Oil is a critical commodity, not just as an energy resource but because of its wide geopolitical repercussions. For economies like Middle East, huge oil exports to other nations are the backbone. So one when comes across reports of shale gas revolution in US - the highest consumer of oil, one wonders about broader implications. These include not just demand supply trends, but also issues like US's commitment to security in the Gulf region.
One may expect that a shale gas glut might make US indifferent to oil security in the Middle East. Or that China with its growing need for oil imports may replace US in this regard. However, the actual trend suggests something different. Despite the shale gas boom, the US is becoming more and more reliant on oil imports from Gulf region. In fact, the share of Gulf oil supplies in US imports recently touched nine year high level. This is because US refineries are still tuned to process heavier Gulf oil. Hence, even though overall crude demand is down in US since 2004, the crude oil imports from Gulf are rising. Also, keeping in mind the high sensitivity of global oil prices to instability, we believe US will remain involved in Middle Eastern oil security.
One may expect that a shale gas glut might make US indifferent to oil security in the Middle East. Or that China with its growing need for oil imports may replace US in this regard. However, the actual trend suggests something different. Despite the shale gas boom, the US is becoming more and more reliant on oil imports from Gulf region. In fact, the share of Gulf oil supplies in US imports recently touched nine year high level. This is because US refineries are still tuned to process heavier Gulf oil. Hence, even though overall crude demand is down in US since 2004, the crude oil imports from Gulf are rising. Also, keeping in mind the high sensitivity of global oil prices to instability, we believe US will remain involved in Middle Eastern oil security.
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