By Tom Fowdy
For the past 100 years and more, oil has become the keystone resource of the human economic world. Displacing older substances such as coal, crude has essentially (and literally) been the "engine" which keeps our world running. From cars, to trains, planes and all manners of industrial production, almost everything has hinged upon access to oil, which in turn has made it a "make or break" substance for prosperity even to the point of causing wars.
While disruptions to the world's oil supply are not new, with those living through the 1970s being well aware, as the global economy has expanded and consumption has never stopped growing, the implications of losing "access" have become ever steeper. As a result, while the current conflict in Iran has not "turned the lights out" as the 1973 Arab oil embargo did with the Yom Kippur War, it is nonetheless brewing a slow-motion shockwave which will permanently re-write markets and economies alike.
For most of the 20th century, the world's energy model looked like this: The wealthy Arabian Gulf States exported oil to global markets in a carefully backed arrangement in exchange for Western security and military protection. The United States had subsequently positioned itself in the Middle East to project "power" over the majority of the world's oil supply, with a long-term foreign policy strategy of ensuring that hostile regimes were never able to gain influence over it. Hence, the US sought to beat back Saddam Hussein's aggression against his neighbours while also containing post-1979 revolutionary Iran.
As a part of this arrangement with the Arab world, the credibility of America's role in the region rested upon securing peace between Israel, Palestine and its neighbours, or at least the appearance of doing so. This subsequently involved constraining Tel-Aviv's behaviour and aggression against others. Thus, despite America's wars in the region, above all the Middle East has had to be a precarious diplomatic balancing act to obtain their interests, ensuring that this "energy and defence" pillar which it had structured its approach with was upheld, and for most of the time, even if the US's choices were questionable (such as Iraq 2003), it largely upheld the status quo… that was, until Donald Trump came into office.
Since 2017, American foreign policy in the Middle East has disintegrated from a "careful balancing act" (even if always supportive of Tel-Aviv) into explicit and unconditional appeasement of Israel. The first Donald Trump administration followed the Israeli lobby's demand to dismantle Barack Obama's "Iran" deal and worse, promote one-sided recognition of Tel-Aviv through the "Abraham Accords," which involved unilaterally buying Arab acceptance of the country without any concessions for Palestinians. This enabled further Israeli aggression, and subsequently laid the foundations for the October 7th, 2023, attack by Hamas which opened the Gaza, and then Iran wars.
The Iran war, based on a faulty premise that the regime could be swiftly terminated, has destroyed the pillar of American energy policy in the Middle East. Iran has closed the Strait of Hormuz, Trump does not have a solution to reopen it, and the Gulf States, long having banked on American protection, were instead attacked. This has sent oil consistently over $100 a barrel, with the President repeatedly attempting to bring it down through vain PR stunts. This conundrum in the Middle East has only been made more unfortunate by the fact that another major global oil supplier, Russia, is also waging a simultaneous conflict in Ukraine in opposition to Western interests. While the United States has its own oil supply, the accumulative events of these conflicts have left many countries with "nowhere to go" and exposed the precarious nature of the Middle Eastern oil arrangement. Even if this war were to end tomorrow, the political and economic consensus is that energy security is now a fundamental strategic problem which cannot be ignored, and all it takes is one conflict to cripple access to strategic resources and bring about economic disaster.
So where does the world go from here? Although originally intended for climate change, ironically, more countries may be forced to go down the path of renewable energy and reduce their dependency on oil products. As the Wall Street Journal notes: "one country above all stands to benefit" with China dominating "renewable energy supply chains, producing a vast majority of the world's solar panels, wind turbines, batteries and electric vehicles." The war has only increased the scale of this, with the article further noting: "Chinese battery maker CATL has seen its Hong Kong-listed shares jump 29.5 percent and its Shenzhen-listed shares rise 13.6 percent."
While of course China's boom in renewable energy goods has also raises further geopolitical questions over supply chains and dependency, with the previous Biden administration seeking to push back against it, Trump's policies have only further cemented this reality. After all, a country who has massive capacity in renewables, even if purchased from China, at least has greater energy security. For most countries, it is seen as the least bad option, not least because the events in the Middle East have shattered a decades-old economic paradigm. For the first time, countries are now having to think "beyond oil," not just in terms of the environment and the planet's future, but more so what it also affects today.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
Opinion | Is the effort to 'contain' China starting to fail?
Opinion | Trump's talk of seizing Iran's Kharg Island will be another disaster in the making
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