While the geopolitical stress on international oil prices may have softened due to the temporary lull occasioned by a “six month” delay on confrontation with the inevitable Iranian nuclear capability, expectations of lower oil prices are both presumptuous and premature. Even though severe sanctions against Iran have taken 1.5 million daily oil barrels off the world market, this has been evened out by OPEC’s swing producer Saudi Arabia. At the oil monopoly’s latest meeting in Vienna, it was decided to maintain the current equilibrium, which comprises one-third of the 90 million daily barrels required by the demand of the consummate oil-using world.
While most energy analysts look at global oil usage retrospectively, there seems to be a void in anticipating the dramatic supply/demand changes that are now in process. While the U.S. and Europe totally dominated the globe’s 25 million barrels per day demand less than 50 years ago, the Western World, dominated by the modern industrial world powers, soaked up the lions’ share of this total. Today, almost 60 million barrels per day are accounted for by the developing world, as it evolves into modernization. In effect, two-thirds of all oil usage and its derivatives have evolved from an insignificant status to two-thirds of global availability. At this rate, spare capacity is barely keeping up as Southeast Asia, South America, and even Central and Southern Africa accelerate their civilizations into a rapid catch-up, with the once dominant world of Euro/U.S.A. The latter has barely increased its demand due to greater efficiency in transportation, plus domestic and industrial usage. And by practically all projected estimates, today’s balance of 90 million barrels of supply/demand will have increased by 50% by the current century’s mid-point.
With China, India, and the bulk of the ASEAN countries creating such demand, the ability to control and generate this huge additional supply will create a new geopolitical confrontation that will match and even eclipse the amount now controlled by the Islamic Mideast. Ironically, this will likely create a new standoff between the last century’s cold warriors. This new attempt at geopolitical superiority will put the natural resources of oil and natural gas, the mainstay of Vladimir Putin’s Russia, allied with China, against the U.S. now bursting forth as the world’s potential number one provider of fossil fuels (coal, oil, natural gas) through the revolutionary shale drilling process.
If such a geological standoff develops, much of the developing world, and the partisanship of Europe may be the high stakes poker game for which Russia and the U.S. will be vying. Russia, which has little else to offer, Moscow has the advantage of pipelines that they are holding over the heads of most of Eastern and Central Europe, and will attempt to use its natural resources as a pressure point.
But the U.S. will counter with the upcoming unlimited volumes of liquid natural gas, coal, and oil that will checkmate the leverage that Putin & Company now hold. That is why both higher development costs and technological metamorphosis will make these fossil fuels the dominant energy control source, which will determine global influence dominance. As the late great energy pioneer, Michael J. Economides predicted, renewable energy (solar, wind and geothermal) will never be of more than supplemental importance.