Why middle east is important

The stability of global energy prices will continue to impact the US economy for the foreseeable future. The US shale industry has been a strategic success from a supply perspective but not without high volatility. In a boom and bust cycle reminiscent of the airline industry, companies have gained and lost fortunes thanks to oil price fluctuations. The latest decline from the Saudi-Russia oil price standoff in April was a case in point.

A wave of bankruptcies and bond downgrades have bogged down the industry, causing economic damage and increasing unemployment. Counter to the conventional wisdom that low prices are a boon for the US economy, they are a bust for the US energy industry. The United States should join this informal group to ensure a balanced oil market. In terms of US national energy policies, the Middle East will continue to be important. Given the outsized reserves and oil extraction costs of the oil-producing countries in the Middle East, the region plays a critical role in balancing global energy markets and helping maintain a stable and fair price.

China is filling many vacuums created by US disengagement or neglect. From Pakistan to Iran to Nigeria, China is striking economic deals to bolster its international power. It has established itself in the Middle East and continues to expand its connections and power.

China has not only dazzled countries with its mega infrastructure projects and loans, but has also made inroads through its technology companies such as Alibaba and Huawei. In addition to corporate activity, Chinese investors are beginning to invest in regional startups. While venture capital activity is still limited, Chinese investment firms are becoming increasingly active in key markets.

Given the projects and ties mentioned above, it is only natural that China is pursuing closer economic relations with Gulf Cooperation Council GCC countries. China will be the clear beneficiary should the United States continue to limit its engagement in the Middle East, adding to its sphere of influence. When China expands its economic relationships further, OPEC will likely keep Chinese interests in mind during the next oil crisis. US support to strengthen Middle Eastern economies can counterbalance the rising economic power of China that has already engulfed most of Asia and Africa and is knocking on the doors of Europe.

Hopelessness and youth are a dangerous combination. This explosive mixture combusted in the Arab Spring. While it may seem that the call for change has lost steam, it simmers in many corners of the Middle East. As the social contract between rulers and the citizenry continues to evolve, ensuring an engaged and productive populace will be critical to stability. While political reform is unlikely in the near term, reforming the economy to decrease unemployment and increase prosperity is high on the agenda.

Most countries in the Middle East are plagued with a large public sector and a weak private sector. This economic mix is unsustainable and will lead to failed states. If the past two administrations were wary about overcommitments in the Middle East pre-pandemic, Washington should be downright allergic to any unnecessary involvement in the time of Covid. Add to that crisis domestic unrest driven by severe polarization along class, racial and political lines and a loss of confidence and trust in our governing institutions.

Pressures from growing debt and deficits will impose severe fiscal constraints on pursuing anything but vital American interests abroad. A glance at the daily headlines underscores just how much U.

All these challenges have assumed far greater significance than the declining terrorist threat to the U. The last thing this country needs is to throw good money after bad in a futile search for opportunities to reform, let alone transform, the dysfunctional Middle East. Throughout most of this period, the Persian Gulf constituted a disproportionate share of global oil reserves and U.

Ancient history. With the growth of nonfossil energy sources, the discovery of large oil and natural gas deposits outside the Persian Gulf and increased domestic U. The price of oil has dropped significantly in recent years despite continued turmoil in major oil producing countries like Iraq, Iran and Libya, which together have removed billions of barrels of oil from international markets.

Still, oil production in the Gulf still accounts for about 20 percent of world oil output, and roughly one-third of total seaborne oil passes through the Strait of Hormuz.

Thus, maintaining stable global oil prices still depends in part on preventing significant interruptions in oil exports from the Gulf that would create a sudden and dramatic spike in the price of oil that markets would have difficulty adjusting to in the short term. This threat can be mitigated by maintaining the U.

Afghanistan and Iraq—the two longest wars in American history—are trillion-dollar social science projects that serve as poster children for the limitations of American power. The standard for victory in these conflicts was never: Could we win?

No amount of rationalization can justify the sacrifices made by Americans, Afghans and Iraqis given the paucity of the returns. It is magical thinking to believe that a less militarized foreign policy—one that relied more heavily on diplomacy, aid and democracy-building programs rather than the use of military force—could have secured better endings.

Sectarian, ethnic, regional and tribal rivalries; the dearth of leadership, rule of law, and basic freedoms; poor governance and weak institutions; the lack of transparency and respect for human rights and gender equality; and rampant corruption have created a broken and dysfunctional region beyond the capacity of America to ameliorate, let alone repair.

These are challenges that need to be owned and resolved primarily by those who live in the neighborhood. The two countries with the highest rate of growth in oil use are China and India, whose combined populations account for a third of humanity.

In the next 2 decades, China's oil consumption is expected to grow at a rate of 7. The reason why Persian Gulf countries' share of the world's energy pie is likely to increase has to do not only with geology but also with resource management. Exxon Mobil Corporation has estimated that non-OPEC production — this includes Russia and West Africa — will peak within a decade, making recoverable oil left outside the.

Middle East scarcer and scarcer Oil and Gas Journal, On the other hand, the reserve-to-production ratio among Persian Gulf producers ranges between 80 and years, allowing those countries to stay in the race decades after their competitors have depleted their reserves. Conventional wisdom, concerned only with the smooth functioning of the market, says that ownership of oil is meaningless, that it does not matter much if most of the world's oil is owned by one regime or the other.

But in the case of the Middle East, resource ownership does matter. In addition, there are problems that have no solution in sight and that will no doubt directly affect the supply of energy from the Middle East, among them a growing rift between Sunnis and Shiites, tensions between the West and an increasingly radicalized Muslim world, increasing terrorist activity against oil facilities, protectionism, lack of investment, unresolved border disputes and the growing uncertainty about the political stability of key energy producers like Saudi Arabia, Iran, and Iraq.

The energy security and national security problems resulting from reliance on a single energy resource that is primarily located in such a volatile area are likely to be intensified as demand for oil grows. Unable to display preview. Download preview PDF. Skip to main content. This service is more advanced with JavaScript available. Advertisement Hide. Authors Authors and affiliations Gal Luft. Conference paper.