Oil independence will reshape world

Published 8:23 pm Thursday, August 1, 2013

Every president since Richard Nixon has talked about energy independence — breaking the petroleum stranglehold the Middle East holds on our economy. But it’s President Barack Obama, no friend to drilling, who might actually see it happen.

Here’s an interesting question: What happens in the Middle East when we no longer ship tankers full of cash to Saudi Arabia, Qatar, the United Arab Emirates and other countries?

We don’t really know. But we can and should make some guesses.

Writing in the Boston Globe recently. Thanassis Cambanis of the Century Institute said, “the energy market is a linchpin of the world order, and any big shift is likely to have costs to stability. Some analysts have warned that America’s growing oil production will create a glut that lowers prices, eating up the profits of oil countries and destabilizing their regimes.”

Oil prices will drop as the current American boom continues, the laws of economics say. And that means oil-producing countries will face shortages of cash.

“It’s easy to imagine how destabilizing that could be for a natural-resource power like Russia, for the monarchs of the Persian Gulf, or for the dictators in Central Asia,” Cambanis said. “No matter how distasteful their rule, the prospect of an unruly transition, or worse still, a protracted conflict, in any of those countries could cause havoc.”

Those countries are watching the U.S. oil and gas boom closely.

“Prince Alwaleed bin Talal, the billionaire Saudi Arabian investor, has warned that his country’s oil-dependent economy is increasingly vulnerable to competition from the US shale revolution, setting him at odds with his country’s oil ministry and OPEC officials,” the Financial Times reported on Tuesday. “In an open letter addressed to Ali Naimi, the Saudi oil minister, the prince called on the government to accelerate plans to diversify the economy.”

Saudi Arabia is the world’s largest crude exporter, with sales of $336 billion each year.

Cambanis points out that these regimes are all autocratic and, to varying degrees, oppressive. Few tears would be shed over the Saudi royal family. But a destabilized Middle East, particularly in the midst of a cash crunch, would be unpredictable.

“In the long term, this is not necessarily a bad thing: Weakening oppressive or corrupt governments could ultimately be beneficial for the people of those countries,” he said. “And a shift in the balance of power away from the Gulf monarchies of OPEC and toward the United States could have a democratizing effect. In any event, though, lower oil prices and a dynamic energy market make the current stable order unpredictable.”

The effect of the U.S. oil and gas boom will be felt elsewhere, as well.

We police the world’s shipping lanes now — in large part, to protect the oil tankers our economy depends on. We may no longer see the need to do that. China could then step in and build up its navy to protect the tankers it still needs.

Energy independence is a worthy goal. But as we approach it, we might want to think about what comes next.