What Happens When America No Longer Needs Middle East Oil?

From Forbes

By Loren Thompson

If you trace your finger on a globe northward over the pole from the U.S. Navy’s main naval base on the West Coast, you’ll discover that the entrance to the Persian Gulf is roughly on the opposite side of the world.  The Gulf is so far away that prior to World War Two, few Americans thought there was any reason to visit the sparsely populated region, much less establish a permanent military presence there.

But after the war ended, world demand for oil surged while America gradually exhausted most of its easily-tapped domestic reserves.  As U.S. oil companies joined the global search for new sources, geologists came to believe that two-thirds of the world’s exploitable oil reserves and one-third of its natural gas lay under a handful of states bordering on the Persian Gulf.  As a result, the security of Gulf oil states became of paramount concern to U.S. military planners.

Now, that could be changing.  The latest edition of the International Energy Agency’s World Energy Outlook says America will surpass Saudi Arabia as the biggest oil producer in 2020 and become self-sufficient in energy by 2030 as new drilling technologies, alternative fuels and declining consumption reduce the need to import oil.  The U.S. may continue to use oil from Canada, Venezuela and other nearby countries if prices are competitive, but the IEA predicts Asian nations will end up consuming 90% of the oil produced in the Persian Gulf.

That’s good news for America, however it could have ramifications that are not good for the rest of the world.  If the United States no longer needs access to Middle East oil under any foreseeable circumstances, then the priority Washington assigns to the region will plummet.  Many analysts believe that a unified global pricing structure for fossil fuels will keep America engaged, but with U.S. spot prices for natural gas currently running at a fraction of what the fuel costs in Europe and East Asia, it appears global pricing isn’t so integrated after all.

Even if it were, Washington’s options for insulating U.S. energy markets from global price swings are multiplying as domestic production grows.  If you know the history of global oil in the years before World War Two, then you realize there is nothing new about America enjoying energy independence as Asia worries about its own needs.  What definitely is new, though, is that in the near future there might be no western nation capable of or willing to police the Persian Gulf.

Britain carried that burden from the late 1700s until World War Two, but its circumstances were so diminished in the war’s aftermath that it soon exited all of its military bases “East of Suez.”  As Britain receded in the Middle East, America’s role there grew — especially after successive energy crises engineered by members of the Organization of Petroleum Exporting Countries alerted Washington to its growing dependence on foreign oil.  So the Pentagon became accustomed to assuring the security of oil passing through the Strait of Hormuz, maintaining a continuous naval presence in and around the Gulf while periodically deploying ground forces to protect fragile oil-producing states.

Nothing lasts forever, though, and now a combination of energy independence and economic necessity may lead Washington to become more insular in its outlook, the same way London did after the war.  With less need for foreign oil and an increasingly urgent requirement to rein in federal borrowing, it doesn’t take a genius to figure out where the political system will be inclined to cut spending.  It will be in distant places that have ceased having an impact to how elections turn out.

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