Iran is a problem that can be resolved as Alexander the Great solved the Gordian knot – whatever cannot be untied can be cut. Although a sudden and catastrophic event, buoyed by headlines, may push the price of oil to over $150, measures already taken will settle the situation relatively quickly. The handwringing public angst of politicians and pundits alike contemplating Israeli military action against Iran’s nuclear facilities is overblown, and for two reasons. Firstly, Iran’s neighbors in the Middle East are fastrevealing where their true loyalties lie – and it isn’t with Tehran – and secondly, Iran’s oil power is already declining.
Speaking at the biennial International Energy Forum conference in Kuwait in midMarch, Saudi oil minister Ali Al Naimi offered this commitment over Iranian oil exports: ‘Saudi Arabia and others remain poised to make good the shortfall, perceived or real, in crude oil supply.’ Right there, in that single sentence, is the bottom line which should allow Western politicians to rest easy on two counts. First, over the potential loss of Iranian oil in the wake of an Israeli strike; second, over the oftrepeated myth that a ‘conflagration across the Middle East’ would ensue.
The Saudis were offering assurances in response to a direct request from the US. But in the willingness of the Saudis and others to make such a commitment we can read plainly enough that Shia Iran does not actually have any real Sunni Arab friends, not least when Iran is on an ideologicallydriven, potentially nuclearpowered, mission.
Opec may currently be chaired by a former member of the Iranian Revolutionary Guard, but that will not mean its constituent members will allow themselves to be cajoled into another 1973style oil embargo should Iran be attacked. Opec members understand well enough that such an action would be more than likely to trigger a political reappraisal over energy in the West; one that would see Western public opinion swing behind fasttracking domestic shale gas and oil developments that would be in anything but the best interests of Opec members. And the threat to Opec isn’t just coming from shale gas and oil.
According to the World Energy Council, global proven reserves of natural gas liquids and crude oil stood at 1.2 trillion barrels in 2010, around four decades at current usage. New technology, new discoveries and high oil prices are reviving previously abandoned prospects. With oil shale pitching in a further 4.8 trillion barrels of oilinplace – around a century and half of oil at current usage – and oil sands around 6 trillion barrels more of oilinplace, hardly anyone is in the business of ‘peak oil’ scaremongering these days.
Even so, for a country with the world’s second largest oil reserves, Iran’s oil market ‘clout’ is already draining away. With the world’s second largest natural gas reserves Iran is incredibly a net importer of natural gas. This fact alone astonishes most students of the area and puts the government of Iran into a deeper loony bin than anybody could have envisioned.
According to the International Energy Agency, Iran’s share of oil production is set to fall from 4.9% in 2010 to 4.5% in 2015. Meanwhile, even with enormous shale oil development in prospect around the world, oil exploration budgets everywhere are ramping up for another bumper year.
Saudi Arabia produced around 10 million barrels of oil a day in February this year. It is likely to match that in March. At March’s IEA conference in Kuwait, one Saudi insider told the Oman Times there were no plans to increase supply in the months ahead. But that belies the fact that Saudi Arabia, Kuwait and the United Arab Emirates certainly have the joint capacity to ramp up production to help match an immediate Iranian shortfall.
The Mullahocracy in Tehran understands well enough that nuclear, not oil, is the way to go to achieve that which it most craves – a seat at the superpower top table. Whether sanctions could have worked is a moot point. In truth, they never really had a chance. Iran’s ‘rush to nuclear’ dictated timing. And, as a host of recent reports, including one from the IAEA, have made clear, time is running out if the world’s leading terroristsponsoring state is to be stopped.
But if conflict over Iran’s nuclear ambitions occurs two things are clear: Shia Iran’s Sunni ‘friends’ will not stand with them and, Iran or no Iran, there will be oil. OE
Michael J Economides is a professor at the Cullen College of Engineering, University of Houston, and editorinchief of the Energy Tribune, where Peter Glover is its Europe editor. The views expressed in this column do not necessarily reflect OE’s position.