Does the Middle East Matter?

Does the Middle East Matter?
By Peter Glover
Energy Tribune
Sep. 19, 2007

The May and June issues of the British magazine Prospect hosted a fascinating spat over the strategic importance of the Middle East. In May, “The Middle of Nowhere” by Edward Luttwak, a senior advisor at the Center for Strategic and International Studies in Washington, D.C., made the case that “despite its oil this backward region is less relevant than ever, and it would be better for everyone if the rest of the world learned to ignore it.” Strong stuff.

Enter David Strahan, author of The Last Oil Shock, with a June letter demolishing Luttwak’s critical claim that the importance of Middle East oil is declining, summed up in his pithy counter-assertion, “It’s the oil, stupid.” We agree with Strahan’s conclusion, but with two amendments. Not only does Middle East energy still matter, it will soon matter increasingly – and…it’s the oil and gas, stupid.

As Strahan says, many of Luttwak’s political points “ring horribly true.” Luttwak attacks the oft-repeated fallacy that solving the Israeli-Palestinian conflict is the key to resolving Arab/Muslim-Western tensions. Luttwak also uses statistics to bolster his point that the region is “remarkably unproductive” with a correspondingly low per capita income as a result: “Despite its oil wealth, the entire Middle East generated under 4 percent of global GDP in 2006 – less than Germany.” But it is in his assertion that the region’s relevance is diminishing because “global dependence on Middle Eastern oil is declining,” and the assumption that the region’s energy reserves are unimportant, that Luttwak ultimately gets it badly wrong.

Strahan rightly points out, “Luttwak claims the Middle East is irrelevant because it produces little but petroleum. Hasn’t he heard that oil provides 95 percent of all transport energy and that spikes in oil price have precipitated every major recession in the last 30 years?”

Luttwak comments: “The region produces under 30 percent of the world’s crude oil compared to almost 40 percent in 1974-75. In 2005, 17 percent of American oil imports came from the Gulf, compared to 28 percent in 1975.” True enough. But as Strahan counters, “This is unlikely to last. Non-OPEC production will peak by 2010 or soon after. According to the International Energy Agency, the U.S. Department of Energy, Exxon Mobil, Shell and PFC Energy…OPEC will soon have to provide a much bigger proportion of global supply – almost 50 percent by 2030 according to the IEA – mostly from the Middle East.” However, Strahan acknowledges: “There are well-justified fears that OPEC output will also peak within the next decade…so dragging global oil production into terminal decline. Since OPEC controls 75 percent of known reserves – overwhelmingly concentrated in the Middle East – this can only make the region more critical, not less.” While ET concurs that the region’s importance is growing, we do not agree with Strahan’s overly alarmist view of what he terms the “imminent extinction of Petroleum Man,” central to his thesis in his book, The Last Oil Shock. (A timely, though poorly written, corrective to Strahan’s peak oil theory can be found in the recent The Battle for the Barrels by Duncan Clarke, Profile Books.)