Energy & Geopolitics Fundamentals
The geopolitics of energy continues to play a critical role in the world today, following the path paved during the Industrial Revolution. In relation to energy, the focus is mainly on the efforts to map out the suppliers and guarantee continued supply for a nation. Research and expert discourse divulge that the supply side of the equation is the driving force behind global security and development (Pascual and Elkind, 2010; Pascual, 2015). For decades, energy politics have remained multifaceted, and the same reality will continue into the future. Clearly, the foreign and economic policies of countries globally have revolved around the need to secure energy supply in the country (Pascual and Elkind, 2010). The Center on Global Energy Policy offers critical insights on the politics and policy decisions surrounding the issue of energy security (Pascual, 2015). Energy has economic, security, as well as environmental implications touching on all countries globally because of the criticality of the resource in contributing towards economic development.
Pascual (2015) introduces the intertwining nature of the concepts of energy and geopolitics. In the wake of the 20th century, energy became a critical force in the determination of many global events, including the course and outcome of conflicts, novel global cooperation created around energy resources, and the swinging of the price of energy, spurring or deterring the superpowers’ adventurism. The 20th century witnessed major instantaneous transformation within the sector, reconstructing the association between the energy and geopolitics (Pascual & Elkind, 2010). New resources emerged, bringing with them innovative geopolitical devices and opportunities. Issues, including economic and environmental have taken the fore with serious implications on mechanisms for navigating the energy and geopolitics nexus. The reality, particularly holds true for the United States, which glimpsed leverage in advancing its agenda within the global economy and politics following the vast production and exportation of hydrocarbons (Pascual, 2015). However, the change in the game is yet to be understood regarding how it will impact its global relations, especially in the Gulf region.
Research has clearly divulged opportunities and challenges, from a geopolitical viewpoint, especially relating to energy. According to International Security Advisory Board (2014), energy has the potential to create economic development or initiate instability to the nations. Besides the developing energy cooperation with Russia and the neighboring states, the continued changes in the markets are a clear signal of energy once again taking the place of a critical indicator of the engagement of the United States in the global arena. Energy is becoming a strategic and a determining factor in the policies made by the United States, primarily on the relationships with the outside world. The United States has always assumed a place of influence in the global energy markets, which has been evolving since the wake of the 20th century. The position taken by the U.S has always had serious policy implications for the country (Pascual & Elkind, 2010). Amid challenges, only time will tell the actual global implications of the connection between energy and geopolitics.
In the event of the relationship between energy and geopolitics, and the implications of the global superpowers on the main suppliers of energy, including the GCC States, it is plausible to note that the interplay of energy, security, and global politics are always transforming. Al-Maamary, Kazem, and Chaichan (2016) highlighted the flexible nature of the energy supply and demand, and hence the variables that it underlies. Pascual and Elkind (2010) elucidated the interchangeable connection between energy and the global politics with the economy. Energy has been a vital indicator of reality within the global system, deciding leading powers, cooperation, and the consequences of conflicts. Currently, the deliberations relating to energy are the indicators of the shape that the global system will assume in the future in the same way the security and political incidents of today are the shapers of the reality of tomorrow’s energy. In a few decades, the reality will be typified by energy realism’s dual impulses as revealed in the report by the International Security Advisory Board (2014).
The aspect of demand and supply of energy will determine the shape of the future of global alliances. Pascual and Elkind (2010) indicated that the United States has made steps to generate adequate energy to cater for the demands within its borders. However, the newly discovered oil and natural gas profusion may lead the policy makers to assume a more isolated stance within the international energy market. However, Kolb (2014) posited that such a policy decision would not be within the best interest of the country. From a geopolitical point of view, the energy has assumed a more global form, and the United States is integrated within the system, at least for the benefit of its economy (Perovic, Orttung, & Wenger, 2009). The United States would not desire to interfere with the dictates of the global market, for its economic and political well-being, and hence illustrating the reality of the country’s interests in the Middle East, and particularly the GCC. The country has always had and will continue to show a close attention on the region.
Chapter 1: History of the Energy Relationship
For a long time, the dependence of the United States on energy, particularly oil, has remained a major shaper of its foreign policy. The country’s energy development agenda has undergone major changes over different periods based on the variations in the demand and supply of different forms of energy (Wenger, Orttung & Perovic, 2009). The development and the ramifications, including environmental issues and geopolitical competition that has shaped the history, have attracted a great deal of scholarly and research interest. Economic development anchored on energy is the primary indicator of the significance of the commodity in the position held by the United States in the global political and economic system. Over the history, the United States remained one of the leading global players with an impact on energy supply/demand fundamentals. In addition, it will continue to exert influence on the economic and geopolitical trends in relation to energy as specified from the history.
The supply/demand realities of energy, primarily oil, have marked the relentlessly transforming reality of the relationships that the United States has entered into since the wake of the 20th century (Wenger, Orttung & Perovic, 2009). The interests of a relationship between the United States and Saudi Arabia, culminating in the formation of Aramco dates back to a period of a drop in the supply of oil in the wake of the First World War. At the same time, under the 1920 San Remo Petroleum Agreement, Great Britain and France had barred United States-based companies from oil exploration in Mesopotamia. On the other hand, the Standard Oil of California (SoCal) was among the American companies that were seeking opportunities for oil overseas, especially in the Arabian world. The opportunities emerged in the form of the ARAMCO, the origins of the Arabian American Oil Company, dating back to May 1933 (Robinson, Terpstra & Malcolm, 1991). During this period, the United States signed a concession with Saudi Arabia that would allow for oil exploration in the country. Under those premises, the exploration would be performed by CASOC, the subsidiary of SOCAL.
The interests of the United States in the deal were strengthened further by the purchase of a 50 percent stake of the concession by the Texas Oil Co. (Texaco). With the apparent success in getting oil from the Saudi Arabian land, the government of the United States continued to give incentives to the company to have adequate capital for continued exploration. One such incentive was the golden gimmick, a tax break that was given by the American government to all the companies that had a stake in ARAMCO. For decades, the United States would benefit from the oil drilled from the Saudi land, until the apparent American support for Israel, which resulted in the Saudi government gaining control over the company, and renaming the corporation as Saudi Arabian Oil Co. (Saudi Aramco) (Robinson, Terpstra, & Malcolm, 1991). However, this did not mark an end to the interests of the United States in the region as influenced by the desire for oil.
The relationship between the United States and the oil producers in the world has experienced some ups and downs with some critical events shaping it. The interest in the oil producing region has always been there, but United States has had some other interests in other countries, some of which destructively affected the United States-Arab world relationship (Wenger, Orttung, & Perovic, 2009). The year 1973 has gone down in history as a time when the United States was politically and economically shaken by the deliberation by the Organization of Arab Petroleum Exporting Countries (OPEC) to cut off the exportation of oil to the country that backed Israel during the military conflict with Syria. The economic downturn of the embargo has been long lasting in the country. In fact, the cost of gas increased as a result of the decline in the supply of the commodity. By the time the embargo came to a conclusion, the cost of gas had gone up from US$3 a barrel to almost $12 internationally (Kolb, 2014). The prices in the country were especially higher because of the direct impact of the embargo.
While the embargo was placed on the United States, the short and long-term effects were experienced globally in the form of an oil crisis, or “shock” (Pascual and Elkind, 2010). The global economy and politics were affected as the decision shaped the geopolitical discourse at the time and for years to come. In fact, “first oil shock,” was the name of the first disaster, which was later shadowed by “second oil shock” in 1979. In the United States, there was a wake-up call in the realization of the increased reliance of the Middle Eastern oil. The United States would react to the embargo by focusing on the vulnerability of the region to remain relevant in the region and have its interests served. The reality marking the period following the embargo was characterized by multiple conflicts and the country’s military interventions in the region (Pascual and Elkind, 2010). The interventions allowed the U.S. to remain relevant in the oil-producing region long after the country could produce a considerable quantity of its energy.
Iraq Invasion 1990/1991
Among the interventions of the United States in the oil producing zone was the first Iraq invasion between 1990 and 1991. The event leading to the invasion was the decision by the dictator Saddam Hussein to use disagreements on production of oil and border conflicts to order a military attack on one of its neighbors, Kuwait. The invasion was reviled by the United Nations Security Council, but the dictator defied the opposition to withdraw the military action. The United States led a coalition of allies to invade Iraq and force withdrawal from Kuwait. There were indications of the various interests of the United States in the region, having had suffered the effect of the embargo by OPEC in 1973 (Charountaki, 2014). The outcome of the invasion would allow the country to continue amassing its influence in the region, especially if the allies triumphed over the Hussein and toppled over his government. However, this was not the outcome of the invasion as the military action did not manage to overthrow the leader.
Experts have presented the claim that there is no conflict within the international arena that is one-dimensional, and hence the invasion of Iraq was not an exception (Shaffer, 2009). Besides the intention to help Kuwait free itself from Iraq, energy was a driving factor behind the intervention by the United States (Crystal, 1995). The policy makers in the country engaged in the conflict as an indicator of the country’s upper hand over the economic rivals and the potential for using the power to control the energy producing region. The war has been argued to be mainly about access to oil, prices, and profits. The invasion could be viewed from the perspective of the continued changes in the global oil industry (Charountaki, 2014). The United States could not allow Iraq to have the upper hand over the exploitation and the pricing strategies of energy. The actions of Saddam Hussein were a form of threat to the superpower and any effort to control the oil region had to be frustrated.
Iraq War 2003
A few years after the first invasion in Iraq, the United States and its allies invaded the country for the second time. In the wake of the September 11 2001, terrorist attack on the United States, President Bush led an invasion of Iraq as a part of the global war on terror. The invasion was carried out in two stages, the initial one being the epigrammatic conventional war that took place from March to April 2003. During this stage of the war, the United States and the United Kingdom engaged in the intervention, with the support of small contingents from a number of other states (Charountaki, 2014). In fact, the military and paramilitary troops in Iraq were defeated during this phase. The second phase is the indicator of the actual intention of the United States in invading the country. The second was an extended phase where the occupation took longer, from 2003 to 2011, when the United States led military presence was withdrawn from the country completely. During this time, the country exerted its economic and political control over the country and region.
According to Shaffer (2009), the military action was a part of the larger intervention that the United States had initiated in the region. In fact, all the efforts by the U.S. were directed as a part of having control over global energy resources. Among the main drivers of the invasion were the huge profits for oil conglomerates that would continue operating without the competition from weaker local companies. Global energy supplies would not remain the same in the face of a weaker Iraq, highlighting the primary focus to destabilize the already vulnerable Middle East further. Although the United States has its energy, it is in its economic interests to stabilize the global supply by guaranteeing that the Iraq oil flowed into the global market (Charountaki, 2014). The situation also assured that the United States companies had economic benefits from such a reality. The strategic economic plan for the United States was an expanded global supply with greater investment in the leading oil reserves in the Arab countries, and mostly in Iraq. The policy makers realized that the future of Iraq had a significant impact on the shape of the oil market globally.
US Historical Energy Map
Both demand and supply of oil in the United States have changed over time, with the generation of innovative sources of energy, amid changes in the consumption patterns (Charountaki, 2014). The United States has always been a huge consumer of energy, primarily because of the level of the country in terms of industrial and economic development. Since the 19th century, the country depended on coal, before petroleum became the prominent energy source. Ever since the late 19th century, petroleum has been the main fuel, but during the same time, usage of natural gas also augmented the consumption of energy (Kolb, 2014). Usage of coal made a comeback in the mid-20th century, which was primarily used in the generation of electric energy. Nuclear electric power emerged during the 20th century significantly contributing to the energy supply in the country. The consumption of natural gas and petroleum halted for a while before the 1970s before resuming growth. The general patterns of energy use in the country have remained fairly constant since the close of the 20th century. Although the country has developed its own energy, the Middle East remains relevant as far as source of energy is concerned.
The energy history of the United States has undergone critical changes with the development of new sources of energy. However, Rutledge (2006) expounded that the main fossil fuels, petroleum, and natural gas, and coal have remained critical, providing up to 87 percent of the overall primary energy consumption in the country. The reliance on these primary sources of energy indicates the significance of the countries that produce them relative to the United States. Figure 1 below shows the history of consumption of energy in the country. The importance of energy is highlighted by the policies, regulations, projects, and laws based on the target countries for continued energy security (Kolb, 2014). However, the country has major projects and has achieved considerable results in production of other sources of energy to decrease the dependence on the Middle East for energy supply. The 21st century has witnessed an increase in the production of nuclear as well as renewable energy aimed at reducing over-reliance on fossil fuel. These changes could alter the country’s energy map and also define the global energy markets in the coming decades.
In 1981, the global energy map once again changed with the cooperation between the main oil producers in the Gulf region. The Gulf Cooperation Council was inaugurated to present an economic and political coalition between the Persian Gulf states, excluding Iraq (Al-Maamary, Kazem & Chaichan, 2016). The coalition was created with the aim of coming up with regulations and controls for economic, social, and political setups of the region. The economic goal was to come up with a common currency for the member countries which would strengthen the economic performance of the oil producing region. Because of the presence of oil reserves, the region has been performing remarkably in terms of the economic performance. However, Charountaki (2014) indicated that the development has not been influenced from within, but from the investment made within the countries from outside. The boom in investment together with reserved revenue from petroleum allowed for the economic growth of the region in the close of the 20th century. However, the region has been performing poorly in the recent past, with deterioration in financial and external balances.
The countries comprising the GCC are the leading producers of oil, with the primary players among them being Saudi Arabia (Al-Maamary, Kazem & Chaichan, 2016). Overall, the countries produce 24 percent of the crude oil that is produced internationally. However, decades of dependence on the oil produced in the region, the United States has been looking within for the production of the oil consumed in the country and getting reserves for export. In the mid-2000s, the U.S. experienced a boom of shale oil, which exceeded that of Russia and Saudi Arabia. Given the importance of the United States as an exporter of oil from the region, the economic implication of the development in the United States has been major. Within the first part of the 21st century, between 2008 and 2014, there was a reduction of 23.74% in terms of the oil exported from Saudi Arabia by the United States. Overall, economic growth in the region has remained weak partly because of the American reality.
Chapter 2: Current Energy Relationship
Since the onset of the 21st century, the United States has gained ground in terms of generation of its own oil. The promise for the economic reality of the country is in the form of shale oil, a sedimentary rock which is fine grained and endowed with “kerogen.” The oil is generated through heating of the shale to separate the rock and kerogen. It is estimated that the United States has greater oil reserves than Saudi Arabia and Russia. From the Figure 2 below, it is evident that oil is a moving investment in the country. The reality promises the country a leading place in the production and exportation of oil in the global markets. The areas with the discovered reserves and those yet to be recovered make up 264bn barrels. The estimated reserves of Saudi Arabia are 212bn and for Russia 256bn (United States, 2015). Research continues in the efforts to discover more areas with the potential of generating more oil for the U.S.
Technological developments allow for a greater potential in the production of oil in the country. An analysis of the barrels that are economically and technologically feasible is performed by the energy sector towards the end of valuations as well the lasting environmental and health impacts within the producing countries. Research is ongoing, which shows a promising future for the U.S. in terms of oil production. The economic wellbeing of the country will be greatly impacted in the event that the promise continues. United States (2015) investigated what the reality means to the global markets, and more importantly to the GCC. In the event that the United States can produce an adequate supply of oil for internal consumption, it means that the country will not have to export from the GCC. In addition, if the United States can export oil into the global markets, it means that the stability of the market in the GCC zone will be negatively affected.
Policymakers in the United States have always been concerned about the reliance on imported gas for the economic performance of the country. Just like oil, there have been recent indicators of a boom in the production of gas, which is enough for use in the country and for export into the global energy markets. The discourse relating to the energy strength and vulnerabilities of the country has been changing with the continued gains in the production of natural gas. Kolb (2014) explicated the significance of the “shale revolution” in stimulating production of gas in the country. Technologically, the United States has been advancing, and hence generating novel approaches in the production of gas, which is adequate to cater for the supply-demand balance. The gas resources, like oil, are no longer a problem in the country.
Along with the increase in the production of natural gas in the country, the market has also been growing. Rutledge (2006) revealed that the modern age has seen the world consume more energy than ever before, a trend that will increase in the future. Hence, the world has witnessed intensification in the demand for energy. Therefore, the gas boom in the United States has come at the right time, where the global demand needs a matching supply. The market for the gas within the country is improved from the perspective of declining dependence on gas imports from other countries (Perovic, Orttung, & Wenger, 2009). Additionally, given the surplus evidence in the massive generation, the country has enough to export catering for the demands in the global market. There is a proof of the fact that the country is producing the amount of gas adequate to cater for domestic and global supply, although the future remains controversial.
New US Energy Map
The United States continue to produce more energy today compared to the 20th century. The energy infrastructure of the country indicates an increase in the region of the country covered by areas where energy is generated. The map is characterized by regions mapping coal mines, oil wells, and power plants. The Information Administration Energy (IAE) provides an interesting reality of the changes that have taken place in the geology of the country in the last few decades. It is estimated that petroleum is the source of over 35% of the overall energy in the country (United States, 2015). Based on the improvement of technology, production of petroleum in the country has almost doubled. In fact, the map of energy indicates that the country is able to produce and consume affordable as well as a reliable energy critical for the economic development of the country.
Statistics reveal that energy produced within the country has increased to approximately 91 percent of the energy used in the U.S. (see figure 3 below). The energy produced in the country in 2015 was approximately 89 quadrillion Btu. The reality indicates the decline in the reliance upon energy from outside the country for the local consumption. The difference between generation and use of the energy was primarily in the net importation of petroleum. Indeed, the petroleum, natural gas, as well as the coal is the predominant energy sources in the country. Data from the chart indicates that the natural gas yielded in the country was 32% of the overall production, where petroleum and coal stood at 28% and 21% correspondingly. The data also indicates considerable production of renewable and nuclear electric energy at 11% and 9%, respectively (EIA, 2016). Indeed, the statistics reveal an impressive image of the increasing reliability of the country regarding energy production.
New OPEC Policy
In the efforts by the United States to become a great producer and exporter of energy globally than the previous giants, it is critical to look at what other producers infer regarding its policy design. Among the policy focus for the United States has been OPEC, which for a long time has been in control of the global oil markets. Such supremacy allowed OPEC to control and even hike the prices of oil, hence creating negative economic impacts to countries, including the United States because of the dependence on the product for economic performance (Rutledge, 2006). A good example of the use of the power has been the 1973 embargo that affected not only the United States but also the world at large based on increased prices of energy.
The United States considers becoming a dominant supplier of energy in the global markets to prevent such control over the prices by OPEC. The policy highlights the criticality of being able to rival the previous leading oil producers. The policy deliberation is also based on the United States efforts to avoid being dependent on the OPEC for oil or natural gas, a reality that has in the past held the country hostage in terms of supply and pricing (United States, 2015). Generally, a future where the United States is not dependent on the Middle East for oil places it at a vantage point economically. In this case, the economy of the U.S. will operate without any restrictions initiated by any country or bloc in the region.
While the United States had in the 20th century engaged in direct interventions in the Middle East, the narrative appears to be changing, potentially because of the increased dependence of energy produced within the country. The best case in point is the Yemen War, which is among the conflicts that have cropped up in the 21st century. Such engagements might have driven the conflict, but largely disregarded by the Western powers. The conflict has its roots from the beginning of the 21st century, but it has intensified since the extensive intervention by Saudi Arabia, the main adversary of Iran (Shaffer, 2009). The intervention has received backing from the Arab states’ coalition. Unlike in the past where the US and its allies intervened directly in such conflicts, things appear different. While together with the UK, the country is in support of the coalition, they have offered restricted practical support. They have eschewed direct intervention but provided intelligence-sharing and training for the coalition states’ troupes.
Like in the case of Syria, the government of President Obama favored a hands-off strategy in dealing with the situation, favoring action through proxies instead of direct engagement. The diffidence was because of the recent trepidation by the United States of being involved in other wars in the Middle East, following decades of direct engagement in the 20th century. The recent years have seen the United States’ policymakers monopolize the diplomatic energy of the country to the detriment of the Middle Eastern regional wars, including the Yemen war. For the US, and potentially West, the message being communicated is that whatever crisis is in Yemen is not important. Clearly, the presence of the United States in the region is nothing like it was in the 20th century (Pascual and Elkind, 2010). Probably as a spillover effect, the United Nations security organs are appearing undisturbed by the reality of the conflict, regardless the fact that it amounts to a human rights violation situation.
Throughout the period of the war, the United States policy makers have continued to strategically align the interests of the country in matters relating to energy. Such is evident of the argument that the United States has always engaged in international interventions to the extent that its energy interests were met. Hence, whether and how to get involved in the Yemen war or any other conflict taking place in the region has a lot to do with its energy map in the present. The government of the United States, under President Obama considered the logistical and diplomatic backing to the adventure of Riyadh in the affected country as a means of lessening denigration of Saudi over the nuclear deal with Iran. Evidently, the energy interests of the United States still play out the foreign policy design, but not from the conventional view of the matter (Pascual, 2015). There appears to be a paradigm change in the discourse from the traditional energy sources to the modern sources, including nuclear power. The United States still involved, but at the present in a more clandestine way than in the preceding interventions.
US Energy Policy
The national energy policy in the United States is increasingly geared towards the efforts to make the country more energy sufficient. Clearly, such efforts are decisive as they underlie the capacity of the country to generate more employment and allow for sustainable economic growth and development. Thus, the energy policy is anchored on the necessity for the country to be a giant in the world, economically and militarily. For the past century, the policy makers have adopted measures to reduce the reliance on energy from exports through improvement of the internal sources. The policy has also ventured into the efforts to improve the consistency of the country’s electric grid, lower the cost of energy, and deal with the contemporary quandaries of environmental degradation and global warming. Programs are in place to drive the changes through technical support, tax incentives, and R&D in novel technologies (IEA, 2014). Evidently, the government has been relentless in the efforts to make it possible for the country to produce enough energy for its use and to gain surplus for exportation.
The United States policy makers have, in the past, been blamed by critics, from inside and outside, for not having a reasoned energy policy at the Federal level. However, there have been in place numerous tactical energy policy papers that the policymakers in the country have written over the past decade. The policy documents have been effective in dealing with the criticisms and guiding the economy of the country towards development of sustainable sources of energy and away from the fossil fuel. Among the commonly cited papers is the “President’s Blueprint for a Secure Energy Future” and the “All-of-the-Above Energy Strategy” (IEA, 2014, p. 2). There has also been the huge impact following the implementation of the American Recovery and Reinvestment Act of 2009 (ARRA). The policy has proven effective in improving the investment in the United States on energy production. The policy is geared towards development of clean energy and allowing efficiency in energy generation and use in the country. The Department of Energy (DOE), using the ARRA, has been able to invest in various green energy technologies and initiatives.
Steps have been made in the country to develop policies geared towards the reduction of greenhouse emissions, among them the controversial climate and greenhouse (GHG) gas policy. With such policy initiatives, the country would engage in the production of energy sources that are less damaging to the environment. When there was a convention of UNFCCC (United Nations Framework Convention on Climate Change) in 2009, the Obama administration committed itself to reduce by approximately 17% of all the gas emissions by 2020 from 2005 (IEA, 2014). In Georgetown University in 2013, the readiness to engage the US Congress in the efforts to reduce the emissions was restated by President Obama. The market-driven efforts by the government would largely draw the country away from using fossil fuel to the fuels that allow the achievement of this objective (IEA, 2014). Use of energy efficiency policies has major implications on the relationship between the United States and GCC States as producers of fossil fuel.
US Energy Integration with Canada
It is worth noting that the history of energy trade in North America has been in existence for long. In 1901, the United States-Canada border witnessed the pioneering global electricity interconnection. Reports relating to the history of energy indicate that the US was the main target for the energy, for internal use as well as for re-export following refining. Canada is the leading supplier of oil to the country (see figure 4 below).
While the country has achieved major strides in the production of energy, it still needs input from other countries, the main one being Canada. Figure 5 below shows a decline in 2016 in the production of oil, pointing to a need for imports that would cater for the deficit.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Production, processing, and use of energy in the region have undergone major changes in the past decade. The demand for electricity in the United States has gone down and the two countries, US and Canada, have engaged the efforts to decrease their emissions of greenhouse gasses from their operations associated with energy use (QER, 2015). Transforming the energy landscape in North America has been associated with major opportunities for the initiated market integration and development of policies geared towards environmental and economic goals. Major steps have been made in enabling the integration between the United States, not only with Canada but also with Mexico.
The US has initiated strategic alliances with Canada towards the end of increasing the trade in energy. The Caribbean region is among the areas the United States is targeting for its trade in energy. Policy makers in North America have the understanding and esteem the advantages associated with integrating the market for energy and other products. Also, because of the common environmental and security objectives, as well as the system undergirding the economy of the region, the alliance is critical to energy production and marketing in the United States. There are currently measures being put in place to ensure effective integration of the market. The integration between the United States and Canada has been successful in terms of increased trade between the two countries (QER, 2015). Trade in energy between the two countries in 2013 was estimated at $140 billion. On an annual basis, liquid fuels, electricity, and natural gas moved from the United States to Canada. Evidently, the integrated markets present major opportunities for the United States in energy trade.
The increased integration and upsurge in energy trade for the United States has major benefits for the players. In addition, the integration has implications for the nations that previously sold energy to the United States. It will not be business as usual that a country that depended on energy from the Middle East is now a producer and even an exporter of energy to other countries. The United States is currently in a position to move crude and refined energy products, electricity and natural gas into Canada, providing evidence of the capability that the country now has in terms of energy production (QER, 2015). By and large, it is clear that the Middle Eastern countries can no longer hold US at ransom because of its dependence on their energy. In addition, the integration of the market also limits the chances for the GCC States to export their energy into Canada as the United States is increasingly taking control over the market. Although production of energy is also increasing in Canada, it remains among the main targets for energy from the United States, with huge implications on the reality of the global energy markets.
The United States government has made major efforts to attain energy security. Among the concerted efforts being the proposal to develop the Keystone XL (KXL) Project. The project is a 36-inch-diameter, 1,179-mile (1,897km pipeline for transporting crude oil, which would terminate at the south of Steele City, Nebraska, all the way from Hardisty, Alberta (Terry, 2012). Alberta was chosen for the genesis of the pipeline because of the fact that it is rich in oil (see Figure 6). At Nebraska, the pipeline would connect to an existing pipe. After completion, it is estimated that the pipeline would deliver 830,000 barrels of oil every day. The pipeline would be similar to another line in operation, known as Keystone, but the route it would take would be direct, allowing for more effective delivery of oil (Terry, 2012). A part of the pipeline that runs south to the Gulf from Cushing in Oklahoma managed to be opened in January 2014. The coast has other ports and refineries for greater exportation of the oil. While it is controversial, the pipeline holds a lot of potential.
(Figure 4: QER, 2015).
The project has been put forward as a vital system with the capacity to promote economic development as well as energy security for the U.S. The recent evidence of the commitment by the government of the United States has been the signing of executive orders by President Donald Trump which are in support of the project. There are already 550,000 barrels of oil sent to the United States from Canada using the current Keystone Pipeline (Terry, 2012). The Alberta oil fields are landlocked, which means that it might be necessary to develop further the mechanisms for the oil to find its way into the international markets. Most of the oil refineries in North America are located in the Gulf Coast. Hence, the pipeline will benefit the two neighbors. Increasing the supply of oil into the United States from Canada suggests that the country will no longer have to depend on oil from the Middle East. From the economic analysis, the increase on the supply side of the curve suggests that there will be a decrease in the prices of oil in the country. In the same aspect, the consumers will be able to pay less for the product.
The United States is increasingly looking into the inside for the potentiality of being energy sufficient in the near future. Therefore, while the pipeline remains controversial, there is no doubt that it is one step towards achieving the goal. A greater level of stability is afforded in the United States, particularly with the possibility of looking for more oil from its neighbors as opposed to going far to obtain the product. Again, from the economic perspective, it is more cost-effective for the United States to move the oil from her neighbors (Terry, 2012). The move to get the oil from Canada is a strategic one for the United States, having had to depend on oil from the Middle East for so long. In addition, the move is a calculated one of the United States, having had designed measures to keep away from the Middle East for the energy resources. Such situations allow for the United States to look into better ways of finding strategic solutions.
Chapter 3: GCC States relationships
The current energy map of the United States has serious implications on the GCC states. From looking back at the energy reality in the world, the United States has had a great deal of strategic associations with the Arab states, mostly founded on the capacity of the region to generate energy that would be, in turn, used for the economic development of the United States. However, the current reality is very different from that of the past. With the growing development of the United States in achieving self-reliance in terms of energy, the global reality of energy markets is shifting (Pascual and Elkind, 2010). The United States is looking within and to the potential for regional market integration to cater for the demands for energy. Hence, there are more sources of energy than the Middle East and the GCC states, which mean that its involvement with these countries is changing.
In fact, to remedy the situation, the GCC states have to strategically align themselves within the global system to have a continued market for the oil. The GCC are working with an emphasis on the financial benefits from the oil. It is true that the grounds have shifted but it appears as though not everything is lost. The GCC has been opened up for a global discourse if only to find new markets or to improve on the current markets within the global arena (Pascual and Elkind, 2010). The GCC has realized the goal through establishing new relationships of strengthening the ones that were already in existence. Evidence from reports and research indicate that the GCC states are looking beyond the west to form alliances that will allow them access to energy markets. Some of the countries that the GCC states have a relationship with include China, Russia, India, and Turkey.
Relationship with China
Where the grounds have shifted, the GCC states appear to be changing the course of their global alliances, especially in relationships founded on energy trade. The states have realized that China has been expanding in economic index, being one of the fastest developing nations in the world today. Thus, a strategic relationship with the country would prove instrumental in providing expanded markets for the GCC states’ energy resources. The states seek a continued balance in terms of the relationship, an effort that is coming to reality based on the amount of trade the states have with China. The GCC states have come to the realization of the expansion of Beijing in its OBOR, including two arteries. The first one is the Silk Road Economic Belt. The second artery is the 21st century Maritime Silk Road (Karasik, 2016). There has been a recent visit by Xi in January 2016, indicating the aspect of strengthening ties between the two nations. The strategic intersection between the two regions includes the potential for a relationship founded on energy and minerals.
Therefore, it is imperative to have the two arteries that cross the maritime of the Arabian Peninsula as well the GCC states. It is well known in the GCC states that the Chinese government considers the criticality of the intersection to the success of OBOR. As a result, the strategic relationship between China and the GCC states is instrumental in ensuring the stability of the maritime. The interest of China in the Middle East is evident and might take the form of the United States in the 20th century, some evidence being witnessed in the recent involvement in then Yemen war. The fact that the Chinese government appears to be interested in the GCC states is an indicator of a future of an economic and political alliance between the GCC states and China (Karasik, 2016). However, given the dynamic nature of international relationships, it is not possible to know for sure the shape the relationship will take into the future. All evidence today points to a strategic relationship between the two regions as a function of common interests.
Relationship with Russia
The GCC, following the deteriorating relationship with the US, in terms of energy, is looking east. Russia is another country that the states are considering forming alliance with. The GCC has invested greatly in Russia in the recent past with the hope of motivating change in the country’s policy towards the region for political and economic benefits. Russia is among the power brokers in Syria, which was one indicator that things could change in the way the country relates to the GCC states (Perovic, Orttung and Wenger, 2009). With the US retreating from the region, the GCC states started to develop a resentful deference for Russia, given the fact that it has been considerate and consistent in its actions that impact the region, including in the recent conflicts in Syria. The GCC appears to have an impulse towards adjusting the source of control over the region, power being the main currency that influences reality in the region. Although Russia does not command much resources and military wherewithal compared to the United States, the country has a lot of impact on the power balance in the Middle East.
The past has not revealed any consistent policy of Russia towards the GCC states, but they remain hopeful that the situation might change in the near future. The efforts of Russia to assert a global influence are among the factors that might influence the power dynamics in the Middle East (Trends Working Paper, 2016). The reality is especially based on the power vacuum that is being left by the United States in the region. The reality of the involvement of Russia in the region is informed by the need to counter the global forces, particularly the United States. While this makes it challenging to define the actual Russian foreign policy in the region, there is no doubt that the future will see a great deal of its interest in the Middle East in the efforts to recover its economic strength. In addition, energy is the primary influences in any interest in the region, because this is the main power behind economic development in the global system.
Relationship with India
Another country in the east that the GCC states are targeting to strengthen the foreign relationships is India. India has also been performing well in terms of its economic strength and might prove instrumental in the efforts of the states to look beyond the United States. The relationship between India and the GCC states has been growing in strength by the day. The reality is informed by the realization of the significance and potential of each of the two in case of an alliance. The India-GCC relationship has the trade as the main pillar, the most traded resources being energy. The connection between the two regions appears to revolve around the high level of economic complementarity. The two have related for a long time based on the capacity to complement each other’s demands. The energy resources are increasingly meeting the energy demands of India that the GCC states command (Pethiyagoda, 2017). With the changes in the focus of the United States, the relationship might have to grow even stronger.
With the increasing economic power and command of Asian countries, including India, the GCC states might continue to focus on that side for the market and its energy resources and also in the efforts to shift global power dynamics. The Asian nations are emerging as global powers, particularly with their development in the economy, a factor that informs the efforts by the GCC states to redefine their relationship with those countries. As India evolves into a major global power, there will be a need for the country also to refine its relationship with the “extended neighborhood” (Pethiyagoda, 2017). Hence, given the reciprocal connection between the two regions, the future holds great potential for the India-GCC relationship. Evidence from the current trends indicate a future where the GCC states are more interested in doing business with the states in the east as opposed to the west. The development of energy security in the United States is a key indicator of the importance of the states to expand their territory regarding trade and commerce.
Relationship with Turkey
Turkey is another country that holds a lot of potential for the GCC regions amid the souring relationship with the United States. The 21st century has witnessed major strides being made in the relationship. Critical antecedents of the relationship transpired in the last century, but the coming to power of the AKP-led administration in 2002 marked the major break in the relationship. Research reports indicate an exceptional bond that has come up between the two regions, which has been viewed from the lens of economic and political interests. Since 2002, the relationship has become one of the institutionalized alliances with the GCC states, holding major potential for the economic interests of the two (Al-Atiqi, 2015). Turkey has been involved in the events that have taken place in the Middle East, including the Arab spring, an indicator of the potential for greater association. The GCC states and Turkey appear to be in agreement in terms of the strategies in dealing with the events in the region, such as the increasing Iranian influence and the Syrian conflict among others.
The two regions have engaged in fighting the Iranian-backed government in Syria, although through proxy wars, a reality that indicates the potential for a serious connection in economic and political spheres. The two have economic connections, the primary driver being the rich energy resources in the Middle East. The hydrocarbons available in the Middle East are the main indicator of the strategic economic alliance. However, the GCC states are also increasingly investing in real estate in Turkey, revealing the reciprocity of the relationship. Hence, with the changing dynamics of the global system, it appears to be in the best interest of the GCC states to strengthen the relationship (Al-Atiqi, 2015). The events at the beginning of the 21st century indicates the potential for the continued relationship, which means that the GCC states will have continued market in Turkey for the energy resources.
Conclusion and Final Recommendation
The United States, like any other industrialized economy, has its economic development pegged on its ability to have a sustainable source of energy. History has seen a major dependent on the energy from outside, particularly from the Middle East. During the 19th century and most of the 20th century, the country has been at the mercy of the countries in the region to sustain its energy consumption. The country, at the time, could not generate enough energy for consumption in the country leave alone for export to other regions. However, development in technology has uncovered great potential for the country regarding being a strong producer of energy, adequate for domestic consumption and even for export. The reality has greatly affected the dynamics of the global markets, with serious implications on the relationship between the country and the GCC states. In addition, it has seen the United States shift alliances and diminishing direct interventions in issues affecting the region.
Countries within the global system should prepare for continued changes in the economic landscape, with energy being the main force. The United States shifting grounds are just a tip of the iceberg. However, it is in the best interest of the players within the global system to be strategic in their decisions and policies that affect their dealings with others. It is true that the United States is no longer dependent on the GCC states and the region in general for its energy. However, it might not be in the best interests of the United States to cut all the ties with the region. The changes are already witnessing the GCC efforts to look east, which will have an impact on the global dynamics, a reality that will affect even the United States. Therefore, it is not in the best interests of the West to ignore such trends. Instead, even amid increasing energy sufficiency, the United States should continue to seek strategic alignment with the Middle East and the east to capitalize on the changes.
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