Energy Politics has began to shape of the world to come

M.Nuri YILIDIRIM Turkish Ambassador (R) Dursun YILDIZ  Expert 23 June 2014 Introduction A world increasingly dependent on energy to drive economic growth and prosperity  makes easy to  look at the world through a geostrategic lens.But  assessing the impact of these new resources is not so simple . Energy demand is increasing rapidly and is largely met by fossil fuels and by hydraulic and nuclear power. The development of shale gas, currently the source of half the natural gas production in the United States. This development will totally change the world energy equation as well as USA  energy dependency to abroad. Analysis of the global energy issues region by region and details the geopolitical aspects would be benefical to understand  gradually transition from uni-polar system of the world order to  multi-polar  system(1). Potential strategic impact of the changing energy landscape on global economic and geopolitical relations is geting more important in the new world. Even if the concrete geostrategic impacts thus far have been limited, there have clearly been changes in national and international perceptions. Big energy producers like Russia and Saudi Arabia, producers aspiring for a greater role in world markets like Iran, Iraq, and Mexico, large energy consumers like China, Europe, and Japan, and,  United States, have all shifted their domestic or foreign policies in response to perceived changes in strategic context resulting (or expected to result) from tight oil and shale gas development. Shale Gas has  Defined a New Map In the last ten years, U.S. shale gas and tight oil production has skyrocketed. Between 2005 and 2014, U.S. production of crude oil and natural gas has risen by nearly 65 and 34 percent, respectively, due to tight oil and shale gas development.[1] The shale gas supplies from Pennsylvania alone equal the entire natural gas export capacity of Qatar, the world’s second largest natural gas exporter in 2012[2] A new map of global economic power will be  redrawn by American shale gas and new energy geopolitics . It could change prompting an American-Russian rivalry over the export of energy to Europe and Asia.And many in Asia now look to America as the next emerging market to fuel global economic growth. The 2011 Fukushima Daiichi nuclear disaster accelerated the turn to natural gas; in its aftermath, Japan and then Germany cut their dependence on nuclear power. Now experts predict that by 2035, natural gas consumption could grow by more than 50 percent, from 3.3 trillion cubic meters a year to 5.1 trillion — 25 percent of expected global energy demand(1). North Dakota and Texas oil production equal Iraq’s current production Even if it is risky business to  extrapolate long-term  conclusions from a resource  with such a short production  history but  thus far, technology and production practices have exceeded expectations, resulting in higher and higher production estimates as experience grows. The increase from light tight oil production in places like North Dakota and Texas over the last five years is equivalent to Iraq’s current production levels. These increased energy supplies have fed not only national but global markets, helping to offset other market disruptions and stabilize prices, to the benefit of many. New production techniques have meant that resource deposits around the world previously considered uneconomic to access have become “technically recoverable,” significantly adding to the global resource balance sheet. According to one preliminary assessment, 137 shale formations in the United States and 41 other countries hold around 10 percent of technically recoverable global crude oil and 32 percent of global natural gas.[1] [1] EIA, “Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States,” June 13, 2013, 10, http://www.eia.gov/analysis/studies/worldshalegas/. Notably, this assessment captures only a portion of the new energy potential, as it does not include some of the most hydrocarbon-rich countries in the Middle East and elsewhere. adsız U.S. tight oil and shale gas shifted Energy Markets  U.S. tight oil and shale gas production along with slower demand growth has decreased the United States’ need for imports. As a result, traditional U.S. suppliers are increasingly servicing other markets[1] At the same time that U.S. energy imports are falling, its exports are  rising. New sources of energy are also altering commercial competitiveness and investment decisions for both companies and countries. As a result, the hierarchy of energy projects is being reordered, at least temporarily shifting capital investments to the U.S. energy sector and away from more expensive and/or risky locations. The sudden surge in U.S energy supply and consequent reduction in natural gas prices have made North America among the most attractive and competitive places in the world to locate energy intensive endeavors. [1] Imports of gas and oil are down 28 and 16 percent, respectively, since 2005, based on calculations data from EIA. adsız Natural Gas prices in USA Already, natural gas prices in America have fallen to less than half of the $17 to $18 per million B.T.U.s that they are in Asia. There is plenty of gas in energy hubs like Qatar, or under the Mediterranean and South China Seas, but it would be very costly to extract and transport, making it difficult for Asian economies to maintain their current cost advantages. So in coming decades, manufacturers may well find it difficult to justify paying twice as much for Middle Eastern gas imported to China as they would for natural gas extracted in the United States. In such a world, China could find itself struggling more in its role as America’s main trade rival, and in the geostrategic role it feels its national wealth can buy. But that doesn’t mean a shale gas revolution ensures America’s unrivaled primacy. Instead, it would shift the focus of rivalry in the direction of competition between America and Russia (and, in the future, perhaps Iran), for the position of the world’s most powerful energy supplier. Iran and Russia have the largest reserves Iran and Russia have the largest reserves of natural gas in the world, and that will not change soon. Their reserves are cheaper and easier to extract than much of America’s, because they do not require the advanced technology and vast water resources that shale gas extraction demands. Nor does extraction from traditional sources carry as many risks to the environment as shale gas does, with its dependence on fracking(3). So it is conceivable that Russia and Iran would use their gas to lure manufacturing to their own territory, in the way China once used cheap labor. But it is more likely that Russia — and Iran, too, if agreement over its nuclear program allowed the lifting of sanctions — would simply get richer by supplying cheap gas to America’s economic rivals, and in the process keep them economically competitive with America. Russia and China (Korea,Japan)  Gas Deal Russia already plays such a role with Germany, providing it with gas at prices comparable to what American manufacturers pay. The recent $400 billion gas deal between Russia and China promises to guarantee China low energy costs by one day allowing China, like Germany, to get Russian gas through pipelines. Russia could also enter into a similar agreement with Korea and Japan(3). In this scenario, there is a geostrategic challenge for the United States: Russia could emerge with great sway over both the supply and the price of natural gas, potentially playing the role that Saudi Arabia played at the height of global dependence on Middle Eastern oil, and making all of America’s main economic rivals in Europe and Asia dependent on Russia. USA has  developed a global energy strategy United States has already  started   to develop a global energy strategy, designed to compete with Russia and to provide both Europe and Asia with viable alternatives to Russian gas. We have to drawn your attention that One of the most strategical step would be to help  China to  develop its shale gas reserves. adsız China will be  second game changer in energy   politics after USA if USA could help China develop its own shale gas. Most important, Congress  ready to approve the export of America’s natural gas and support the building of terminals for shipping it. And USA plan to seal long-term gas deals with Europe and Asia. adsız Multi polar world The gradual decline of the USA as a world power is already taking place. USA will continue to occupy the centre-place but will see its role as a single great power being replaced by a multi-polar world driven by the resurgence of Russia, China and independence of the European Union. To a large extent the world is already showing signs of this shift in polarity. Although still a leader on the technological front, there are increasing doubts regarding the moral authority wielded by the USA. On the military front too, the country has faced several defeats: they have been unsuccessful in controlling the spread of the Taliban in Afghanistan; USA invasion of Iraq has been heavily criticized. In the aftermath of the 2008 financial crisis the country has also faced tremendous economic erosion(3). Russia and China are contributing to the shift in power equations. Both Russia and China are rapidly modernizing their military technology. Russia has already demonstrated its position of power through its strong actions in Ukraine. Russia’s oil and China’s economic prowess have strengthened the political positions of both countries. In addition, the two are also forming partnerships in key areas such as the energy market and regional security arrangements. During Russian President Vladimir Putin’s visit to China in May 2014, the China National Petroleum Corporation (CNPC) and Russia's Gazprom finalized a deal through which Russia will be able to deliver approximately 38 billion cubic meters (bcm) of natural gas to China by 2018, after the completion of the Chayanda natural gas field in Russia. This agreement is a first as Russia has thus far focused largely on the EU for its energy exports. adsız EU-USA  Ally The EU is carving out its own identity, independent in thought and action from its American ally. Although the EU still works in cooperation with the USA on many fronts and both share similar views on most international issues, there have been some signs to suggest that the EU is making its independent mark on the international stage. For example in the case of Syria, the US is of the view that they should either completely stay away from Syria’s internal problems or engage in full-fledged military intervention. Most countries in the EU are opposed to this extreme approach and seek a middle ground to resolving the crisis and putting an end to the violence. adsız In terms of technology as well, the EU is asserting its independence from American technologies, for example it is developing Galilio which is the European Global Satellite-Based Navigation System, very similar to the American GPS system. Once Galilio is fully functional (this is estimated to take place by 2019) the EU countries will no longer depend on GPS. Central Asia could  be  Center of   the Word It is obvious  that the balance of power in the world is definitely shifting. Although the US still holds a strong position on the international stage, new voices are emerging that can no longer be ignored. By 2020, the multi-polarisation which is starting to take place today will be more firmly rooted; changing drastically the face of international politics. China, Russia, and the United States have started to compete for influence in Central Asia since begining of 21 st Century. The Central Asian case is not a throwback to the past but a guide to what is to come: the rise of new players and the decline of Western influence in a multipolar world. References (1)Sarah O Ladislaw,Maren Leed,Molly A Walton 2014“New Energy, New Geopolitics: Balancing Stability And Leverage” CSIS website (http://csis.org/program/geostrategic-implications-unconventionaloil-and-gas-revolution)  April  2014. (2) Alexander Cooley "The New Great Game in Central Asia"Geopolitics in a Post-Western World     August 7, 2012 (3) Vali R. Nasr A New Map, Defined by Gas. The New York Times June 10, 2014    
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