 years from now it [United States] will import 70 percent of its oil. Our [United States] dependency is growing, and our dependency on Middle East oil is also growing. We [United States] will import 50 percent of our oil from the Middle East by 2025” (Bowman, 16. October 2003). In addition to the growing demand of the United States, other nations will increase their oil consumption in the near future. Particularly emerging nations such as China, India, or Brazil will contribute to increased oil consumption, rising from 83 million barrel per day in 2004 to 118 million barrels per day in 2030 (Energy Information Administration, 2007). In the face of this situation, it comes with no surprise that “the world is now entering a challenging period for energy supply, due to the limited resources and production problems now facing conventional (easily accessible) oil” (Energy Committee at the Royal Swedish Academy of Sciences, 14.10.2005). Therefore, oil supply security has become a priority in political agendas and given an “extreme dependence on supply from the Middle East holding more than 60 % of the global oil reserves” (Energy Committee at the Royal Swedish Academy of Sciences, 14.10.2005) this region has become a focus for oil importing countries. Since this region has witnessed a variety of wars, conflicts, terrorist attacks and other disruptions that caused large losses of oil supply (Horsnell, 2000, p. 2) security issues in the Persian Gulf have become a matter of international interest in order to secure the oil supply from this region. In the following this paper will analyze major security issues in the Persian Gulf Area; such are inter-state conflict, the unsolved Israel-Palestine question, terrorism, as well as the problem of under-investment and domestic instabilities in some of the most important countries within the region. Furthermore, this paper will outline possible impacts of these security issues on the economic security in the rest of the world.
Even though some countries are trying to reduce their dependency on resource imports oil and gas remain the most important energy sources, providing “close to 50 percent of global energy consumption” (Ayoob, 2006, p. 148). Given that 61 percent of the world’s proven reserves are located in the Middle East region (BP Statistical Review of World Energy, June 2008, p. 7), the significance of this area for the global energy security situation becomes obvious. Within the Middle East “the Persian Gulf region remains central to the global oil market and will become even more vital in the future” (Shibley & Hill, 2002) since some of the world’s largest oil producers are located in the Persian Gulf. It is estimated that Saudi Arabia’s reserves alone account for 21 percent of the world’s oil reserves. Iran and Iraq are each believed to hold 10 percent; the other Persian Gulf nations are estimated to hold from 6 to 8 percent. (BP Statistical Review of World Energy, June 2008, p. 6). Moreover, the same region holds the largest reserves of natural gas with a total share of more than 40 percent (BP Statistical Review of World Energy, June 2008, p. 22). Therefore, the Persian Gulf region is “indispensable to the health of industrial economies” (Ayoob, 2006, p. 148).
Aside from the world’s largest reserves, the Persian Gulf region is a guarantor for cheap and affordable oil since the exploration costs are significantly less than in other oil producing regions. It is assumed that the “average Persian Gulf production cost is $5 per barrel and North Sea (and Alaskan) production cost is $15 per barrel” (Chapman & Khanna Neha, 2001, p. 372). Moreover, the growing demand for oil, especially in emerging nations such as China or India discloses another significance of the Persian Gulf oil fields. Since “globalization and commoditization of the oil market have forced the oil producing countries to minimize their excess capacity in order to compete with each other. Hence, most oil-exporting countries have no significant spare production capacity, with the only exception of Saudi Arabia. No other country can produce an additional 1 – 1.5 Mb/d to offset lost oil supplies on a global scale” (Umbach, 2004, p. 144).
Yet, as already outlined, the global demand for oil will increase in the near future and even if countries such as Saudi Arabia are planning to increase their oil output, “that may be far from enough to meet the rising demand” (Mouwad, 06.08.2005). Therefore, oil will become even more valuable than it is today and the strategic importance of Persian Gulf as the region with the largest proven reserves and the largest oil producers will increase. Hence, “instability in Saudi Arabia, Iran and Iraq will have much greater impact on the global economy in the future than has been the case so far” (Ayoob, 2006, p. 149). Yet, if one considers the near past, it becomes evident that “major oil disruptions in the last decade originated from OPEC members outside the Middle East and elsewhere in the world” (Fattouh, 2007, p. 2). Furthermore, the region “did not witness any civil unrests or strikes such as those in Venezuela, successful militant attacks on oil installations as in Nigeria or tensed relations with importing countries as in the case of Russia [or…] any major disruption due to technical failures, hurricanes or weather related events” (Fattouh, 2007, p. 2). However, there are security issues that give causes for concerns for the international community.