Iranian Oil Exchange
                 …Declaration of War?

The Coming Warfare of Oil Shortage
by Islam Yaisn Qasem

If the conflict-ridden and oil-rich Middle East today is crucial to the national interest of superpowers and stability of the global economy, future worldwide dependency on the region for oil will push the international system into new frontiers of conflict and chaos. The region has been a vital source of oil not only for western but also eastern powers. China, Japan, and India have been and will be as much depended on Middle Eastern oil supply as the United States and Western Europe.

What makes oil one of the most important minerals is humankind reliance on an oil-based economy. It flows through the economy, empowering various sectors from fueling the vast majority of the transportation sector, powering factories and appliances, to the production of chemical and petrochemical products. It is this vital role of oil in feeding the productivity of modern economies, which explains the inexorable present and future global demand for it.

Historically the demand for oil has been rising. The world average demand jumped from 47 million barrels per day in 1970 to 85 million barrels per day in 2006. Leading the rank of consumption by far is the United States, increasing its average demand from 1970 to 2006 by 140 per cent.[i] Similarly, China, Japan, Russia, Germany, India, and South Korea have been notorious consumers, and their appetites for oil, like the rest of the world, are also trending upward.

Future global demand for oil is expected to surge, increasing from 80.1 million barrels per day in 2003 to 118 million barrels per day in 2030. The highest increase will occur in countries industrializing at a rapid pace, like China and India. To stimulate potential economic growth, China’s share is projected to rise from 5.6 million barrels per day in 2003 to 15.0 million barrels per day 2030; in the same period, India is expected to jump from 2.3 to 4.5 million barrels per day. As for the United States, the top consumer, its share is projected to reach 27.6 million barrels per day in 2030.

Much of the growth in oil demand will be supplied from Middle Eastern oil wells. With 728 billion barrels of proven reserve in 2006, accounting for 55 per cent of the world’s reserves, the region is sitting on the largest oil reserve and has the lowest production costs in the world.

Oil supply however is not everlasting. Because of worldwide rising consumption the day when oil wells begin to deplete will eventually arrive. Holding other variable constant, at the rate of production in 2004, proven oil reserves for the members of the Organization of the Petroleum Exporting Countries (OPEC), which includes almost all Middle Eastern producers, will last for 83 years. For Non-OPEC members oil reserves will last for about 26 years. Against this inevitable background of decline in production rates, oil prices will continue to climb up. Assuming that no cheap, abundant, and versatile source of energy emerges as a substitute for oil, both exporting and importing countries are heading toward economic hardships and political instability.

For exporting countries, in the short-to-medium-term, high oil prices will generate budget surplus and boost the economy. Things, however, are quite different in the long-term: for oil revenues will ebb, due to reduction in reserves, causing dramatic political and economical upheavals. Because oil revenues for top oil producing countries represent the main source of states revenues, in the long term the surplus will turn into deficit and economic growth into recession. These economic effects are compounded by a precarious political order, as oil exporting countries in the Middle East suffer from democratic deficit and lack of legitimacy. Political scientists described these states as “rentier states” to suggest that rent derived from international sale of oil is used to “buy off” political consent of various groups. If the cash flow from oil revenues dwindles, these states will face erosion in their legitimacy and the door will fling wide open for domestic tensions and conflicts.

The future is no less opaque for importing countries. In the long-term, under the pressure of high oil prices and decline in reserves, importing countries are forced to spend more on oil expenditures. Higher expenditures will reverberate throughout the economy, leading to higher transportation and manufacturing costs, as well as reduction in consumers’ confidence and spending; ultimately cumulating in a worldwide recession.

Recognizing the strategic value of oil for their national interests, superpowers will not hesitate to unleash their economic and military power to ensure secure access to oil resources, triggering worldwide tension, if not armed conflict. And while superpowers like the United States maintain superior conventional military power, in addition to their nuclear power, some weaker states are already nuclearly armed, others are seeking nuclear weapons. In an anarchic world with many nuclear-weapon states feeling insecure, and a global economy in downward spiral, the chances of using nuclear weapons in pursues of national interests are high.

What all of this means is that when reserves are exhausted oil will turn from a blessing to curse. When the curse strikes a new world order will emerge, in which today’s ways of life, politics, and conflicts will be not the same. The rising oil prices and current international tension over nuclear capabilities are telling signs about the kind of future awaiting humanity ahead of the road. Alas, we are all waiting for the final drop of oil to trickle before reaching the zenith of a disaster which is already in the making.