5 oil and gas geopolitical hotspots – Part 2

Susan L. Sakmar's picture
Susan L. Sakmar, Independent consultant, author and adjunct law professor, University of Houston Law Center
Comments: 0

As discussed in my previous article, Greece, Russia and China are crucial areas for geopolitical developments. Here are the other two countries to watch:

IRAN – Sanctions and the Energy Sector

Adding to the pressure on oil over the past few weeks has been negotiations between Iran and Britain, China, France, Germany, Russia and the US to end a long-standing dispute over Iran's nuclear program and lift sanctions.

According to the US EIA, Iran holds the world's fourth-largest proved crude oil reserves and the world's second-largest natural gas reserves. International sanctions have significantly limited the development of Iran's energy sector and if a deal is reached, the main beneficiaries could be international energy companies who are anxiously awaiting the opportunity to help Iran rebuild its energy sector. While increased Iranian oil production would put downward pressure on oil prices, Iran has also said it would push OPEC to return to a production quota system.

UNITED STATES – The Next Saudi Arabia?

While the ramp up in Iranian oil output would take time, Iran’s oil could serve as a buffer against any supply disruptions resulting from continuing conflicts in the Middle East. For example, as this article goes to print, US led forces are stepping up air operations in Iraq against ISIL. Surprisingly, Iraq has somehow managed to pump more oil than ever with reports that Iraq’s oil production hit an all-time high in June of 4.1 million barrels of oil per day.

The US is also fighting battles at home with disputes and Congressional hearings over whether the US should export its newfound energy wealth. While a number of LNG export terminals are already under construction, pressure is mounting in Congress to remove current US restrictions on oil exports amid calls that US oil could be a geopolitical tool to aid allies abroad. With the recently announced Iran deal, these calls are likely to grow louder.

What’s Next?

With global economies struggling for growth, it appears a modern day “Cold War” is brewing between the world’s super powers over energy. But unlike the energy wars of the recent past based on perceived shortages, the new energy war is based on oversupply. For the time being, oil and gas prices will remain under pressure until the market rebalances and while world powers jockey for position in the age of abundance.

What's next? Leave your comment below.

To read "China – One of the top 5 oil and gas geopolitical hotspots (Part 1), click here".

Subscribe here to our weekly newsletter.