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What makes the world go round?

WHAT MAKES the world go round? Money, as the song says?

No. Rather, the answer is energy. Our modern industrialised and digitalised world cannot function without energy. And that energy is generated mostly by coal-fired and nuclear power stations, as well as oil and natural gas.

Especially oil and gas has assumed a crucial role in the modern world. The greater part of our transport capacity – by road, by air and by sea – depends on oil products of some kind, while gas provides most of the Northern Hemisphere’s ability to cook and stay warm in the cold northern winters.

Therefore, whoever controls the production of oil and gas, possesses a huge stick with which to blackmail the rest of the world.

Since the decolonisation process after World War II that capacity has largely resided in the Middle East. Smaller amounts of oil and gas were also produced in the Americas, the Soviet Union and Africa, but these were dwarfed by the seemingly unlimited liquid riches extracted from the Persian Gulf region and North Africa.

This has given the mainly Muslim countries of the Middle East a disproportionate amount of influence in world politics. The oil boycott against the West after the October War of 1973 between Israel and its neighbours gave Western countries a huge fright. This is certainly one of the factors – of which there are more – which moved the West into a more critical stance of Israel.

It also explains why an extremely conservative, perhaps even fundamentalist Muslim dictatorship like Saudi Arabia is treated with kid gloves by the rest of the world. Russia has also become a major producer in recent years, making it possible for President Vladimir Putin to throw his weight around considerably.

In recent years another large consumer has arrived on the scene. China’s economy grew at times at a blistering 14% per year, creating a gigantic thirst for energy and oil.

This all conspired to drive the oil price up to $140 dollar a barrel at times.

However, things are changing. The oil price has dropped from $115 a barrel in June to under $70 now – a drop of about 40%.
The reasons are complex.

Firstly, the consumers have realised that the planet’s oil and gas reserves are finite. As surely as I am sitting behind a computer while writing this column, we all know that the day the last barrel oil is pumped up, already lies on the horizon.

Therefore, countries have taken numerous measures to wean themselves from their “addiction to oil”, as President George W. Bush put it in one of his rare lucid moments.

Modern motor cars use much less petrol than the gas-guzzlers I grew up with. Electric cars (or hybrids) are no longer a strange sight. Cars running on hydrogen, with water vapour as the only exhaust gas, are already in the prototype stage and will be common in another decade.

Secondly, shale oil and gas has been introduced. It is a controversial method (fracking), the danger being that the environment may be damaged, but in the US it is already being utilised to a large extent. This has brought the US oil production to 9 million barrels a day, making this superpower less dependent on keeping its oil suppliers friendly.

The point is that the stranglehold traditional producers was able to excercise on the West is being eroded. By and large, countries like Saudi Arabia, Iran, Iraq, the smaller Gulf states, Libya, Venezuela, Angola, Nigeria and Russia are becoming less important on the global scene.

This development is, of course, not something which plays out in a week or two. It is a rather drawn-out affair, and its full import may become apparent only in another decade or so.

For the immediate future, for instance, Europe still has a problem. There are sizeable natural gas fields in the North Sea and adjacent interiors in the UK, Norway and the Netherlands, but the end of these fields are nigh.

As a whole, Europe has until very recently become ever more dependent on Russian gas. Which made it rather problematic to introduce economic sanctions against Russia because of its aggression in the Crimea and the Ukraine.

The realisation has now hit home in the European capitals that the continent will have to reduce its dependence on Russian gas drastically. One alternative is to import American gas, produced by fracking, or to start fracking themselves, but this is so controversial that it may perhaps not happen in the near future.

Besides, before the latest crisis with the Russians started, German Chancellor Angela Merkel abruptly decided to close her country’s nuclear power stations, a decision she surely now regrets.

Nevertheless, when looking at the wood through the trees, it seems clear that a strategic geopolitical shift is looming in world politics. As yet, nobody can with any certainty predict where it will end. It will, however, be fascinating to watch. There is more to the world than paying less while filling your motor car at the petrol station!

* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.

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