Axis of Oil? Canada, Venezuela and America
Energy needs shape government policies. Wars, high seas standoffs and diplomatic spats are common forms of conflict that result. As is often stated, big oil produces big money. The flag follows the money and the soldiers follow the flag. For the foreseeable future, it seems reasonable to assume that conflict and energy needs may go hand in hand.
Currently, when the words “oil” and “policy” occur in proximity to each other, the expression “Middle East” is not far behind. Given the constant news focus and conflict in the Gulf Region, this linkage is understandable. The Straits of Hormuz are just one obvious example of a conflict flash point due to the oil supplies that move through that region.
The focus may be due for a change in the next 10 years. Despite continuous and unsubstantiated claims that the world is running out of oil, the reality is that new supplies of oil are constantly being found and exploited. The numbers are massive. Canada, for instance, was believed to have approximately five billion barrels of proven oil reserves in the year 2000. Now, estimates suggest that Canada’s oil reserves are in the range of 180 to 200 billion barrels, second only to Saudi Arabia. Furthermore, various projections suggest that Canadian oil reserves could be as high as 300 billion barrels of oil, allowing for a series of complications that involve cost, technology and the environment.
Further south, Venezuela’s oil reserves are somewhat of a mystery. While oil reserve and production figures are notoriously unreliable, the estimates for Venezuela are even more of a guess. Exploration continues, but it appears that the figures for oil there will be at least twice those of Saudi Arabia and potentially more. The oil is mainly heavy tar sands, which means cost, technology and the environment will be at issue as well. Additionally, the choice of Venezuela to follow partial nationalization programs in the oil sector will most probably cut production and exploration efficiencies, rather than improve them.
Most unusual, however, is the oil reserves of the United States. Again, figures vary widely, but the USA may be sitting on several times the total proven reserves of Saudi Arabia. This oil is mainly in the western USA and in the Arctic areas around Alaska. The Arctic oil reserves will be expensive to develop due to cold temperature and environmental concerns, but the capabilities and technology already exist. The largest amount of oil is contained in the shale rock reserves of Utah, Wyoming and Colorado. The estimates of oil available in the USA in shale rock vary widely, but the figures often run in excess of one trillion (with a T) barrels of oil. Critics state that the oil claims are elusive and that the recovery of the oil cannot occur due to cost and technology concerns. However, many of the same claims were made about Canadian oil in the 1980s which have now been proven false.
Ironically, we may be facing a situation over the next ten years and onwards where the world’s major oil reserves and increased producers are Canada, Venezuela and the USA. Needless to say, many problems exist. While the expansion of Canadian oil production looks relatively stable and mostly in private hands, Venezuela’s future production figures appear much less stable and will depend on the path chosen by President Hugo Chavez, known for his often mercurial approaches to policy. In the USA, future oil production will depend on technology, cost and potentially massive environmental concerns in both Arctic and western production areas.
Allowing for even midrange projections, however, these three countries could be holding oil reserve and production capabilities which individually exceed that of Saudi Arabia and collectively rival that of the Middle East region.
How does this affect the future of international policies concerning oil production and energy needs? While the Middle East today consumes large about of policy effort and energy, it is possible to envisage a future some 10 years or more away where North American energy requirements from the Middle East are drastically reduced. American concerns over Middle Eastern politics and security concerns will drop coincident with the amount of reduced oil purchases in the region. On the other hand, the new consumers, such as China and India, are constantly on the outlook for future oil supplies. China and India are less likely to be concerned with ideological concerns and historical baggage.
In the Americas, the future for further competition and conflict appear mixed. Most Canadian oil being produced now flows directly to American markets. Canadian export figures have grown from a 2005 figure of 700,000 barrels a day to current figure of more than one million barrels per day. Future production figures envisage a capability of exports of more than 2 million barrels per day. This will provide the USA with a stable source of imports and Canada with a reliable revenue stream.
However, the outlook for Venezuela remains murky. President Hugo Chavez’s relationship with the USA may be strained, but both countries may remain mutually dependent. The USA needs the oil and Venezuela needs the revenues from a stable customer that pays world market prices in US dollars. While ideology and personalities may collide, energy needs and big money should do the loudest talking.
Where does this leave security matters? The future is murky. For Canada, it can be said that big trouble may follow big money. Terrorism concerns are valid, given the fragility of the oil infrastructure which is spread out over vast areas, often with temperatures regularly hitting more 20 degrees below zero.
Transnational organized crime is another concern. Regional economic inequalities will produce fiscal infighting at the provincial and national levels. Oil money can be a curse as well as a bonus if mishandled.
For Venezuela, it means a greater voice and leadership in South America and the Caribbean, especially while the attention of the USA is focussed on Afghanistan, Iraq and the economy. Leadership and visibility comes with a cost, however, and Venezuela will find itself with further complications, especially with the Caribbean states and Columbia.
While much of the future security picture is unclear, several observations can be safely made. The first of these is that the Middle East will progressively see a shift in the next ten years as American interests in this region decline along with its dependency on local oil production. The security picture in the Middle East will be more complicated, as China and India move into the region driven by their own oil needs. At the same time, the security picture in the Caribbean will become increasingly complicated as Central and South American states try to adjust to the reality of having their own version of Saudi Arabia in the neighbourhood. For states such as Columbia and Brazil, how do they chose between one of their own South American neighbours and the USA?
Whatever the future, energy driven security affairs in the next ten years are about to become much more “interesting,” to use the Chinese sense of the term. Will Canada, Venezuela and the USA form the “axis of oil”?
The opinions expressed in this blog are personal and do not reflect the views of Global Brief or the Glendon School of Public and International Affairs.
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