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Jerusalem Center for Public Affairs
Strategic Alliances for a Secure, Connected, and Prosperous Region

The Berlin Wall of Mideast Oil Comes Down

Filed under: Israel, Saudi Arabia, U.S. Policy
Publication: Dore Gold Articles

Israel Hayom

In 1945, despite his poor medical condition, President Franklin Roosevelt decided to meet with King Abdul Aziz of Saudi Arabia aboard an American destroyer in Egypt’s Great Bitter Lake. The background to the unusual meeting was a radical transformation of the world oil market.

Washington had become aware of the fact that because of the need to provide fuel for the allies in the Second World War, the US had drawn down its domestic reserves of oil in Texas and Oklahoma. Saudi Arabia, and the Middle East were seen as an alternative long-term source of supply. An influential geologist told the US government in 1944: “the center of gravity of world oil is shifting to the Middle East. “

The geologist was right. Back in 1948, 64 per cent of world oil production came from the US. But by 1972, the US was only producing 22 per cent of world oil as Middle Eastern production grew. As a result, US foreign policy had to find a balance between the goal of safeguarding access to Saudi oil, whose production it sought to encourage, and the US commitment to promote the rights of the Jewish people to a national home and later to the security of Israel.

This tension reached its high-point during the Yom Kippur War, in 1973, when the US decided to airlift military supplies to Israel and King Faisal, the son of Abdul Aziz, initiated an oil embargo against the United States. The price of oil skyrocketed. After the fall of the Shah of Iran in 1979 oil prices in the US shot up again. US policy on the Middle East appeared at times to be held hostage to the volatile nature of politics in the region. But now it appears that the historic dependence of the US on Middle Eastern oil is about to change dramatically.

David Ignatius is one of the most knowledgeable commentators on the Middle East for the Washington Post. In an article on May 5, he reported that a major internal commercial report for the oil industry was predicting that by 2020, because of the expansion of oil and gas production from shale, the US was about to become the world’s No. 1 producer of oil, gas and biofuels, pulling ahead of Saudi Arabia and Russia.

As this transformation occurred, it was expected that US energy imports of oil and gas would plummet — if they constituted 52 per cent of American energy demand in 2010, the US would only need to import about 22 per cent of oil and gas from outside its borders by 2020 — and not necessarily from the Middle East.

The international political implications of this change are immense. Ignatius quotes one of the experts with whom he consulted as saying that for the energy industry what was happening was the “equivalent of the Berlin Wall coming down”. The US would no longer have to rely on Middle Eastern oil, he added: “…the trauma of the 1973 oil embargo is ending now.”

Indeed the situation for the U.S. gets even better if the picture across the entire Western hemisphere is taken into account. British Petroleum is predicting that by 2030, the entire Western Hemisphere will be energy self-sufficient. There are a number of reasons for this optimism. For years, Brazil developed an ethanol industry to produce fuel for its cars. But now Brazil has discovered huge oil reserves off shore in the South Atlantic.

But the real good news is Canada. In the province of Alberta are enormous oil sands that could supply the US if the 2,700 km, “Keystone Pipeline” is built. This is a subject of a fierce political debate in the U.S., for President Obama appears to be sympathetic with the arguments of the green lobby against the pipeline, while the Republicans are arguing that America must be free from Middle Eastern oil.

Israel needs to reach peace treaties with its neighbors. But the terms of any agreement should not be influenced by Western dependence on Middle Eastern oil, which undoubtedly prompted the international diplomatic pressures on Israel in the past. There is no reason why Israel should feel compelled to race back to the 1967 lines, but rather should protect its legal right to defensible borders, without the sword of Middle East oil hanging over its head.