The Oil Bomb Is Waiting To Explode

Greater Middle East (Photo credit: Wikipedia)

In one of our earlier articles, we mentioned how India is slowly progressing towards sustainability by investing in green energy and technology. We all know that such steps are usually long-run and take a significant time to realize. But till that happens, should we be condemned to depend on conventional, non-renewable resources of energy? How sustainable is that given we import almost all of our oil, and also, coal reserves in the country are not of good, high-carbon variety?

As the Indian elephant struggles to keep its pace with the changing global economic scenario, one thing is out there at large – that we, as a country, are heavily dependent on oil-producing nations for the sustenance of our growth momentum. The bad news is that the Middle East is on fire, in the true sense of the word, and we are not as strong as Uncle Sam, to have our writ extending in such geopolitical matters. We don’t really have a choice, but to cry and sigh.

US Plays Smart

The US created Taliban to contain growing influence of the USSR in Afghanistan. They taught innocent youth that Islam was at risk in their own land due to communists, who believed in no God. Though the US succeeded in its Cold War policy, it created a Frankenstein monster, which came to devour the American turf on 9/11. Till then, the US intervened in the Middle East, just to secure its oil interests (yes, they talked big, “democracy, change, etc.” then, too), or to be at loggerheads with Iran, the country that openly declared the US and Israel as enemy states after 1979. Saudi Arabia, otherwise the hub of Sunni Islam, found it comfortable to be lovey-dovey with the US (that couldn’t help but be friends with Israel). The US provided Saudi’s authoritarian regime protection against an aggressive Shia-majority Iran; in turn, Saudi had no issues being close to a nation that was being run by strong Jewish lobby, otherwise considered the paramount enemy by fundamentalist Muslims. Should we give greater evidence that the world runs for power aspirations, and religion truly is used by those in power to misguide laymen and keep them oppressed?

Nothing Is Same

But a lot has changed now. The biggest watershed event being the discovery of Shale gad in the US; the country used to be a gas importer, but now can well export it. The last century was known as the century of oil; this would be known for the dominance of gas. Now when the US is self-sufficient for her energy needs, and has also secured energy contracts from Canada, they have no incentive to play the boss in the Middle East, and unnecessarily make more enemies. Not that they have learnt their lessons; they bombed Iraq to destruction for no reason and didn’t even spare Libya – how many more Osama Bin Ladens would they want to create? They don’t care; they have enough arsenal to destroy the world nine times, and now when they have not much to worry about, they are going to exit Afghanistan, when the Middle East is burning.

At such a juncture, they wanted India to assume a bigger role in Asia Pacific. Yeah, right – smart way to shift fundamentalist attention to the country that is still reeling under the pressure of basic issues like poverty, hunger and of course, terrorism. Great that our ministers played smart, and said, “Thanks, but no, thanks!”

Why Should I care?

So how does this concern us? In a huge way; unlike the US we haven’t made any leviathan Shale gas discovery. We still import a majority of our conventional energy resources. An unstable Middle East is no good news for us. Add to this the fact that the West in not particularly happy with Iran’s nuclear shenanigans. If Iran were to close the Strait of Hormuz, it would escalate into a war – ensuring a huge blow to our energy needs. So what? It will impact other countries, too. Well, yes, but not all countries house 17 per cent population of the world. If we were to look at comparable economies, then Brazil and South Africa can easily access Venezuelan oil; Russia has the largest gas reserves, and China has too huge foreign exchange reserves to bother.

Oil Prices Artificially High

It’s not that oil prices have plummeted due to weakened demand. Global production levels are on an all-time low; there are hushed voices that tell us that China is manipulating its growth number and the Dragon may report sick anytime soon. Still, prices went down marginally, only to recover, all thanks to the ongoing uncertainty in the Middle East. The political landscape is not what it used to be; Syria is killing her own populace, and Libya, Yemen and Egypt are witnessing historic transitions. Any tension in the region and $200 a barrel oil bomb will be a horror that we shall all witness.

India has tried in vain to enter in deals with Central Asian countries to deliver natural gas through pipelines; this was important when the pipeline project with Iran went into cold box. The biggest pain-point is that the pipeline from Turkmenistan passes through Pakistan and Afghanistan – the countries that are witnessing mass unrest. The $7.6 billion investment, to construct the pipeline, can prove infructuous, and we won’t get the gas.

With such challenges in sight, may God save us; America is just fine and so are many other countries. If there’s no contingency plan to deal with the oil addiction, we may not even continue  witnessing this 6.5 per cent GDP growth.