The 1970s marked a turning point in the relationship between oil and power. It was a decade when upheavals in the Middle East held the West 'over a barrel'- quite literally, giving rise to the so-called petro-politics that have hitherto dominated the global stage. First came the 1973 crisis, when OPEC's Arab members curtailed supplies in response to the Yom Kippur war. Six years later, the Iranian revolution prompted a second supply shock.
Forever more, foreign and economic policy would remain inextricably intertwined, as the most industrialised states scrambled to stay close to their suppliers, turning a blind eye to their ideological differences, and in some cases even going to war -- so desperate they were to secure access to fossil fuels.
Today that familiar cycle is coming to an end - and fast.
A shale oil boom in the United States has for some years been subtly rewriting the oil production hierarchy, turning the world's biggest consumer of energy into its most significant producer according to the International Energy Agency. Add to the mix a slower growth pattern in China - and new oil discoveries elsewhere - and the price of a barrel of crude has tumbled 30 percent in the second half of 2014 alone. While the price swings may have been swift and sudden, the ramifications of an energy independent America are likely to live on with us for years to come, altering the traditional axis of power as the nation's commitment to a troubled, oil-rich Middle East begins to wane.
What’s more: a sharp drop in the value of oil today could help the West settle old scores tomorrow without the need for traditional punitive measures - like sanctions for rogue states such as Iran and Russia, redrawing the code of international diplomacy. Why? Because at below 100 dollars a barrel, the price of petroleum becomes more effective than embargoes.
With a budget based on an estimated of 135 dollars, analysts reckon 2014’s low value for oil has likely thrown Tehran’s financial planning seriously out of line.
Banned from trading with the world’s major markets and locked out of dollar funding, the shrinking value of Iran's main export has potential to undermine the stability of the current regime, jeopardising Hassan Rouhani's pledge to provide jobs and growth for the country's youthful population.
In Russia, where the budget reportedly targets 100 dollars, the shortfall will only exacerbate an economy already on the brink of recession thanks to sanctions over its incursion into Ukraine. The nation has given up propping up the Rouble and can't go on spending its reserves to make up the difference without prompting a spike in consumer prices - which have already reached a three year high.
Oil’s slide won’t bring down all the world’s autocracies single-handedly. But from 2015 onwards it will usher in a new era: one of oil-induced domestic prosperity for the US and a shift in the planet's power balance.
OPEC - whose clout has been dwindling for years - will become less relevant. Oil will become more abundant and green technology will be refined to give hydrocarbons a run for their money. If such events come to pass it could be the age when our petro-paranoia may soon come to an end.
Source: The Warsaw Voice