MAJOR GEOPOLITICAL DEVELOPMENTS THAT COULD
IMPACT ON OIL SUPPLIES FROM THE ARAB GULF REGION
Mamdouh G Salameh, World Bank, Washington DC / Oil Market Consultancy Service, UK
Phone: +44 1428 644137, E-mail: mgsalameh@btconnect.com
Overview
Four major geopolitical developments have the potential to impact on the flow of oil supplies from the
Arab Gulf region: Iran’s nuclear programme, the US shale oil revolution, the huge natural gas discoveries
in the eastern Mediterranean and the steep-rising domestic oil consumption among the Gulf States and a
lack of a meaningful diversification of their economies.
Whilst Iran’s nuclear programme with the inherent risk of war in the Gulf could have direct & serious
impact on the flow of oil from the region and the price of oil, its impact would be short-lived. On the other
hand, both the US shale oil revolution and the eastern Mediterranean gas discoveries would virtually have
no impact.
However, the real threat to oil supplies from the Gulf region in the long term actually comes from the
steeply-rising domestic oil consumption among the Gulf States and a lack of a meaningful diversification of
their economies. This means they will have to cut their domestic oil consumption drastically or replace oil
with nuclear power and solar energy for electricity-generation and water desalination. Failing to do either
would result in their relegation to minor crude oil exporters by 2025 or ceasing to remain oil exporters by
2032 altogether.
Methods
The paper will discuss each of these geopolitical developments to determine what actual impact they could
have on oil supplies from the Arab Gulf and, therefore, on the price of oil. It will also discuss what
measures could be taken to mitigate any adverse impact from these developments.
Results
The paper will argue that among the four geopolitical developments outlined, Iran’s nuclear programme
poses the most serious threat to oil supplies from the Arab Gulf region in the immediate future. However,
the paper will warn that the real threat in the long term actually comes from the steeply-rising domestic oil
consumption among the Gulf States and a lack of meaningful diversification of their economies.
Conclusions
The paper will conclude that Iran’s nuclear programme poses the most direct and immediate threat to the
flow of oil supplies from the Arab Gulf region and the price of oil because of the inherent risk of war in the
Gulf and the possible mining or blocking of the Strait of Hormuz. However, its adverse impact would be
short-lived.
The paper will also conclude that both the US shale oil revolution and the eastern Mediterranean gas finds
would virtually have no impact on oil supplies from the Gulf.
The paper will, however, warn that the most serious threat to oil supplies from the Gulf region and the price
of oil in the long term actually comes from the steeply-rising domestic oil consumption among countries of
the Gulf and a lack of meaningful diversification of their economies. It will recommend certain measures to
mitigate any adverse impact from these developments.
---------------------------------------------------------------------------------------------------------------- ----------------* Dr Mamdouh G. Salameh is an international oil economist, a consultant to the World Bank in
Washington DC on oil & energy and a technical expert of the United Nations Industrial Development
Organization (UNIDO) in Vienna. Dr Salameh is Director of the Oil Market Consultancy Service in the
UK and a member of both the International Institute for Strategic Studies (IISS) in London and the Royal
Institute of International Affairs. He is also a member of the Energy Institute in London and an advisor of
the Oil Depletion Analysis Centre (ODAC) in the UK.
References
BP Statistical Review of World Energy, June 2013.
Knell, Yolande. “Gas Finds in East Mediterranean May Change Strategic Balance”. A BBC News
Report on 13 May, 2013.
Maugeri, Leonardo. “Oil: The Next Revolution”. A paper published by Belfer Centre for Science &
International Affairs at Harvard Kennedy School, June 2012.
OPEC, World Oil Outlook 2012.
OPEC. Annual Statistical Bulletin 2012.
Salameh, Mamdouh. “Impact of US Shale Oil Revolution on the Global Oil Market, the Price of Oil &
Peak Oil”. A paper given at the conference on Peak Oil: Challenges & Opportunities for the GCC
Countries, 2-4 April 2013, Doha, Qatar.
Salameh, Mamdouh. “Natural Gas Flares Up over Eastern Mediterranean”. USAEE Working Paper
Series No: 30-130, July 20, 2013.
Salameh, Mamdouh. “Oil & Iran’s Nuclear Programme”. USAEE Working Paper Series No: 09-036,
29 December, 2009.
The International Energy Agency (IEA), Annual Energy Outlook 2012.
US Energy Information Administration (EIA).
About the Author
Dr Mamdouh G. Salameh is an international oil economist, a consultant for the World Bank in Washington
D.C. on oil and energy and also a technical expert with the United Nations Industrial Development
Organization (UNIDO) in Vienna.
Dr Salameh studied economics at the American University of Beirut and pursued his postgraduate studies
at Bradford University in the UK and later at Pacific Western University in California, USA, earning a PhD
in economics and specializing in the economics and geopolitics of oil and energy. He also holds a
postgraduate Diploma in Industrial Management and Marketing. Dr Salameh is a visiting professor of
energy economics at the ESCP Europe University in London and the American University of Beirut.
Dr Salameh has presented papers to numerous international energy conferences on the economics and
geopolitics of oil and energy and has been frequently invited to lecture on these topics at universities
around the world. He has written three books on oil: “Is a Third Oil Crisis Inevitable?” (published in
London in April 1990), “ Jordan’s Energy Prospects & Needs to the Year 2010: The Economic Viability of
Extracting Oil from Shale” (published in London in October 1998) and “Over a Barrel” (Published in the
UK in June 2004) as well as numerous research papers published in international Oil and Energy Journals.
Dr Salameh has undertaken research assignments for the US Department of Energy, the World Bank, the
Institute of Energy Economics in Japan, the Indian Government, OPEC, the Canadian Energy Research
Institute, Boston University working on the Encyclopaedia of Energy and the government of Jordan among
others. He regularly appears on TV to discuss oil prices and other developments in the global oil market.
Dr Salameh is a member of many International Institutes and Associations including the International
Association for Energy Economics (IAEE) in the US, the British Institute of Energy Economics, the
International Energy Foundation in Canada, the International Institute for Strategic Studies (IISS) in
London, and the Royal Institute of International Affairs (RIIA) in London. He is also an advisor to the Oil
Depletion Analysis Centre (ODAC), London.