Geopolitical Implications of Middle East Oil
Authors: Keplinger H.F. 
Published: December 2007

Summary
Despite the current belief that there is no longer an energy crisis, the U.S. is highly dependent on imported oil from the Middle East. This dependence will increase with economic growth, causing crude imports to double by the year 2000. Without further investment in exploration and development, the U.S. will continue to suffer from a declining reserve base and the uncertainties associated with world politics.

Introduction
Even though some experts contend that there will not be an oil shortage until the 1990's and that there is no longer an energy crisis, the facts to the contrary are irrefutable. Because the industrialized countries use about 60% of world oil but produce less than 30%, they are still highly dependent on oil imported from the Middle East. In fact, the entire world depends on Saudi Arabia for its survival, Saudi Arabia has about 169 × 10(9) bbl [27 × 10(9) m3] of recoverable reserves, making it the most valuable piece of real estate in the world. More than 369 × 10(9) bbl [59 × 10(9) m3] exist in the Middle East, compared with a reported 90 × 10(9) bbl [14 × 10(9) m3] in North America, for example (see Fig. 1). Fifty-three percent of all the oil in the world is located in the Arabian Gulf area. Saudi Arabia alone has the capacity to reach about 6 × 10(6) B/D [1× 10(6) m3/d] of exported oil. No one else in the Middle East has that capacity. Other countries have respectable reserves but limited capability, either technically or politically, to increase their production. OPEC missed its projections in 1985, and the reason it missed them is that the world had hoped for a healthier economy. The current world economy is very fragile. We are walking a fine line. But if we start to experience some economic growth throughout the world, OPEC production will return to about 18 × 10(6) to 20 × 10(6) B/D [2.9 × 10(6) to 3.2 × 10(6) m3/d]. If the economy grows, then in the next year or two, OPEC can again begin to dictate prices, which will become firm.

World Reserve Picture
Estimates indicate that world reserves increased by 3 to 4% from 1983 to 1984. When the estimates are analyzed, however, most of the increase comes from several discoveries in the Middle East. The rest of the non-OPEC countries have reserve bases that are declining or barely holding their own. The estimates for 1985 reserves indicate declines of somewhat less than 1%. North Sea reserves are already declining. U.S. reserves are not being replaced; consequently, there is a real energy problem in the U.S.
We had hoped that Mexico could become a major supplier. The figures for North American reserves, however, are highly inflated by Mexican reserves. Mexico actually has closer to 15 × 10(9) to 20 × 10(9) bbl [2.4 × 10(9) to 3.2 × 10(9) m3] rather than the reported 55 × 10(9) bbl [8.7 × 10(9) m3]. Mexico's reserves will start to decline in the near future. Exports will be down to 0.8 × 10(6) to 1 × 10(6) B/D [130,000 to 160,000 m3/d] by 1990. This differs from the claim some make that Mexico can export another 4 × 10(6) B/D [600,000 m3/d] and, therefore, relieve worries about imports from the Middle East (i.e., Saudi Arabia, Iran, and Iraq). A leading financial daily newspaper reported that Colombia is going to "break the back" of OPEC. Colombia, however, will be able to ex rt only 150,000 to 160,000 B/D [24,000 to 25,000 m3/d] in the next 3 to 4 years, hardly denting the 55 × 10(6) B/D [8.7 × 10(6) m3/d] needed in the world today. Venezuela has very little shut-in capacity; it might be able to increase production to 2.2 × 10(6) B/D [350,000 m3/d]. This will not help the U.S. much as its requirements move from 5 × 10(6) to more than 8 × 10(6) B/D [800,000 to more than 1.3 × 10(6) m3/d] of imports. The Soviet Union's oil reserves, also declining, decreased by almost 3% from 1984 to 1985. Now at about 78 × 10(9) bbl [12.4 × 10(9) m3], they were at 86 × 10(9) bbl [13.7 × 10(9) m3] in 1982. Also, no major discoveries are being made in Asia. In fact, Asia is increasing its imports from the Arabian Gulf area. Asia imports 70 % of all its oil and will continue to be in direct competition with the U.S. and Europe for that oil in the future. All the new finds in Indonesia and Australia are geologically small and very expensive to produce. Canada does not have the ability to move a significant amount of gas through existing pipelines. No new pipelines are being built in the frontier areas. We do not think Canada can hurt the U.S. gas market, but the media continue to report that Canada is suddenly going to move 2 × 10(12) ft 3/yr [57 × 10(9) m3/a] into the U.S. at inexpensive rate; this is unrealistic.

U.S. Assessments
The U.S. has about 28 × 10(9) bbl [4.5 × 10(9) m3] of proven reserves, another 30 × 10(9) bbl [4.8 × 10(9) m3] expected to be found, and a potential for about another 100 × 10(9) bbl [15.9 × 10(9) m3].
JPT
P. 1241^