Oil and Global Economic Security “The key actors on the oil stage—importing and exporting nations—enjoy much the same relationship as junkies and pushers: neither can easily do without the other.” First, oil threatens global economic security because it is a finite resource with no clear successor and because the gap between supply and demand is growing. Oil, most of it imported, accounts for a large share of energy budgets in most developed countries: 36 percent in France, 39 percent in the United States, and 49 percent in Japan, for instance. (Developing countries are even more vulnerable because their imports are larger in relation to GDP.) Growing evidence suggests that rising demand, especially from nations such as China and India, will soon permanently outpace supply, leading to a longterm rise in prices. Meanwhile, the exporting nations are dependent in their own way, in that many of them—especially in the Middle East—have become accustomed over the years to the heavy stream of revenues from oil sales and have failed to use those funds to diversify their economies.

       The widening of the supply/demand gap could be accelerated by the imminent peak of oil production, if the theories of a growing body of dissident geologists and oil analysts prove correct. They argue that the history of oil production and a careful analysis of current reserve estimates suggest that global oil output is likely to peak soon, perhaps within 10 years, and then drop off sharply. Already, oil production has plateaued or begun to decline in 33 of the 48 largest producers, including 6 of OPEC’s 11 members. Even under conditions of steady but moderate growth in demand, such a drop in supply would be troublesome. But its occurrence just when the huge developing economies of India, China, and other awakening economic giants are poised to take off could spell major trouble for the global economy.


Text: World Watch Institute


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