There's a New Energy Crisis Brewing in the Middle East

There’s a New Energy Crisis Brewing in the Middle East

by | published April 26th, 2013

Don’t look now, but there are some problems developing in the global energy network. The U.S. may be basking in the prospect of ample unconventional oil and gas substantially transforming the country from an importer to an exporter. But elsewhere, constrictions and outright shortages are developing more quickly than anticipated.

It’s hardly reassuring that the epicenter of all this is the Middle East.

The primary problem is hardly new. Actually, calling it an “old” problem is more accurate because the culprit is a collapsing network of delivery and storage that has been deteriorating for decades.

Unfortunately, this is hitting hardest those areas already beset by broad, accelerating economic shortfalls. That they also happen to be areas of significant unrest hardly improves the situation.

The latest is Pakistan. There a combination of lower-than-expected water availability and a government powerless to provide the diesel fuel essential for the planting season means a population already on the brink is staring at food shortages.

The picture is very grim.

The main difficulty here remains the energy crisis that has locked this country in a downward spiral. Pakistan has some of the worst energy prospects on the globe, accentuated by low levels of domestic production and alternative importing possibilities charged with politics.

Take an essential natural gas pipeline from Iran, for example. The transfer of gas across the common border between the two countries would be an immediate relief for this beleaguered nation. But that project is in no-man’s land.

The Western pressure against Tehran to end its nuclear program prevents any new projects because the sanctions are targeting Iranian hydrocarbons. Islamabad has attempted to kick-start a liquefied natural gas (LNG) import plan to offset the political impasse. Unfortunately, that alternative involves a considerable cost that the government cannot afford. It has started a domestic war among potential corporate participants, and is likely to take too long to develop.

As an aging electrical grid begins to break down, rolling blackouts have become a daily routine. Major cities are often able to provide less than eight hours of reliable power. That, in turn, is wreaking havoc on industrial production, food distribution, local revenue, and the manufacture of goods necessary for money-making exports.

In addition, the increasing energy plight is undermining the thin veneer of political stability. Already, the central government has lost control over wide expanses of territory inside the country now effectively controlled by local warlords and terrorist groups bent on toppling Islamabad’s ability to govern.

This week, the situation is becoming worse. Opposition politicians are beginning to demand government action, associating themselves for the first time more directly with demands made by more radical groups. The situation is deteriorating.

The collapse of an overburdened energy delivery network is now becoming a likely cause of a domestic insurrection. And as the energy picture worsens, so does employment prospects in a country where the median age is 21.5 years. The rising number of unemployed youth in this region is a fertile breeding ground for terrorism.

However, Pakistan is hardly the only nation in this unsettled region experiencing an energy crisis. Its neighbor, and frequent adversary, India has similar problems. There, one of the leading engines in the international development drive is experiencing its own energy crunch.

Once again the source is an inability to procure and deliver adequate energy. India is experiencing a disturbing rise in brownouts and blackouts, while its requirements for imported energy continue to grow. Its population is 6.5 times the size of Pakistan, making the demand even stronger.

India is also feeling the pressure from Iranian sanctions. The country is the second-leading importer of Iranian crude (after China). New Delhi has received a reprieve from Washington – the U.S. has granted it a temporary exemption from the sanction penalties.

Saudi exports have helped some, but India is again paying an “Asian premium” for that oil, a price higher than the same oil bound for other places like Europe. And with its refineries built to operate on Iranian-grade crude, even finding continuing (not to mention affordable) alternatives will still create problems.

Elsewhere, Egypt is facing an absolute energy shutdown. As the problems in Cairo streets heat up again, government officials now speak openly of massive power deficiencies. One suggested earlier this month that the delivery infrastructure could shut down altogether.

This week in Jordan, blackouts have hit, with the prospect of more frequent shortfalls coming. Jordan has been a bastion of relative stability during the Arab Spring, but there are signs of unrest developing there as well.

Then there is Turkey. What happens in this country may well end up being the lynchpin for the entire Middle East. Turkey’s energy needs are the fastest growing in the world, with prospects forming to transform the country into the de facto regional leader as internal disorder blunts the influence of Egypt and Syria.

Turkey is also poised to be the primary new throughput nation for gas and oil coming into Europe from rising production in the Caspian basin. The gas future looks very strong with competing pipeline projects contesting to deliver energy west by traversing the country.

Increasing oil exports, on the other hand, are limited to what additional volume can be moved safely through the Bosporus and the Dardanelles – the Turkish Straits. This is a major chokepoint in international oil trade and an accident would subject large and congested populations to an outright disaster.

Yet these days the government in Ankara is becoming more concerned about its ability to feed the growing domestic demand requirements. Turkey’s internal stability will depend on solving its own energy distribution situation.

As the picture darkens, a region thought for some time to be ripe for competition over energy production is morphing into one where the next wave of conflict may well result from the lack of energy availability.

That becomes far more dangerous for everybody.



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  1. Chuck S
    April 26th, 2013 at 09:11 | #1

    I’ve been saying for years that more US oil production would strengthen us vs middle east countries. Now I’m thinking we could even help India and Pakistan. Obama is approving few energy operations and blocking many. The Bakken and some other good production is in private lands, which he hasn’t been able to stop yet.

    The big new developments in Australia and New Zealand may help, but maybe not soon enough.

    Drill, baby, drill.

  2. Ken O
    April 26th, 2013 at 10:06 | #2

    Help Pakistan ? Are we crazy they hate us. We’ve already given them billions to prop up corrupt regimes. We always seem to back the wrong guys Musharraf, Marcos, Noriega, Hussein, The Shah of Iran. Let’s keep our nose at home and produce added value products from our oil and gas abundance instead of letting our enemies use us as a third world country for our valuable resources.

  3. Bob
    April 26th, 2013 at 10:48 | #3

    Iran and Pakistan agreed to build a new gas pipeline from Iran into Pakistan, with Iran already having completed its side of the pipeline. Pakistan is certain to build its side of the line, despite US sanctions.

  4. Patrick Hickey
    April 26th, 2013 at 12:46 | #4

    Thank you so much for informing me about a situation that hasn’t been reported by the mainstream-media!

    Though I don’t invest in oil or natural gas, I do consider that the people of all countries are important.

    Considering that my knowledge about how these countries came to fail to provide the basic electricity so important for some semblance of civilization, I have no doubt that this is terrible for the common people trying to live there.

    For them, it is like a collapse of civilization, and a return to barbaric living conditions. I am deeply concerned about what these dire circumstances might lead to, but I certainly wouldn’t want to visit these countries as a tourist.

    Anyway, thanks for alerting me! Keep me informed!


  5. Ash
    April 26th, 2013 at 17:21 | #5

    Indian government has stated many times that it will not halt Importing crude oil from Iran. Undoubtedly US president is very good at begging for jobs around the world and push a bit for its international agenda by various means except any direct threat, that is ridiculous to even say that US exempted India for time being, the only reason Indian oil import from Iran fell down last year was reluctance of insurance companies. Although by publishing false information you can blow your trumpet but it wouldn’t change the world scenario anytime soon. Pakistan has defied US in this very matter of gas pipeline. does anyone even listen to what USA and its puppet president bark? investors beware!

  6. enthusceptic
    April 27th, 2013 at 08:39 | #6

    Getting something so country-spcific as this is really fantastic. Turkey is specially interesting because it’s “the factory of Europe”, like China is to the whole world. Thanks, Dr M!
    Chuck and Ken, the US of A will always help itself first. It would be smart to not interfere with badly needed energy supply to Pakistan. -And yes, Bob, it would be smart – and right in my opinion – to ignore the USA in this case.
    Also, natgas for vehicle fuel is greatly needed. There, I said it again!

    April 28th, 2013 at 03:05 | #7

    The Western pressure against Tehran to end its nuclear program


  8. Bertha Garrison
    June 1st, 2013 at 20:55 | #8

    The sums involved make your head spin. In total, “upstream” energy companies (the ones involved in exploration and drilling) spent £800bn last year. Shell alone paid £63m for exploration rights in 5,000 sq miles of water off the eastern coast of Canada. It would not have done so without extensive data suggesting the presence of hydrocarbons, but all the same, in many ways the most striking sentence in the press release announcing the deal was this: “Shell said it has yet to determine if its new exploration blocks could contain oil or natural gas.” What might Shell have paid if it knew for sure?

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