EMC Working Papers

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 natural gas discoveries in the eastern Mediterranean and the steep-rising domestic oil consumption among the Arab 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 and serious impact on the flow of oil from the region and the price of oil, its adverse 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 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.