Oil, often dubbed 'Black gold,' has long been the lifeblood of the global economy, driving industrialisation, transportation, and geopolitical strategies. Oil use comes from either being used to propel vehicles, heat buildings or being burned and used to create steam which generates energy. The current annual global energy consumption is estimated at 580 million terajoules and 40% is made from oil, emphasising its current importance in global energy markets. Furthermore, the Middle East has accounted for the majority of oil production for a long time and today, their share in the oil production market is just shy of 30%. However, countries like Russia, the USA and China have entered the market due to technological advancements which could undermine the Middle East's previous dominance. Therefore, the Middle East's oil, which has historically played a vital role in shaping global energy markets and geopolitical dynamics, is a potentially declining market as there are shifting trends in energy production and consumption which raise questions about its continued dominance and whether it does indeed still have the global importance that it once had.
Middle Eastern nations have been endowed with abundant oil reserves, holding sway over the world's energy landscapes since the mid-20th century. The first large deposit of oil discovered in the Middle East dates back to 1908 however, the production made from oil, didn't kick off properly until after World War II. Soon after, oil became the world's primary energy source, and the Middle East were at the forefront of this. By 1974, the Middle East was producing an all-time high of 37.4% of oil and contained over 50% of the world's proven oil reserves, and countries like Saudi Arabia, Iraq, UAE, and Qatar emerged as major players. In September 1960, OPEC was formed consisting of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela and its power was quickly acknowledged when it accounted for half of the global oil production in the 1970s. Countries didn't understand how much they relied on oil, particularly Great Britain and the USA who suffered alongside most of the world when OPEC decided to impose an oil embargo in 1973 and prices increased by 400%. This was made to punish countries supporting Israel in the Yom Kippur War and Richard Nixon famously set up 'Project Independence' afterwards. Shockwaves were sent through global markets, with stagflation occurring in the USA, high inflation of 16% and a record budget deficit in the UK. Furthermore, the world was struggling to cope economically with the absurd price of energy which proved the vital role of the Middle East in the distribution of oil globally.
In comparison to today, Middle Eastern countries collectively produce over 30% of the world's crude oil, with Saudi Arabia leading the pack. Furthermore, OPEC remains equally important in co-ordinating and unifying petroleum policies among Member countries which are still predominantly Middle Eastern. In addition, the strategic location of the Middle East oil reserves remains advantageous, due to the easy access to major shipping routes, enabling their critical role in ensuring global energy security to continue. Oil itself remains incredibly important since it fuels all modes of transport like cars which 80% still rely on petrol. However, this figure stood at 99.6% in 2016 which shows the rapid increase in electric car use which implies that oil may not provide so big a role in transportation soon as it once did. Moreover, oil infrastructure is well distributed and high quality, making it low-cost to extract and cheaper in comparison to renewables. Lastly, many nations, particularly oil-producing nations, rely heavily on oil revenues to fund government expenditures and support economic growth and a disruption in this market would have significant economic consequences globally. Meanwhile, due to population growth and increasing infrastructure, oil demand rose 2.3mb/d to 101.7mb/d in 2023. Therefore, due to the high oil demand, it remains an indispensable commodity in the global economy. However, does the Middle East still play a powerful role in dictating the global oil markets?
In recent years, technological advancements have unlocked new oil reserves outside of the Middle East, reshaping global energy dynamics. Off the back of the oil crisis in 1973, the USA signed the Energy Security Act in 1980 which sets about the USA heading towards an energy-dependent country. Now, the USA, having been propelled by a shale revolution, has emerged as the world's largest crude oil producer accounting for 18.9% compared to Saudi Arabia's 13% in second. Furthermore, Russia has wielded significant influence as the second-largest oil producer globally, due to its oil and gas-rich provinces. Lastly, China now ranks 4th in the world in oil production due to the several large oil fields possessed within its borders. This massive surge in large nations entering the oil market is largely due to technological advancements that have enabled extraction to be cheaper and more effective but also new processes like fracking have been implemented. Therefore, these developments have diversified global oil supply sources, challenging the historical dominance of Middle Eastern oil.
Despite the rise of alternative energy sources and increased production outside the Middle East, Middle Eastern oil continues to play a central role in meeting global energy demand. Displayed by the ongoing reliance on petrol to fuel cars, buses, ships, and jets and increasing demand. Whilst major nations outside the Middle East are making significant headway in oil production, the Middle East still produces around the same share of oil it has throughout the last 60 years. Currently, many Asian countries are taking more Middle Eastern crudes with examples like Japan making up 98.1% of its imports on it in February 2023. Furthermore, Saudi Arabia is China's main crude oil supplier with nearly 87.5 million metric tons worth of crude oil imported in 2022. Therefore, showing the maintained reliance on Middle Eastern oil and how a disruption in trade could affect major nations' economies like China and in turn impact global markets. This questions the message of recent organisations gaining traction like 'Just Stop Oil' as in doing so immediately, it would be impossible to meet world energy needs and most likely 6 billion people would die within a year. Therefore, oil made and sold from the Middle East still makes the world go around as the demand and supply are higher than ever before.
As the world grapples with the imperative of reducing carbon emissions, renewable energy sources like solar and wind power are gaining traction questioning oil's importance in the future. The Middle East holds the bulk of OPEC oil reserves amounting to around 55% of the world's proven oil reserves. However, this benefit is only likely to last 50 years, as it'll no longer be profitable for the Arab States to produce oil as the costs will greatly outweigh the gains. Furthermore, the world is tackling the issue of Climate Change, and the United Nations COP conferences plus the Paris 2050 aim for countries to be solely reliant on renewable energy which would massively impact the oil market for the Middle East. Therefore, we have seen Middle Eastern oil-dependent countries, such as Saudi Arabia and the UAE investing in diversifying their economies into sectors such as tourism to reduce reliance on oil revenues. In addition, The IRENA estimates that by 2050, 90% of the world's energy will be renewable. Therefore, despite the Middle East having a major role in global oil markets, their future looks pessimistic which is likely why countries are keen to make as much money as they can now, while they can. Therefore, a collaboration between oil-producing nations and renewable energy innovators is essential to navigate the transition towards a more sustainable future.
https://www.iea.org/regions/middle-east
