Make the Gulf irrelevant again

Whatever one thinks of the current war in Iran, allowing the fundamentally unstable Islamic Republic power over the world economy is truly a fool’s errand. In many ways, Iran’s attempt to control the Strait of Hormuz and the Red Sea is playing out in waters long shaped by piracy and imperial rivalry.

Rather than seek to placate the potentates, crowned or turbaned, the West should instead focus on making the Gulf irrelevant again. Since the days of the Silk Road, where the area played a critical role as a link between Asia and Europe, few in the period of European ascendancy worried much about these territories – that is, until they discovered huge pools of energy there a century ago. Since then, these countries have, at different times, disrupted global commerce and promoted forms of largely Islamist militancy throughout the world. Even Dubai, arguably the most enlightened of the Gulf monarchies, may not be able to thrive long-term in its awful neighborhood.

This is a lesson we should have learned during the oil embargo after the 1973 Yom Kippur War. The Saudi-led effort drove most of the capitalist world into a deep recession. The embargo hit hard because the energy business had swung, in economist Tyler Goodspeed’s words, from ‘a Gulf of Mexico oil market to a Persian Gulf-centric one’. That trend now shows signs of reversing, even if doing so may hurt the Trump family’s financial interests in the region.

To be sure, it will take years, not months, to unwind this primacy. But both the need and the means are clear. Most significant is the US transition from a mega-consumer of energy to the world’s largest producer of oil and gas – giving it the kind of leverage that did not exist in 1973. This shift predates Trump. Fracking boomed under President Obama. President Biden, facing inflation-driven political pressure, expanded drilling in the Gulf of Mexico and Alaska and approved a new LNG plant in Louisiana aimed largely at supplying Europe.

Energy abundance has already made the US far less vulnerable to disruptions in Hormuz, and the boom may only be beginning. Estimates suggest public lands may contain nearly 30 billion barrels of oil and 391.6 trillion cubic feet of gas – enough to supply the US for years. States such as Texas, Louisiana, Oklahoma, North Dakota and Pennsylvania could even benefit if shipping shifts from the Persian Gulf to the Gulf of Mexico. A proposed Alaskan pipeline could also prove vital for Asian markets.

America’s surge forms part of a broader push to develop new energy fields. Advances in fracking, horizontal drilling and geological surveying are turning multiple regions into potential energy superpowers. Canada, once wedded to anti-fossil fuel policies, now aspires to that status, as prime minister Mark Carney suggests. With the world’s fourth-largest oil reserves, it is seeking pipelines to reach Asian customers.

Perhaps the most promising developments are in South America. Venezuela’s vast oil reserves – the largest in the world – could lead to renewed production following the US toppling of Nicolás Maduro, opening the door to US oil companies after years of mismanagement. Mexico, another potential energy powerhouse, has begun embracing fracking to reduce dependence on US imports.

Right next door to Venezuela, Guyana is home to huge oil and gas deposits, putting it in the top 20 in terms of reserves, surpassing Norway. Maduro threatened to seize these fields, but now with him gone, US oil companies can exploit a potentially huge energy cornucopia. Together, what Foreign Affairs calls the ‘Americas quintet’ – the US, Argentina, Brazil, Canada and Guyana – may yet erode the Middle East’s oil dominance.

Then there’s Africa. The UN projects its population could rival Asia’s by 2100, and this booming population will need power. European NGOs like to pressure African leaders to go with solar and wind, which critics, such as Austin Williams on spiked, have described as ‘neo-colonialism gone green’. This advice is clearly being rejected by governments in Senegal, Nigeria and South Africa – and increasingly in Ghana, Tanzania, Uganda and Mozambique – which are instead pursuing fossil-fuel development.

Demand from India will further support this trend. Like many African nations, India prioritises energy access over emissions targets. Advisers to prime minister Narendra Modi have openly criticised what they call ‘Western carbon imperialism’. In such contexts, even coal is often seen as preferable to the health risks of burning biomass fuels.

Some, including South Korea’s president, think current energy shortages will accelerate the shift to renewables; others claim that China will be the winner in the post-fossil-fuel future. Yet, as Mark Mills of the Manhattan Institute notes, global oil consumption has risen by 30 per cent over the past quarter of a century. In the words of one former Net Zero campaigner, writing in the Free Press, the movement’s passion has run up against ‘the inconvenience of reality’.

Barring a massive disruption, fossil-fuel energy will remain critical through the next few decades. Trillions have been spent on green energy over the past 20 years, notes energy entrepreneur and investor Brian Gitt, yet the percentage of global power generated by fossil fuel has barely declined – from 86 to 81 per cent since 2010. The bulk of greenhouse-gas reductions have come from substituting natural gas for coal.

Efforts to ban fossil fuels prematurely, particularly without nuclear power, have proven disastrous. California illustrates the risks: once responsible for 40 per cent of US oil production, it now accounts for just two per cent and relies heavily on imported energy. The result has been higher prices, increased electricity imports and mounting strain on households and industry.

With energy costs among the highest in the US, California faces growing pressure not only on consumers but also on its tech sector, where energy-intensive AI development is expanding rapidly. Companies may ultimately look elsewhere for more reliable and affordable power. Governor Gavin Newsom likes to blame Trump – who else? – and the evil oil companies for the high prices, but more than half the price is the result of state regulations. The state excise tax on gas is now the highest in the US.

Australia, another nominally energy-rich country, with vast supplies of coal, is performing a similar act of economic seppuku. Its Net Zero obsession has meant a forced transition to renewables, resulting in higher prices and deindustrialisation. Once a winner in the energy wars, Australia is purposely undermining its own prosperity.

By far the most consequential and damaging policy agenda comes from Europe. The decision by the EU and the UK to embrace foolishly concocted green policies, including in some places the phase-out of nuclear power, while restricting domestic fossil-fuel production has increased dependence on external suppliers and left the region vulnerable to disruption.

As energy analyst Robert Bryce notes, this is despite the continent’s untapped fossil-fuel reserves. According to the European Parliament, Europe holds substantial shale-gas reserves, yet seven European countries have decided to ban fracking. Britain also has enormous oil and gas reserves that, as spiked has reported, it refuses to use.

The current German energy minister has acknowledged the problem with this approach. She said this month ‘that by ignoring costs’, the so-called energy transition will ruin the country ‘it claims to save’.

As for the rest of the economy, the outlook is also bleak. Energy prices are so high that Germany’s long-admired industrial base is threatened, as they are across the continent. Just recently, McKinsey suggested that Volkswagen shut down eight of its 10 German plants, due in part to energy prices. High energy prices have shifted more production to places like the US. Today, the states of Alabama and Mississippi now produce more vehicles annually than Italy or the UK. By some accounts, Brits are now, on average, poorer than Mississippians.

Rather than reducing their nations’ reliance on the Gulf for energy, British and European leaders seem resigned to their dependency. The rot here comes from the top, including academics who continue to claim renewables are cheaper than fossil fuels. European elite opinion, epitomised by The Economist and the Financial Times, seems more interested in criticising the US than protecting the continent’s basic interests.

This means that, increasingly, Europe and Britain will be leaving their futures in the hands of some of the most reactionary regimes on Earth. The Islamic Republic of Iran is the current focus, for obvious reasons. But other regimes in the region, such as Saudi Arabia, Oman and terror sponsor Qatar, are all autocracies and embrace varied forms of Islamic supremacism.

Rather than try to score points against the US, other Western powers need to wake up to the need to develop their own energy supplies. Even if Trump manages to secure the Strait of Hormuz, we can expect disruptions in the future from the Gulf. A better option lies in making the Gulf irrelevant again, not by turning back the clock, but by ensuring it no longer holds such sway over the global economy.

Joel Kotkin is a spiked columnist, a presidential fellow in Urban Studies at Chapman University in Orange, California, and a senior research fellow at the University of Texas’ Civitas Institute. Find him on Substack here.