GRM 2010 GRM 2011

Abstract Details

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The Energy Situation in the Middle East and the Approaching Turning Point
Paper Proposal Text :
No other region in the world is more influenced by energy factors than Middle East. Energy production and export will continue to be a major economic driver of the region. Supported by high economics growth in the last decade, as well as growing population, Middle East has emerged a large demand giant in the international energy market. Energy has become a critical factor both in supply and demand spheres. This paper aims to identify and analyze three factors that are likely to influence the future Middle East, particularly GCC countries, namely 1) shale revolution, 2) “Arab Spring,” and 3) growing domestic energy demand.
Of these points, at the present point in time the shale revolution will conceivably have a limited impact on the Middle East’s petroleum and natural gas exports, and thus on its politics and economy. It is likely that the US will continue to import crude oil from Middle East, particularly from Saudi Arabia. Gasoline price which the US government and congress care most will continue to be determined by international oil markets, regardless of the increase of the US domestic crude oil production. Shale revolution, however, will come to be used as a good pretext to justify specific US foreign policies, especially its reduced commitment to foreign policy in general and its “rebalancing” policy. In that respect there is a possibility the shale revolution will have an influence on approaches in the Middle East region, via the US’ involvement in the Middle East in the future.
Where the “Arab Spring” is concerned, its influence on the actual petroleum and natural gas exports is only apparent in Libya and Yemen’s petroleum supplies. The combined supply disruption is far smaller than the previous supply disruptions in Iraqi War in 2003 and the Gulf War in 1990-91, and it is not a critical supply crunch factor for the international oil market. Nevertheless, there are concerns that factors ushered in by the expansion in social spending brought on by this rise of grassroots movements, such as growing fiscal expenditure and rising budget breakeven oil prices. Higher oil price will inevitably lead to an increase in non-Middle Eastern oil production and may induce another supply-side revolution such as the shale revolution.
The growth in domestic energy demand will bring about a decline in future export volumes for oil-producing countries, and even for non-oil-producing countries there is a possibility it will be a factor contributing to social uncertainty by triggering domestic energy shortfalls. Currently no effective measures are being adopted in response to this problem, and in the future its impact will conceivably surface in the form of declines in export volumes from the Middle East region on the international petroleum and natural gas markets and deterioration in fiscal revenue and expenditure in Middle East oil-producing countries accompanying that. Among the three energy factors, this energy demand problem is by the most serious issue for Middle Eastern countries and how to smoothly implement demand rationalization measures such as gradual subsidy cuts will be a big challenge for these countries.