Energy and Security in the Arab Gulf

In the long range, it is expected that the rise in oil prices lead to a reduction in demand, and thus the price collapse, which gives industrial powers effective mechanisms of adaptation. In addition, it could help the petroleum partnership agreements made by the International Energy Agency IEA in 1974, and the United States to maintain a strategic reserve of oil. However, it should be noted that many of those that did not participate in the agreements and the International Energy Agency, or did not follow the plan, may be exposed to devastating effects in the case of the rapid rise in oil prices.
The rise of oil prices in 1990-1991 took India to the brink of bankruptcy and forced it to make radical reforms. Many emerging economies today are facing a similar position. The impact of good exporters from the low price is that it encourages consumption and therefore greater reliance on the security cheap Gulf oil. In the long run, low prices might lead to a retreat from efforts to maintain strong oil industry, and develop alternatives to petroleum economy. The negative effects, is that low prices directly affect the returns, and therefore the budgets of the oil producing Gulf States will cause serious political problems.

Low returns also limit the size of domestic capital that could be invested in major oil producers’ infrastructure of new oil. As a result, the growing pressure on the countries of the Gulf Cooperation Council GCC, and Iran, to amend their national policies does not encourage foreign investment in the oil sector.

The demand on energy will increase, by 2020, three times more than it was in the 1970s, and this growing demand will be saturated by oil, natural gas, and coal. The energy needs of the newly industrialized nations will increase to double by 2010. It is expected that the global demand for oil will increase from 71.6 million barrels a day in 1997 to more than 115 million barrels a day by 2020. In 1995, the States of the Organization for Economic Cooperation and Development OECD consumed about two thirds of world oil supplies. In the next two decades, it is expected to consume about one third of these countries the increase in demand only.

There is an urgent need to increase production, especially in Saudi Arabia. Saudi Arabia possesses a quarter of known oil reserve in the world (and appreciation 265 billion barrels) and it is the only state who is able to meet American and global demand. The Ministry of American energy production says that Saudi oil must double, in the next twenty years, from 11.4 million to 23.1 million barrels a day, to meet the expected global needs. However, the increased production of 11.7 million barrels per day – the equivalent of the current total production to the United States and Canada – would cost hundreds of billions of dollars, there will be immense technical and logistical challenges. Analysts believe that the best way to achieve the necessary increase is to persuade Saudi Arabia to open its oil sector to the huge investments of the American oil companies. Under the energy plan by the American administration, this is what entirely by the President. Nevertheless, any American effort to exert pressure on Riyadh to allow the largest American oil investments in the Kingdom is expected to get a great deal of resistance from the royal family, which nationalized American oil companies in the 1970s.

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