The success, to be confirmed, of the negotiations with Iran, as well as the reactions of the oil markets to the draft agreement, show that we have entered a new era, both of our relations with the Gulf countries and of the geopolitics of energy. The destabilization of the Middle East and parts of Africa, due to civil wars and their massacres, is the result of the merciless war between Sunni and Shia Islam. It is also reminiscent of the terrible religious wars that pitted, in Europe, Catholics and Protestants against one another, in the sixteenth century. So far, the US position, followed by European countries, was dictated by geopolitical considerations: Iran, led by an anti-Western government was threatening the security of its neighbours, Israel, but also Saudi Arabia. It was therefore the main enemy. The rise to power of a more moderate government was well received but had not fundamentally changed the opinion of the West. Two factors have challenged this delicate balance, the proclamation of an "Islamic state" and the reversal of oil markets.
The emergence of a terrorist-state, Daesh, on the ruins of two previously stable states made of a strong Sunni population, Iraq and Syria, and the atrocities performed by its members, has made the West aware that the main danger was probably no longer Shiite Iran. Moreover the discovery of huge reserves of oil and gas on US territory, thanks to new technologies has greatly reduced the strategic importance of the Middle East for the United States. Indeed Sunni Saudi Arabia was until then playing a twofold role. From a geopolitical point of view Saudi Arabia was a stabilizing factor in the region. The kingdom also extended its influence on oil markets by controlling them through the OPEC. This position is now being challenged.
An agreement between Iran and the United States has not definitively been reached, even if the leaders of both countries want it. They still have to "sell" it – the Americans to the Congress and Iran to the most conservative fringe of their religious authorities. The Republicans are reluctant to offer a democratic president a diplomatic success a year before the elections. Furthermore, conservative Iranians might have not said their last word. But they will not remain forever immune to popular aspirations, shown by the demonstrations of joy in Tehran after the Protocol of Lausanne has been announced. These obstacles are not insurmountable. But this agreement will mean a dramatic reversal of alliances, Shiite leaders becoming de facto Western allies to fight Daesh and bring peace to the Middle East. Iranian militias are already fighting in Iraq alongside the regular army and ... Western allies. This will inevitably entail that the United States will grant lesser importance to its relations with Saudi Arabia. The balance of the oil markets will be permanently modified as every state is now guided by its national interest – as it has been the case for the past six months.
From the American point of view, "the shale oil and gas revolution " has inevitably contributed to this shift. This phenomenon was beneficial on two levels: it has promoted the return to growth after the "Great Recession" and the price decline has reduced Russia's resources while the tensions between East and West reappeared, following the events in Ukraine. A high price of oil and gas is no longer, as it was for a long time, in the interest of the United States. Iran has more to gain from the end of sanctions, expected at the end of the current process, than it has to benefit from the maintenance of oil prices above $ 100, since the country hardly exported its oil. All this will consequently lead to a complete revision of the analyses provided so far that anticipated the depletion of fossil fuels (excluding coal) and therefore an inexorable rise in prices.
We remember the arguments of Ivan Illich and the Club of Rome, who were predicting forty years ago, the end of the growth and technological civilization as a German philosophical school. The Earth is a finite place and we will reach, sooner than we think, the limits of a system based on the exploitation of natural resources. What they had not factored into their reasoning is that if the Earth is a finite place, man's ability to create and innovate is infinite. They had forgotten Mozart. Deposits of considerable size, long before those discovered in the United States, have become exploitable through the implementation of new production techniques, particularly in Africa and South America. Concerning gas and oil shale, thinking that they exist only in Canada and the United States amounts to denial. Just think about the immense and unexplored Siberian lands and foresee what would happen if we began to look for gas and oil shale there.
Many commentators – who are not always neutral in this debate - also expressed the view according to which the fall in oil prices will prevent the countries from exploring and exploiting new deposits. None of this has happened, even if the profitability of the new sites was at the time seriously reduced. But operating companies were reactive since they have learned from experience how to reduce their costs. The falling oil prices has not had and will not have any effect on US production, which will continue to grow. Exporting countries, led by Saudi Arabia had understood this point.
We thought its leaders would respond to the situation by agreeing with other countries at the last OPEC meeting (at the end of last year) to reduce production in order to cause a decrease in oil prices.They did the opposite because they realized that it would be better to produce and sell their oil, accumulating thereby dollars in their bank account, especially as the rate exchange of the US dollar increased, rather than to leave it unexploited because its price would likely to decrease in the future.
The prices of oil and gas will therefore remain low for a long time. Last time such situation happened, between 1985 and 2003, it lasted for almost twenty years – the lowest level being reached in 1998 with a barrel price of crude oil below $ 20. Political leaders must therefore take into account this new paradigm, while elaborating their economic strategies, especially as the reversal of alliances in the Middle East, if confirmed, will lead sooner or later to a pacification of the region which will become a source of new investments and will increase its local production. The revolution in gas and shale oil and Iran’s reintegration into the community of nations, if it is confirmed in June, will be a major event that will leave a mark on the first decades of the twenty-first century.