The idea of Arab sheiks being able to bring the United States to its economic knees on a whim due to our reliance on an unstable oil supply is long past its due date.
That’s according to Rasoul Sorkhabi, research professor and manager of energy fluids and minerals at the University of Utah Energy and Geoscience Institute.
“The idea that the U.S. is heavily dependent on the Middle East oil is a relic of history,” he said.
Why?
Math mostly.
“The U.S. only imports 12 percent of its crude from the Middle East,” he said.
The vast majority of our oil, it turns out – about 70 percent of it – comes from Canada and Mexico.
“In fact, since the 2008 market crash, our imports of oil from the entire OPEC have steadily declined while our crude imports from Canada have risen,” said Sorkhabi.
Sheiks in the desert, though, make for better political fodder during political debates than do businessmen in Ottawa.
This perception (and misperception) of the monolithic power of the Middle East goes back decades and is intertwined with the end of World War II, political jockeying between superpowers and real-world energy needs and calculations.
“As far back as the 1940s, Everette Lee DeGolyer, one of the pioneering figures at the AAPG, clearly foresaw this. In 1942, he visited the region on a special U.S. government mission and reported back that the ‘center of gravity of world oil’ would soon shift from South America to the Middle East,” explained Sorkhabi.
For much of the world, this is how it has been for decades.
A Smaller Piece of a Bigger Pie
“But how far into the future will it continue clearly depends on how much oil the world will need and consume,” Sorkhabi added.
That need isn’t as straightforward as it appears. Less is sometimes more, as Sorkhabi points out.
In 2000, oil accounted for close to 40 percent of energy consumption. Today it is a bit more than 30 percent.
Good news, at least on the environmental front, yes?
Sort of.
“In 2000, we (globally) used less than 80 million barrels a day; today we use a bit more than 100 million barrels a day; so, in the past 22 years or so, even though the share of oil consumption relative to other energy sources has decreased by 8 percent or so, in reality we have added almost a million barrels of oil per day each year during these two decades,” Sorkhabi explained.
Even if the overall downward trend continues – and it probably will – in absolute numbers, oil consumption may increase because of population growth and economic development.
“Even if we assume that the oil consumption remains at today’s level, the world will still need to produce 100 million barrels a day,” he said.
An Ever-Changing Game
From where will this volume of oil come? Clearly, whatever the sources, much of it will come from the oil-rich Middle East.
In 2009, Saudi Crown Prince Mohammed bin Salman, after toying with the idea of giving up the country’s – as he called it – “addiction to oil,” ultimately decided to increase oil production.
Sorkhabi was not surprised.
“In reality, the so-called ‘addiction to oil,’ which he believes is a 21st-century catchword for lazy politicians and journalists, boils down to economic propositions, technological advantages and resource abundance, availability and accessibility,” he said.
“If economic, technological and policy factors surrounding a particular energy resource change, then societies, industries, corporations will also change their patterns of energy production and consumption,” he added.
The current debates and discussions on energy transition are motivated by two factors, Sorkhabi noted: “First, the threats of global warming from fossil-fuel burning. Second, energy security. Of course, what political leaders do or say, or even an abrupt weather change, may have short-term impacts on oil prices.”
That’s been going on for decades.
The wildcards out there are natural gas, especially if becomes a main bridge in the energy transition to decarbonized economies, and alternative energy sources like wind and solar.
On the gas front, he said, “Some countries in the Middle East will emerge as major players. Iran and Qatar (after Russia) are the second and third largest possessors of natural gas. Qatar is already playing its cards. After the Russian invasion of Ukraine last year, Qatar rushed to supply natural gas to Europe, and we can expect that Qatar’s share of natural gas market will grow.”
As for alternatives, he said it will depend on how much of the world’s commitment is talk, how much is action.
“If the (alternative) scenario is a real – real, not on paper – move, on the part of the world, to go beyond oil, so much so that other energy resources actually replace oil to a considerable part …”
That could be the proverbial game-changer, he said.
Emphasis on “could.”
“But how soon or to what extent this will actually happen remains to be seen. This indeed lies at the heart of the current discourse on energy transition,” he said.
In the United States, two-thirds of oil goes to the transportation sector, meaning electric vehicles can potentially replace a large part of that oil consumption.
Another consideration, not talked about as much, is that Middle East countries are increasingly consuming their own oil resources.
“In other words, the share of domestic consumption in the overall oil and gas production of the Middle East countries have steadily increased over the past decades and this will continue for the foreseeable future,” said Sorkhabi. “They will face serious challenges to be a part of the energy transition because they have access to rich and relatively inexpensive oil reserves and they will need to produce them both for export revenues, which they heavily depend upon, and for their rising domestic consumption.”
Historical Perspective
Sorkhabi, who teaches on the Middle East energy dynamic and has written about it extensively, said much of the accepted understanding comes from the First Oil Shock – the Arab oil embargo of 1973, and the Second Oil Shock – the Iranian revolution of 1979.
It’s an incomplete history.
“The history leading up to the 1970s was very different,” he said.
Before the second World War, it was Great Britain, not the United States, who was predominantly present in the Middle East. The end of the war and the world’s power structure changed all that.
“In 1945 President Roosevelt’s meeting with Saudi King Abdul Aziz on the USS Quincy battleship and the unwritten, but an enduring, agreement between these two leaders opened a new chapter for the U.S. involvement in the Middle East – not through an oil company but with all political power,” Sorkhabi said.
He explained that the United States’ expectation of the Middle East throughout the 1950s and ‘60s was not so much for U.S. domestic consumption, but so that the Middle East oil’s undisrupted flow of oil would help reconstruct the war-damaged Europe and also win the Cold War against the Soviet Union.
“In fact, in 1959, President Eisenhower introduced a bill that would limit the imported oil to the U.S. to a maximum level of 12 percent, which essentially protected the U.S. domestic oil production and independent companies,” he said.
In 1973, when the conventional oil production in the United States hit a peak, it placed a ban on the export of any crude oil produced domestically to protect supplies. This ban was in place until 2015 when Congress repealed it because the U.S. shale oil revolution had doubled domestic oil production and the country was able to export oil.
Still Reigning Champion
“In the past decades, one region or another – North Sea, West Africa, Caspian region – was sometimes considered to rival the Middle East oil. But all of these claims have proven to be wrong,” Sorkhabi said.
And there’s a good reason for that: geology.
Sorkhabi, who has made geological studies in India, Nepal, Japan, Borneo, the Rockies and the Great Basin of the American West, said of the Middle East, “Of nearly 1,000 giant oil fields mapped, nearly one fourth are located in the Middle East – a region that has only 3.5 percent of Earth’s land surface. Look at the largest oil fields in the world – Ghawar is number one, located in Saudi Arabia; Burgan is number two, located in Kuwait; the third largest is located in Iran or Iraq, depending on what estimate you take. “
“The history has a wider and longer range; and the energy landscape is different, too. We should have a richer and more sound understanding of the history, oil, Middle East and geopolitics,” he added. “I do not see any other region to have been geologically so lucky as to have experienced and inherited optimal conditions for oil generation and accumulation.”
Sorkhabi spoke on these topics at the recent International Meeting for Applied Geoscience and Energy in a presentation entitled, “The Middle East in the Oil World: Past Landmarks and New Bearings.”