Last week, the regular semi-annual meeting of OPEC's ministerial council convened, as oil prices continued to be above the $100 per barrel mark since 2012. This, of course, would be reassuring to exporting countries in normal circumstances. However, these are not ordinary times at all for the oil markets, with a major revolution taking shape in the oil industry, as a result of the large-scale and commercially viable production of shale oil and gas, especially in the United States. This has major implications for the global oil industry. For one thing, the United States, instead of remaining the world's largest consumer and importer of oil and gas, will in the foreseeable future become an oil-exporting country itself. This transformation will impact the oil industry and trade globally on the one hand, and US foreign policy on the other. The transformation will also influence pricing mechanisms, as well as the movement of exports and supply and demand in the markets. As is known, sustained high prices push companies to take risks and become involved in new discoveries and investment in alternatives, whether these are renewables like solar, wind, and nuclear energy (although these alternatives do not yet represent more than 6 to 7 percent of the total energy sources used so far), or non-conventional fuels, such as from shale oil, petroleum liquids, and oils extracted from the deep sea (about 20 thousand feet below the surface of the water) or from previously untapped areas such as the Arctic, not to mention biofuel. These alternatives have started to compete with conventional oil markets, and most importantly, they began to pose serious competition in attracting investments, at the expense of conventional oils (in the Middle East specifically), though the latter are less expensive, more abundant, and easier to extract, and are already linked to extensive networks of pipelines and ports that haul them from production areas to consumer markets. The oil age has lasted so far more than a century (since the last quarter of the 19th century). The key role of the Arab oil countries in this industry dates back to the period that followed the second world war, although it began in some states in the 1920s (e.g. production from the Kirkuk field in Iraq began in 1927). Needless to say, the development of non-conventional oils will prolong the oil age, instead of the full adoption of sustainable alternatives, despite the fact that non-conventional oils hog a significant share of the oil market. However, this radical change in the petroleum industry (oil and gas) has other effects, including changes in market trends, and implications for prices. What does this mean? It means a larger role for major consumer countries in the industry and the global markets, in tandem with greater reliance on their respective internal energy sources rather than imports. But it also entails greater responsibility on the part of the national oil companies in OPEC countries, specifically the Arab ones, to set new priorities, not only to develop and market their oils, but also to begin operating in a broader way in new markets in collaboration with international companies to tap into new energy sources and emerging markets. We are starting to see the precursors of such investments here and there, but it is clear that these new investments require new insights and training cadres on new methods of work and competition. This will require structural changes and new investments, not to mention the visions and ambitions to match them. We hope that the countries concerned, the owners of the national companies, are flexible enough to instate these changes. In the midst of these expected changes, one must differentiate between the effects of this oil wealth in the energy industry on the one hand, and its implications at the same time on the future of US foreign policy on the other. The key question here is this: what will happen to US policy in the region if the United States becomes “energy independent"? In truth, US strategic interests in the Middle East had begun to change even before the shale oil revolution. For some time now, the US strategic direction has shifted to eastern and southern Asia, home to the world's emerging and booming markets, in parallel with high population density. Two giant powerhouses are also emerging in Asia (China and India). In the Middle East, meanwhile, there will continue to be interest in the huge reserves of oil and gas, and as long as there is reliance on hydrocarbons in energy worldwide, there will still be interest in the reserves and output of the Middle Eastern countries. To be sure, anything that impacts these dynamics will leave its mark in the global oil markets. However, it is highly anticipated, and there are signs in this direction, that as a result of its experience in Afghanistan, Iraq, and the pressure on its financial resources as well as negative local public opinion attitudes, the United States would ask its European and Asian allies to bear the military and financial burdens of maintaining security in the Middle East, or at least the sea routes for oil exports. Nevertheless, the special bond between the United States and Israel will prompt the latter to maintain considerable interest in the region. The data available indicates that the shale oil revolution will lead to important shifts in the future, and this is to be expected in international economic relations or in the foreign policies of major countries. But it is also clear that countries, especially the major ones, have multiple interests, some of which continue over long periods of time, while others are not affected by a particular economic variable. Proceeding from this, the increase in US petroleum reserves, and the United States becoming a player in oil and gas exports, both mean that the United States will be more vulnerable to fluctuations in global markets, despite its shrinking dependence on energy imports. This means that the United States will be more accommodating in the future of the interests of exporters. Concerning US foreign policy, its interests and concerns are too large to rely on only one factor, i.e. energy, in spite of its importance. The debate in US circles for some time now has been about focusing US military assets in the Far East and south Asia. This began before the shale oil revolution, and it is ongoing. However, the United States and its allies will continue to give the necessary attention to the flow of energy resources from the Middle East to global markets without any interruption or threats. This is something that complements the US pivot to Asia and its economy, and does not contradict it whatsoever. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
