Over 75 percent of all known oil reserves is found in Muslim countries. A gigantic amount of oil travels through or near Muslims countries, including across some risky transit choke points. Oil accounts for about 36 percent of all energy use in the world. Over 96 percent of all world modern transport energy comes from oil. About 43 percent of all oil travels by ship, and most of that goes out of, through, or near Muslim countries.
One of these transport choke points is the Malacca Straights that is between Indonesia and Malaysia. 2/3 of oil going to China and the rest of East Asia goes through there. The channel is very narrow. Up to 11 million barrels a day would have to be rerouted, with the concomitant increases in demand for tanker space, increasing insurance rates, and possibly a $100-150 (or more) per barrel price until the straights are unblocked. The oil price may not drop back to pre-closure levels due to the then increased perception of risk in world oil markets.
The Straights of Hormuz in the Gulf, with Iran on one side and the UAE and Oman on the other, is also very narrow. Iran recently tested a new torpedo nearby. The region is not exactly the most stable. If it is blocked up to 15 million barrels a day could be cut off until it is opened again, or other routes can be secured to reroute at best a small amount of it. The alternative pipelines out of Saudi Arabia could not take up much of the lost oil transported if Hormuz is blocked in any significant way by war or the sinking of ships. (Which makes one wonder why alternative routed here and near other potential chokes points are not already being significantly developed.) This could be a very expensive problem for the world, and would likely, like other major oil chokes, lead to large increases in unemployment and inflation, and a fairly large hit to international trade and finance.
If that is not enough to think about, we also have large amounts of energy and other traffic going through the Bosphorus in Turkey, the Suez Canal and the Sumed pipeline in Egypt, Bab al Mandab between Yemen and Djibouti, and across major pipelines and rail tracks in Central Asia and many volatile and potentially volatile areas.
Furthermore, other parts of the world’s energy infrastructure are more fragile in places than some would like to admit. For example, extremists tried to attack Ab Qaiq, a huge oil processing facility in Saudi Arabia, a few weeks ago. If they were successful then up to 6 million barrels a day of the world total of 85 million barrels of day of production could have been lost for, possibly, days or months or even a year, depending on how much damage they caused. They, or others, will likely try again. 6 million barrels a day is a big enough percentage of the overall supply to send prices going up to well over $150-200 a barrel, with correspondingly huge increases in the price of gasoline, diesel, plastics, food, and more in the US. Even the loss of 1 million barrels a day could push prices up considerably, especially of that cut off is due to war or an act of terror. There are other such energy infrastructure vulnerabilities.
Even though most US imports of oil and natural gas come from the Western Hemisphere, from places like Canada, Mexico, Venezuela, and Trinidad and, oil markets are world markets. What happens in one major source, even if it is not a large source to the US, can have great consequences for the US economy, and to the wallets, jobs and livelihoods of Americans. Oil prices are world prices, even if they differ across grades of oil.
Serious damage to major oil facilities, closing or damaging transport routes, and anything else that could significantly cut off supplies oil and gas across and from these countries can hit home here pretty hard. Much of the damage could occur in the short run, and in the medium and long runs national and world economies can adjust to such price and resource shocks, but in the meanwhile the poor and other vulnerable groups could be the most harmed (as usual), and, possibly there could be more social strife and even a few governments could fall in some strategically important areas. Many less developed countries are more reliant on oil than the developed ones.
Many governments and others are working to keep these sea-lanes and other potential transport chokepoints open; and major energy infrastructure nodes and zones safe and secure. But does it not seem that the old argument that good intelligence and force will always prevail seems to have fallen into the dustbin of strategic history? Are we not facing a much more complex and fluid world than we have at many times in our past?
Significant parts of many countries’ defense budgets could be connected with protecting oil-rich areas. There are also massive effective subsidies in many parts of the world to be found in royalty agreements, exploration agreements, tax breaks, resource depletion write-offs and more.
Those in-kind and other subsidies are effectively significant distortions in energy and other markets. Such subsidies also lead to a slowing down of one of the major initiatives the world needs to make: to gradually, but more rapidly, move away from oil as such a dominant source of energy in order to not only help improve our environment, but also to help bring us better energy security world wide. I am not talking about jettisoning oil altogether, but am recommending that greater efforts be put forth to develop more secure energy supply portfolios. (It seems the internationally integrated oil companies are seeing the future also. They are some of the biggest investors in new energy technologies and alternative energy systems.) Carefully, gradually, yet fairly quickly (5-10 years) taking off some of these subsidies would make the markets move more rationally into a new energy future. However, this may prove to be politically infeasible, most particularly in the US where cheap energy is seen as almost a cultural entitlement.
Furthermore, moving some of these indirect subsidies could have effects on other national and human security issues, and we need to take these into account. These are not simple problems; nor are there easy answers to them. Oil will be a big part of our energy futures for some time, but it should be best part of a more rational and thoughtful energy system that takes into consideration the systematic nature of our environment, our security situations, and our very complex energy potentials.
Oil really has a lock on transport fuels, and to a lesser extent industrial fuels. It and coal are major sources of CO2, acid rain, numerous pollutants, and other greenhouse gases that contribute to global warming and other environmental and health problems. As Amory Lovins and others have pointed out: there are many medium- to long-term (30-50 years) answers to: how can we move from oil? Continuing the subsidies will slow down that required progression into a better future.
Moreover, if we continue to engage in the tit-for-tat stumbling into a clash of civilizations, it may be likely only a matter of time until something happens to one or more of the important oil transport nodes and networks described.
In the better of all possible worlds the chances of this potentially enormously deadly and costly clash of civilizations will fade in the memories of the world. In the worst possible of worlds it will happen big time, and we will be in a very sorry mess indeed, and for many more reasons than just the oil prices.
The fact that oil is one of the many reasons behind increasing inter-cultural and other tensions adds complexity to the situation. Carefully, rationally and sensibly moving from oil, and diplomatically, energetically and humanly moving toward a safer, more secure world are two of the most important human security objectives we face, not just in the United States, but in the world.
Professor Paul Sullivan
National Defense University and Georgetown University (All opinions expressed are those of the author alone.)
Operation Breakfast Redux