DAMMAM, 3 April — US President George W. Bush has recently urged the US Senate to back his plan to open parts of Alaska to oil drilling. While the president has cited energy security and economic security as the primary motivation for pursuing oil exploration, his mention of energy independence may have a wider impact.
Renewed calls for “energy independence” especially in the US are being heard for sometime now aftermath of the Sept. 11 attacks. These rightwing voices have nothing to do with “energy security” or “economic security” and their only objective is to decrease the country’s reliance on imports, especially from the Middle East. Being minority and jingoistic opinion, their effectiveness leading to a large-scale shift in energy markets can be shrugged off by the oil cartel.
Little cause for any concern notwithstanding, strategic thinking and futuristic planning calls on the oil-exporting countries for the consideration of possible disruption in the oil markets. If import cuts were to occur in any of the major oil-importing nations, among the OPEC, it will be the countries in the Middle East which will be singled out for segregation.
Since these voices for “energy independence” come in the context of a post Sept. 11 world, their political nature can lead to a search for political solutions by the oil cartel. That may be flawed thinking. Instead, the OPEC planners should focus on a non-political response to any such crisis. Whatever the motive, import cuts by any country should be best viewed as demand variation by oil-exporting countries.
Oil commands respect in more ways than one in the modern oil-driven civilization of ours. Yet, seen from the perspective of trade and commerce, oil should be viewed at par with other commodities and the same degree of caution should be exercised while determining current and future oil demand. No doubt, even today, oil producing countries can display a sense of confidence on the issue of oil demand.
On current evidence, it’s apt to say that oil demand weakens in a cooling economy, but doesn’t plummet like many other goods and commodities. Despite global recession, oil exporting countries have not plunged into crisis that has come to be identified, for instance, with some of the Southeast Asian countries largely dependent on exports.
The impact of fewer imports by the West in the Southeast Asian countries has a striking parallel if the oil-exporting countries were to face similar situations. Relative to their economies, high-tech exports are a significant factor that shapes the stability of Southeast Asian countries. In the same vein, oil exports are a key determinant of the economic outlook for the oil-exporting countries.
The response of Southeast Asian economies in the face of a US recession has been dismal and any rebound is linked to the fate of the US economy. Nevertheless, economic thought and government decisions in these countries have rekindled newer approaches to sustain their economies. The Southeast Asian experience should be food for thought and action for Middle East countries. Moreover, unlike the Southeast Asian countries, the oil-exporters in the Middle East have two advantages. For one, should there be large disruption in oil demand, the economies of these countries will not have an immediate impact as observed in Southeast Asia. Secondly, new buyers for oil will be easier to find. Continuous globalization and economic development around the world will only increase oil and energy requirements in many developing nations. It will be prudent on the part of these countries to identify and develop these new markets. Additionally, oil-exporters should continue to look for other avenues of income. This has always been on the agenda of long-term planning in these countries. However, their dedication to oil has prevented from directing resources and fostering ideas to make alternate revenue streams a reality. There is no better time than now to embark on this journey and make the possible alternate sources reasonably strong if not rival the might of oil. Broad-based economy has many benefits but most remarkable of them all is that it will have no single point of failure.
