For a few years now, there has been increasing talk of the renewed independence of the United States from Middle East oil, due to the rising level of gas and shale oil production. This week, the International Energy Agency issued a report confirming that rising supplies of oil from North America, from the US and Canada, have caused a shock in global oil supply and a fundamental change in international markets; this rising level of supply is relieving markets, which have seen limited increases in oil production capacities. Based on this report, balance between supply and demand over the next five years will improve. At the end of last month, Ali al-Nuaymi, Saudi Arabia's oil minister, gave a speech in Washington in which he welcomed this development in the US, hinting at contradictions in some previous American expectations, which had talked about "peak oil" and that the end of the oil era was approaching. In his speech, al-Nuaymi observed that he had not heard such predictions recently, saying that the fear of shortfalls in supplies were now replaced by fears about too much oil. Al-Nuaymi affirmed what was shown by the IEA report on the energy sector in the US, namely that it is seeing striking development of a large reserve of shale oil, which has led to a big change in the oil industry. "It's good news, because it helps in the American economic recovery, creates jobs and helps in seeing more stability in the global economy," he added. "However, the talk about ending American dependence on Middle East oil is a silly notion, because global markets are interconnected." No doubt, the end of America's foreign energy dependence will invigorate its economy locally but it will remain linked to the world's economy, especially countries such as China, and Africa and Asia, which depend a great deal on supplies from the Middle East. International oil prices will remain linked to these supplies, which will remain fundamentally important factors in the stability of the global economy. However, this huge transformation in the American oil market, the world's largest, will have a big impact on oil countries in the Middle East. Oil supply has grown because of North America, and Brazil and Canada, and heavy oil from Venezuela, due to the rise in Middle East oil prices. If the price of a barrel from the Middle East had been $80 or less, international oil firms would not have been encouraged to explore for oil in places where extraction is more difficult and more expensive, such as oil sands in Canada, and subsalt oil in Brazil. Oil states in the Middle East have become used to budgets based on around $90 to $100 a barrel, and it has become difficult for them to increase their production to reduce prices, so that their oil can compete against other types of oil. Thus, Middle East oil countries have become significant exporters but they do not control the international oil arena the way they used to. This means that if these countries do not offer attractive projects for global oil firms, these companies will not be interested in getting involved. For example, Total refused to enter a project to develop a field in Iraq based on a price of $2 a barrel, while Exxon withdrew from a project in southern Iraq, preferring the Kurdish Regional Government area, where conditions are better. These oil states can no longer impose their conditions on companies that are looking for opportunities wherever they can. In addition, oil states in the Middle East have become used to budgets based on high prices of oil, and it is difficult for these budgets to instead become based on lower-priced oil for the sake of better competition. Oil prices will remain in the $90 to $100 per barrel range, based on a number of reports, as long as there is political uncertainty in several oil countries, among them Libya. This country has recovered its pre-uprising production levels but suffers from security conditions that prevent the return of employees to oil companies there. There is also Nigeria, and Algeria, which experienced a terrorist attack at Amenas, and sanctions on Iran, and a war in Syria that threatens the region. However, Middle East oil countries should adapt their economies in order to become significant, but not dominant, players in the market, and this requires long-term efforts and vision.
