New oil technology helps U.S.A wean itself from the Middle East

For decades the USA has been a powerhouse economy and what happens over there affects the world’s economy and in turn ours back here in Australia.

So I read with interest that by the end of this decade America will halve its reliance on Middle East oil and could end it completely by 2035.

The shift, a result of technological advances that are unlocking new sources of oil in shale-rock formations, oil sands and deep beneath the ocean floor, carries profound consequences for the U.S. economy and energy security.

According to a report in the Wall Street Journal  a good portion of this bounty comes from the widespread use of hydraulic fracturing, or fracking, a technique perfected during the last decade in U.S. fields previously deemed not worth tampering with.

Whereas at one point there were real and serious concerns about the ability to maintain sustainable access of supplies to the United States if there were disruptions in the Middle East By 2035, oil shipments from the Middle East to North America “could almost be nonexistent,” the Organization of Petroleum Exporting Countries recently predicted, partly because more efficient car engines and a growing supply of renewable fuel will help curb demand.

The change achieves a long-sought goal of U.S. policy-making: to draw more oil from nearby, stable sources and less from a volatile region half a world away.

Apart from the prospect of years of steady or even falling oil prices, there will be interesting economic and political ramifications from this change.

Political implications

Dependence on Middle East oil has shaped American foreign, national-security and defence policies for most of the last half century.

It helped drive the U.S. into active participation in the search for Arab-Israeli peace; drove Washington into close alignments with the monarchies of the Persian Gulf states; compelled it to side with Iraq during its war with Iran; prompted it to then turn against Iraq after its invasion of Kuwait, bringing about the first Persian Gulf war; and prompted Washington to then build up and sustain its military presence in the region.

Whatever the success such strategies had in ensuring American influence in the region, all also came at a price. Involvement in the Arab-Israeli peace process brought the U.S. the enmity of many of the region’s most radical forces upset at the failure to create a Palestinian state. The decision to build up an American military presence in the region was used as a rationale for anti-American agitation and attacks by al Qaeda and other extremist forces.

The shift away from Middle Eastern oil is likely to also have significant economic consequences, which you can read about in the Wall Street Journal.

It is likely to lead to a stronger US economy, but don’t write off the Middle East just yet as the drop in American energy imports comes at a time when hundreds of millions in the developing world are beginning to consume more energy as they rise from poverty.



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