The American Oil Miracle: Will Washington Finally Abandon the Middle East?

In 1981, US President Ronald Reagan ascended to the White House to find himself beginning to face one of the most severe economic crises in the country's history, with unemployment rates, inflation rates, high interest rates, and a severe slowdown in economic growth. The solution, in his view, was that they had to develop sources American energy and reducing dependence on foreign suppliers to tackle these major problems and liberalize US foreign policy.

In other words, Reagan saw that the dilemmas of the economy, energy, and foreign policy are all inseparably linked to only one solution, which is to allow the development of energy on US federal lands, both land and sea, and it is his personal ambition that he has not succeeded in concealing during any time since he was governor of Florida a year ago 1975, and during the years before his candidacy for the White House to his presidential campaign, where Reagan always believed that his country possessed abundant undeveloped energy sources, in sharp contrast to the conventional wisdom of his predecessor, Jimmy Carter, who saw that oil and natural gas were running low and that America had to take Deep changes to fear It consumes oil and searches for new sources of energy.

Reagan's unlimited optimism about oil was mainly due to three factors: On the one hand, the Republican president apparently did not believe the estimates of US federal agencies that influenced Carter's belief that the time of oil would end in three decades, and Reagan simply protested that these predictions would remain questionable. In it at best, especially since similar investments were issued at the turn of the century and predicted the end of the time of oil before the early fifties, while America, and contrary to that, succeeded in increasing its production by one million barrels per day during that time.

Reagan believed that the main problem lay in the policies of the US government as the owner of a third of the federal lands, and in the way they organize things, and given that the private sector is the primary concern in investing in energy sources within the states and not the government, all the government should do is allocate the lands and create the legal environment And economics, leaving it up to investors to do the rest of the work. As for the environmental impact of drilling technologies, Reagan, like most Republicans, saw that environmental concerns about oil exploration are often overestimated.

As a result, Reagan immediately removed all of his predecessors' controls to reduce fossil fuel consumption, cut research and development budgets for renewable energy programs, abolished wind energy investment tax, and reduced government energy intervention to the point that he tried to abolish the Department of Energy from scratch, but he He failed to do so, and he opened the billion-acre American continental shelf to those who gambled their money on the prospects for oil and gas development, and it appears that the Reagan plan paid off on some levels, as the cost of extracting shale gas decreased, and a number of huge oil fields were discovered New in the Gulf of Mexico and the Rocky Mountains in Colorado and New Mexico, and American oil production increased significantly.

But Reagan's plan quickly proved (1) that it was more ambitious and less realistic than it seemed at first glance, with the collapse of oil prices in the mid-eighties due to the economic slowdown in the industrialized countries; many producers found themselves unable to bear the high costs of production, which led to their exit from Ultimately the market, and with the elimination of policies to rationalize consumption and undermine ambitious clean energy projects, the bottom line was that the Reagan administration left America more dependent on foreign oil from the time it came to power, giving way to the George HW Bush administration that transferred half a million American soldiers to defend oil The Middle East following the Iraqi invasion of Kuwait, and later in front of Bill Clinton's government, which has sought to impose comprehensive taxes on energy production, including oil and gas.

Self-sufficiency in energy will allow Washington to reconsider its military presence in many areas and reduce its presence in the areas of inflammatory conflicts, particularly the Middle East.

Reuters

It is likely that this historic share was entirely present in the minds of American decision-makers and some elite public opinion while following with passion the current boom in the production of shale oil for their country, a boom that culminated with the announcement (2) of the US Energy Information Administration nearly two weeks ago, the end of November The second, that America as the largest producer and consumer of oil in the world exported 89 thousand barrels of crude oil and refined petroleum products more than it imported during the month of September, the first month in which the country achieved a positive surplus in the oil trade balance in seventy years Soon, while the administration is expected to reach US net exports of 750 thousand barrels per month in 2020 next year.

For many Americans, led by the current President Donald Trump, the news of this oil boom is a long-term dream that they have been waiting for for decades, and they argue that achieving self-sufficiency in energy, alongside the economic benefits that it achieves at the level of the American trade balance, investment flows and job opportunities; It has more important geopolitical benefits, perhaps the most prominent of which is that it will isolate America from its long-term fears of interruption in oil supplies from exporters or major shocks in prices due to lack of supplies, or the use of oil-producing countries as a weapon to pressure the country to achieve this. Understanding, and being content with Washington will allow it to reconsider its military presence in many areas and reduce its presence in the areas of burning conflict, particularly the Middle East, as well as reorient its strategic assets to the most important regions.

On the other hand, others argue that achieving energy independence, especially by relying on hydrocarbon resources such as oil, is a distant American dream. On the one hand, and although the United States is the world's largest oil producer and is on the way to becoming a net source of hydrocarbons, there are many technical constraints that govern its ability to reduce oil imports. Otherwise, they see that their country will not be able to isolate itself or its citizens from the shocks. Globalization in oil markets or abandoning its role in securing the global oil flow in a free global market. Finally, some fear that the current American oil boom may not be very sustainable due to the high costs of production compared to traditional producers, and the large fluctuation in the price T, and the abundance of the global supply of cheap oil, as well as global efforts to reduce dependence on oil because of the climate crisis, which means that Washington may again find themselves more dependent on foreign oil, as happened in the Reagan era, despite all the current American dreams.

Kaaba oil

Although America was a net importer of oil throughout most of the oil age that began around the end of World War I, Americans are proud that the first drop of oil in the world was extracted from American soil when Edwin Drake finally succeeded in obtaining black gold from the first well Global oil in Pennsylvania in 1859.

At that time, the world was still betting on coal as a major source of power generation before the moment Winston Churchill decided to convert the British Royal Navy to rely on oil instead of coal, in a trade-off in which Britain sold its energy independence in favor of the greater efficiency and speed it provided Oil, and as a result of this strategic decision, Britain has consolidated its efforts over the coming years to control the oil fields in the Gulf region, ignoring the authority of the decaying Ottoman Empire.

With Britain rushing to secure as much new gold as possible from the lands of the Middle East, America was not far behind despite being the most prominent oil producer at that time, and by 1932, Standard Oil in California had discovered oil in Bahrain, before it won The company the following year with a historic contract for oil exploration in the Kingdom of Saudi Arabia, and in 1939, the Arab American Oil Company "Aramco" succeeded in exporting the first Saudi oil barrel, and with it the American policy was completely transformed and started centered largely on the protection of oil coming from the Middle East.

Since that time, (3) America has used its army and harnessed its military power to ensure unrestricted access to oil in the region, and this approach has been particularly strengthened with the outbreak of the Second World War, as oil has turned into a strategic and vital commodity to ensure the continued military and logistical operations of the Allied countries around the world And with the end of the war, US President Franklin D. Roosevelt realized that securing cheap oil supplies from the Middle East would play a crucial role in preserving the new Washington's position as the only global superpower.

As a result, Roosevelt sought to codify the American role in protecting Middle East oil through a historic agreement with the Saudi King "Abdulaziz bin Saud" in February 1945, immediately after the end of the World War, where "Ibn Saud" pledged to secure a stable supply of oil to America. In exchange for the latter's pledge to provide military protection to the Kingdom, and although this policy was not mentioned historically in any of the American national security documents, it remained heavily dominated by American political behavior during the following decades, which was evident in the principle of Eisenhower announced in 1957, which was According to which the East is considered The Middle oil wealth and the area of ​​American influence pure.

This oil connection between America and the Middle East became especially important in the early seventies after the first became a net importer (4) of oil (the volume of imports exceeds the volume of exports) for the first time in its history. Ironically, America was about to test the most important turning point in its relations with the countries of the East The Middle Oil a few years later, specifically in 1973, when Washington's full support for Israel during the October War pushed Arab countries to cut all their oil exports to them in protest of that support and in an attempt to bend the Americans' arms to stop it.

The Arab embargo caused the price of oil to quadruple within a few weeks, and the long waiting lines of Americans at petrol stations caused widespread embarrassment to the world's largest power, and it became clear that America without Arab oil had become a paper tiger, and despite the fact that the oil blockade lasted only weeks Few; it had long-term effects on the US national security strategy, as Washington strengthened its military assets in the Persian Gulf, and oil protection was no longer made only through that tacit agreement on protection between it and Riyadh, but through actual military reinforcements that guaranteed America's hegemony On the pain The Global Maritime Times and Oil Trade Ways, which have been secured at the heart of the US military for more than 35 years.

This position was further strengthened after 1979 in the wake of the Soviet invasion of Afghanistan and the Islamic revolution that toppled the Shah’s regime in Iran, America’s closest ally there, and the Americans saw both developments as a serious threat to freedom of oil movement in the Middle East, which prompted them to legalize their military presence in The region is part of a US national security strategy for the first time in 1980, in the annual State of the Union speech given by Carter that year and decided that his country was ready to use military force to secure its interests in the Gulf region, which was later known as the "Carter Doctrine."

Simultaneously, American decision-makers have concluded since the Carter era that their country’s role as a protector of oil supplies and a center of gravity between producers and consumers is the most important source of international influence for them in the first place, regardless of even the value of oil itself as an energy source for America, and as a result Therefore, the "Carter Doctrine" remained virtually dominated by Washington's Middle East policies during the following decades, which was especially evident during the era of President George HW Bush who did not hesitate to mobilize the American military power to defend oil supplies in the region by interfering to free Kuwait from the invasion. Iraqi .

Operation Desert Storm was the most prominent manifestation of the American application of the Carter Doctrine, and demonstrated the depth of the American commitment to the Middle East in general, and oil coming from it in particular, although it came at the beginning of a decade when the world was obsessed with talking about the peak of oil, the moment when oil production will begin The world is diminishing and depleting, leaving the world on the threshold of a new energy era, however, the fact that Washington was forced to send half a million soldiers more than eight thousand miles away from its territory raised Americans' old concerns about the dangers of relying on foreign oil, and highlighted efforts The country is foldable The term to achieve energy independence.

Dreams of oil independence

It can be said that the American obsession with local energy also began during the "Roosevelt" era after the end of World War II, as America sought to secure its own sources of energy which are the main engine of the country's economic and military strength, which prompted Roosevelt to invest huge funds in a number of hydroelectric dams, led by The Grand Cole Dam on the Columbia River was considered one of the largest concrete structures in the world at the time.

Later, President "Dwight Eisenhower" launched the era of commercial nuclear energy through his famous "nuclear for peace" speech in 1953 before the United Nations General Assembly, where America has since paid special attention to nuclear energy, which today accounts for 12% of the total energy produced America, and although energy policies were relatively late during the administrations of John Kennedy and Lyndon Johnson administrations due to the preoccupation with the Vietnam War, the American interest in energy quickly reached its peak following the ban imposed by the Saudi King Faisal in 1973 - as we mentioned - marking the first era of the global rise in oil prices .

The rapid developments in the geopolitical environment of energy since the Arab embargo prompted Washington to give an advanced priority to its internal policies for energy independence, and it set up the International Energy Agency as an international body concerned with the energy interests of the major industrial countries aiming to reach a collective policy to address potential crises in oil supplies, and as an initial measure Precaution The Agency imposed on member states to maintain a strategic reserve equal to 90 days of its net imports as emergency stocks to face crises. Later, since December 1975, Washington imposed a historic ban on the The American crude was expelled abroad, and although this step seemed until recently a symbolic measure, as American oil production never increased to levels that allowed the country to export large quantities of its oil outside North America, it shed light on the renewed American obsession with possible crises in Oil supply.

This obsession has been particularly exacerbated since 1977, after Washington broke the critical level of energy balance after it imported more than 50% of its oil needs, which led to calls that started since the time of President Nixon to reduce American dependence on oil imports, whether through Reducing its consumption or by searching for local alternatives to produce hydrocarbon energy, but the results of these calls were often disappointing, as studies of the Energy Independence Project during the Nixon era concluded that this independence, other than being very costly, would not be sufficient to protect America from exposure For the effects of any potential shock in supplies Global oil due to the huge oil market on the one hand, and given the great link between America and the global economy on the other hand, to the extent that Washington concluded at that time a conviction that its access to energy independence could lead to a global economic recession.

In other words, American decision-makers concluded most of the time that estimating the goal of energy independence that has been embraced by American public opinion since 1973 was exaggerated at best, and that the role of the United States as a global superpower and its place as the largest consumer of oil in the world and as a policeman for waterways is the optimal guarantee To reduce the effects of global energy shocks. But that did not prevent Washington from trying to take advantage of the surge in price increases in the late seventies to boost its oil industry, as happened during the Reagan era, but that price boom was quickly discouraged by the economic recession of the eighties as we have already indicated, which is what drove it during the era of George Bush Sr. to return to its original plan to reduce dependence on oil by investing in renewable energy projects, increasing energy efficiency and reducing dependence on hydrocarbons.

Otherwise, George Bush Sr. - unlike almost all other Republican presidents - was obsessed with protecting America's environmental heritage and tackling the effects of five decades of the Cold War, nuclear power production, and unclean energy research projects conducted and conducted by the federal government, which prompted him to re-place restrictions on projects Oil and gas raised during the Reagan era, however, these policies made his country more sensitive to Middle Eastern oil supplies, and paved the way for the largest US intervention to liberate Kuwait from the Iraqi invasion and re-adjust oil markets in the wake of the crisis that inaugurated the second global era of high prices The oil.

With fixed oil prices above about $ 90, shale investment has become economically feasible and politically desirable.

Reuters

During subsequent years, the world's oil supply seemed to be on the way to peaking, but these predictions soon proved surprisingly incorrect when global energy production began to shift from traditional suppliers in Eurasia and the Middle East to unconventional oil producers around the world, beginning From the hydrocarbons rich waters in Australia, Brazil and the Mediterranean Sea to the oil sands of Alberta in Canada, but the greatest development in this revolution took place in the American soil itself, where the producers benefited from the development of horizontal drilling and hydraulic fracturing techniques to launch m Take unlimited oil from the core of American rocks.

In light of these developments, and with the increase in oil prices to their highest level ever, reaching $ 150 in 2008 and an increase of 12% in one year, a major increase that approximates to the increase of 14% in one year ( 2003) against the background of the invasion of Iraq and the attempted coup President Hugo Chavez a year ago in Venezuela, and with fixed oil prices above about $ 90, investing in shale oil has become economically feasible and politically desirable, while America itself is gradually shifting towards a new energy model.

The American Oil Revolution

Shale oil has revolutionized the American energy production dramatically. Between 2007 and 2012 shale gas production increased by more than 50% every year, and its percentage of total American gas production jumped from 5% to 39%, and many stations that were dedicated to bringing gas were converted Foreign liquefied natural to American consumers and its allocation to export US gas abroad.

On the oil level, the results of the cracking revolution were more evident and epic. During the same period, cracking techniques caused American shale production to increase 18 times, reflecting the significant decline in American crude production, and in May 2011 the United States became a net source of petroleum products. Refined, and since 2011 became the third largest producer of crude oil in the world after Saudi Arabia and Russia and the second largest producer of refined products after Russia, and at the beginning of this year, America became the largest producer of crude oil in the world, and by November this year, I had become a net exporter True to all petroleum products, including all petroleum products and crude oil.

(6) This boom in oil and gas production has brought clear economic benefits to America, and has improved the country's trade balance and competitiveness of its industries, and the United States has become one of the most attractive places for investments in the field of petrochemicals, something that was not conceived possible a decade ago, and given that The era of American abundance and price recovery continued for a relatively long period (from 2008 to 2014). American oil producers were able to prove their presence in the global market in the face of traditional producers led by Saudi Arabia and OPEC, and they succeeded in reducing production costs and making the industry work. At relatively low price levels, as a result, most shale oil producers were able to withstand the price war launched by OPEC since 2014, which caused prices to drop to a level below $ 30 in early 2016, when they were able to return to production levels again Once prices recover relatively to a level below $ 50 a barrel.

This dynamic demonstrated that the new shale boom, unlike the previous production boom in the Reagan era, was not easily achievable, and that the changes it brought about in the oil markets were structural and lasting changes, and the realization of this fact prompted the US Congress to make a historic decision in 2015 to end the embargo. Long-term exports to US crude oil, allowing American producers to export oil instead of selling it inside the United States, which has caused the country to increase its crude exports and contributed to narrowing the gap between imports and exports (the United States remains a net importer). VIA Crude Oil), and made Washington a net exporter of petroleum products that include total exports of crude oil and oil derivatives both.

As expected, the shale oil revolution caused permanent structural changes in the oil market, and put all the major hydrocarbons producing countries in the world under pressure, starting from Indonesia and Vietnam in Asia, Angola and Nigeria in Africa, passing through Kazakhstan and Russia in Eurasia, to Mexico and Venezuela In Latin America, ending in Saudi Arabia, Iran, and Iraq in the Gulf, and that implied that countries that had long used oil as a weapon to achieve their geopolitical goals began to see their influence shrink dramatically.

Russia is at the forefront of these countries, which have been weakened by the increase in the global supply of oil, as low prices have put pressure on the country's budget, as well as reducing its ability (7) to use oil exports to put pressure on its geopolitical opponents in Europe who now have additional suppliers that can To provide them with leverage to negotiate more flexible terms with Russian oil suppliers, but in the Middle East, Saudi Arabia is at the forefront of the losers, as Riyadh has virtually lost its traditional influence as the sole controller in the oil market through OPEC in favor of shale oil producers, and has found itself compelled to cooperate P Russia to maintain its influence in the oil market, as well as Iran, which has become more vulnerable to sanctions tyrannical by Washington now most confident in their ability to compensate for the impact of the Iranian oil disruption from global markets.

Unlike the affected producers, the major oil consumers welcomed the new energy revolution. The drop in oil prices has proven to be a great blessing for the emerging economies of China and India that have achieved a huge boom in oil imports in recent years, and according to the International Energy Agency, we will see an increase in oil imports. From China and India increased by 40% and 55% respectively by 2035, so the two Asian countries stand out as the biggest beneficiaries of cheap oil.

America still imports more crude than it produces, mainly due to the type of American crude and the unwillingness of most American refineries to deal with it.

Reuters

In the foreground, America naturally stands out as the biggest beneficiary of the new energy revolution, whether at the level of job creation or accumulation of wealth from energy exports or stimulating major oil and gas-based industries such as petrochemicals and steel and improving competitiveness advantages, as estimated by (8) The production of oil and shale gas is likely to add between 380 and 690 billion dollars to US GDP, as well as creating 1.7 million new jobs, improving trade balance and reducing the nation’s deficit.

In spite of this, the declining dependence on energy imports should not be confused with achieving full American independence, which is still a distant goal, on the one hand, America still imports more quantities of crude than it produces, and this is mainly due to the type of American crude and the lack of readiness of most of the American refineries to deal with it, while while the bulk of the added production in the United States is from the sweet light crude extracted from the oil fields in Texas and North Dakota, most of the oil refineries in the Midwest and South Coast on the Gulf of Mexico are equipped to process the degrees of crude Except Heavy weight, and while the refineries located on the Atlantic coast seem qualified to deal with the new crude, there is a clear deficit in the infrastructure that links these refineries with the Gulf Coast and the states of the Midwest.

On the other hand, it is clear that there are fundamental differences between the structural problems in the more diversified oil market today, and the 1973 oil market on which the United States built the dreams of energy independence, and in today's market the concerns do not lie in a complete supply disruption but in price shocks (10) And given that oil is priced in a global market, the oil prices inside the American territories will remain linked to international prices, whether America imports oil or not, as well as the fact that Washington will continue to import large quantities of oil even if it becomes a net source.

In other words, we can say (11) that the extent of American consumers being affected by the rise in world oil prices does not depend on the amount of oil that their country imports, but on the extent of its dependence on oil regardless of its source, and this means that whatever the volume of American oil production, Washington will not be able Retreat from its role in protecting the global oil markets, securing shipping lanes, and ensuring a stable oil price with the ability to reach it for all countries according to the dynamics of supply and demand.

In light of this, we should be more careful in anticipating the repercussions of the energy revolution on American foreign policy, and it seems tempting to say that the oil revolution may make Washington less related to some regions of the world and specifically the oil-rich Middle Eastern countries, or it can use its influence The new oil has the effect of influencing the policies of hostile states, but the relationship between the growth of energy sources and the geopolitical influence is shrinking in general in a world where it does not seem that one or a group of forces can dominate conventional energy sources entirely, and with the shift of the center of gravity in Oil market from countries Producer to consumer countries due to the abundance of global supply.

This means that the most that the United States can do to exploit its new oil boom - if it wishes to do so - is to encourage the countries that are most dependent on oil and gas imports from hostile countries like Russia to obtain their energy needs from American lands instead, and Europe is counted Reliant on Russian gas is the most prominent example in this regard, although Washington may not be able to achieve this goal any time soon, because the integration of gas markets between the United States and Europe requires years of massive investment in infrastructure, as well as most of Europe F Replace cheap Russian gas in favor of the more expensive American gas.

We can conclude that the chances of the United States launching oil wars or using oil as a conventional weapon seem very limited at best, if not entirely impossible.

Reuters

Otherwise, America can take advantage of its oil boom to urge the new oil-consuming powers, foremost of which are China, to participate in the role of the global policeman to secure waterways and bottlenecks, fight piracy and ensure freedom of navigation, while gaining greater comfort in deploying and distributing American military assets in The Middle East is towards other parts of Asia and the Pacific as it appeared in the 2012 President Barack Obama's National Security Strategy, which shifted Washington's primary focus for the first time in a long time from the Middle East to Asia and the Pacific.

However, the United States itself will not be willing to allow a foreign power to control the global straits and waterways and contribute to shaping the global oil market, and would prefer to have the upper hand in this regard as it has always done before its oil boom, similarly, although Washington can use Its oil balance is to pressure the traditional oil producers in the Gulf to provide more political, military and financial support to the American foreign agenda in the same way that these countries used their previous oil influence to pressure Washington; despite this, the capital’s ability to achieve this goal remains limited At best, given that the US oil industry is not primarily designed to achieve this type of geopolitical goal.

Unlike the major oil companies in Russia, Saudi Arabia, and many OPEC countries, where production levels, investment priorities, and the size of reserves are mainly determined by governments that direct these decisions to achieve their geopolitical goals as the organization has done throughout its history, the US oil market is more divided and complex than that, where Investment and production decisions are made by many investors according to costs, financial returns and risk ratios. Therefore, decisions such as deliberately reducing production or lowering prices are not meaningful for profit-making companies only, and as a result of this structure To my pure capital for the industry, along with the fact that America is the largest producer and consumer of oil as well, and the fact that the oil market is divided between many centers of power; by combining that we conclude that the chances of the United States waging oil wars or using oil as a weapon have traditionally seemed limited Extremely at best, if not completely impossible.