World oil in 2001 grew by close to 5% annually rather than the rate 2% that was projected by private oil industry analysts and the international energy agency.
In examining both short-and long term risks to the oil market, consideration must given to the private government inventories, spare productive capacity and producer diversity in maintaining market equilibrium at moderate levels during the periods of turbulence.
There are now special economic and geopolitical risks associated with addressing the world's increasing thirst for oil by accepting expand reliance on a single geopolitical area — Persian Gulf — which is fraught with political instability and socio-economic challenges.
From the energy security point of view, consuming countries benefit when global oil production comes from as diverse a base as possible. Many options exist to enhance the diversity of the world's oil productive base. Enhancing technology transfer and encouraging resource development in politically-unstable regions such as Asia, Africa, Central Asia.
Great consideration also must be given to the cost and benefits of thwarting upstream oilfield investment in Iran given its prolific resource wealth. Careful consideration must be given to factors that are now emerging that could potentially change the geopolitics of oil into the next century.
A repeat of 1990 where a real loss of exports from Persian Gulf or elsewhere occurred would wreak havoc on oil markets under current circumstances. Closure of the Strait of Hormuz at the entrance of the Persian Gulf, for example, would necessitate the release of government-held strategic stocks in consuming countries.
If Saudi Arabia or Iranian supplies were cut off for a period of time, the market reaction would be severe.
The oil market has become co modified and globalized in recent years. Oil is no longer sold mainly through exclusive, long term, fixed price contract arrangement with a handful of major suppliers but rather on a free- market floating price basis with a multitude of players.
The free market environment of the 1990's has broadened the issue of energy security from a national security matter to an international one. For the US, energy security means both guarding the domestic economy and international financial systems. However, energy security is not solely an economic question but enters the realm of the political to the extent that large increase in income are distributed to countries that use the money to facilitate their support for terrorists.
In the 21st century, energy security could take on new geopolitical meaning if the predicted changes materialized in the balance of resources around the world.
Iran's challenge to the political balance of power in Persian Gulf manifests itself in two fashions: through its ideological challenge to the legitimacy of neighboring Arab regime ad through its abilities to pose military challenge to the free passage of oil through the vital Strait of Hormuz. Iran so far remained relatively unsuccessful in actively propagating and disseminating its ideas to the Persian Gulf states.
Outside of its ideological support for radical movement, another area of Iran's military focus has been the Strait of Hormuz. At the present time. About 25% of the world's supply of crude oil transits through the Strait. The volume includes oil exports from Iran, UAE, Saudi Aravbia, Kuwait, and Qatar.
Arsenal of defensive weapons has been placed on the islands of Abu Musa, Greater Tumb, Lesser Tumb (all 3 islands belong to Iran and not the UAE). The real future aggressor and danger in this region seems to be the UAE for its claim over the Iranian islands.
I like to mention that UAE has one of thPirouz Mojtahed-Zadehe worst and undemocratic governments in this region with its political prisoners, the absence of ethical principles, and human trafficking. Also child negligence and abuse are common in the UAE, as well as under age prostitution, corruption, drug abuse and interfering in the political situation of other countries such as Iran.
The three Iranian islands lie close to Persian Gulf shipping lanes and at the center of a territorial dispute between Iran and the undemocratic UAE regime. Its regime remains in power with the backing of British intelligence.
Individual Persian Gulf countries have their own plans for energy development. But a plan for regional energy policy does not exist. This is an industry with expensive Greenfield infrastructure costs that requires large markets. Cooperation in energy could serve as a major catalyst for regional development and integration.
The critical component to a common energy policy is the construction and administration of pipelines throughout the region. The pipeline network and associated facilities would provide immediate economic boost to the region. Literature — Amy Jaffe: political, social, economical trends in the Middle East. — Kenneth M, Pollack: Securing the Persian Gulf, — James A Russel: political and economical transition on. Peninsula. — Christopher Preble: After victory toward a new military posture in the Persian Gulf