Oil is back in headlines. Not for price reasons, rather for political considerations!

Crude has been one of the major issues President George W. Bush dealt with in his State of Union speech recently. Politics continues to play havoc with the global crude markets in a rather big way.

President Bush pledged to reduce the American dependence on Middle East by reducing crude imports from the region by 75 percent, it caught many off guard.

Many felt it was more directed at the domestic audience. In the absence of a serious master plan, on ways to reduce this dependence, it appears more of a hollow call, apparently to silence his critics who blamed him for the nation’s growing problems these days, many asserted. Easier said indeed than done!

The United States today imports, almost half of its total requirement - averagely over 10 million barrels a day of crude - from all over the globe. The imports from Saudi Arabia in the last few months have averaged around 1.2 million barrels per day. The combined crude exports form the region has roughly been around 2.0-2.2 million barrels a day. Thus the crude supplies to the US from the region averages about 20 -22 percent of the total US crude imports currently.

Global crude consumption in the meantime is also rising - slowly but steadily. And although one may wish to the contrary, the fact remains that the incremental supplies in future too have to come from this very region. Despite pumping in excess of 35 billion barrels into the global markets over the past five years, the proven oil reserves in the region have reportedly surged by nearly 68 billion barrels over the same period.

By the beginning of 2006, the recoverable crude oil resources in the Arab region and Iran peaked at nearly 743.1 billion barrels, compared to 675.6 billion barrels at the end of 2000, the Energy Information Administration (EIA) of the US Department of Energy said in a recent report. The reserves at the beginning of 2006 thus accounted for nearly 57.5 percent of the world’s total extractable oil potential of around 1.29 trillion barrels. The reserves are thus much higher than the current market share of the region and in future, if the supplies get tight, this would only have to creep up.

According to Paris based OECD energy watchdog IEA forecasts, the oil exports from the region was destined to go up from the current 29 million bpd to 33 million bpd in 2010 and 50 million bpd by 2030.

The Saudi crude production, according to the IEA was in the meantime, also expected to go up from the current 10.4 million bpd to 11.9 million bpd in 2010 and over 18 million bpd by 2030, roughly the period by when President Bush is pledging to drastically cut the dependence on the Middle Eastern crude.

Hence despite the pledge the global call on crude from the region is all set to grow. The IEA estimates that if other constants remain same, and indeed that is a significant if, the region’s (Middle East and North Africa) share in the global crude market would go up from the current 35 percent to 44 percent by 2030.

As per the conservative estimates of IEA at least $1 trillion is required to be invested in the sector, by 2030, if it has to meet the growing global demands. And in the wake of such political rhetoric, to reduce dependence without having a real blue print in hand, Bush is doing no service to any one. It could only be disastrous, not only to the US interests but in fact to the interests of the entire energy thirsty world.

In the absence of clear cut, viable alternatives, such pronouncement could dry out investments in the sector, serve no purpose and could be a recipe for disaster. One needs to be a little more pragmatic and this is all what one would like Bush to be at this stage.