2020: THE PANDEMIC THAT HAS STRUCK THE WORLD WILL HAVE A PROFOUND IMPACT ON GLOBAL ENERGY TRADE.
2020 – 2030: WE ARE WITNESSING A SHIFT IN ENERGY TRADE FLOWS FROM THE NORTH ATLANTIC TO THE INDIAN OCEAN AND THE STRAIT OF MALACCA.
We will show that the return of the global energy trade from the Atlantic to the Indian Ocean was historically expected.
We have a wealth of evidence from centuries of energy history showing that the Indian Ocean has been at the heart of world trade due to favorable wind conditions (wind energy) and access to other maritime hubs and economic centers on the edge of this vast maritime region.
1. A vast geographical area with interconnected energy trading flows
We all know that the Gulf region is full of oil reserves. History is our guide in a sense. We have seen that in different epochs the Indian Ocean was full of economic activity, the bustle of the largest comprehensive economic area on the planet since the time of Alexander the Great, stretching from Yemen to the Gulf, to India and the Straits of Malacca and Indonesia. The Indonesian archipelago formed the eastern edge of this vast space and was the junction between the trade networks of the Indian Ocean and the West Pacific. This maritime space has been well traveled not only by marine explorers, but also by busy traders and emerging powers. China has long had contacts in this region, even though it is far from the Indian Ocean.
2. The eastern Mediterranean as the western hub of the energy world.
ENERGY HISTORY: The Indian Ocean and the Strait of Malacca are unique. This region is connected in all directions with other maritime junctions. In the west we had the Greeks in the eastern Mediterranean, who traded with the Levant. The trade there was closely connected to the trade networks over land, which extended to India and China. But there was always a silk road by sea and a land bridge for traders to the east and west.
Later the Romans took over the whole Mediterranean area and called it Mare Nostrum. The Mediterranean, including the eastern Mediterranean, became an independent maritime economic center. But it was no coincidence that the eastern Mare Nostrum was the driving economic force of the Roman Empire. Tax revenues were generated here and expensive goods were traded.
In terms of energy needs, Rome relied heavily on the Eastern Mediterranean. The Romans imported wheat from Egypt, and exchanges with the East brought in coins and gold that could be used for imperial projects. It is no coincidence that the eastern Mediterranean maintained Roman civilization after the fall of Rome. The eastern Mediterranean was bound into a complex network. Goods were traded along various hubs on the shores of the Indian Ocean.
OUTLOOK 2020 – 2030: The eastern Mediterranean Sea lies on the border between three continents: Europe, the Asian continent and Africa. It is, in every conceivable way, a key region and possibly the most interconnected region connected to the wider Indian Ocean. Recently we have seen the growing importance of the Eastern Mediterranean in the exploration and production of natural gas and its growing importance as a transit area for natural gas. The region is ideally suited for the export of natural gas via underwater pipelines.
3. The Gulf region and the importance of wind energy
ENERGY HISTORY: Yemeni traders facilitated the exchange of goods between East and West. They benefited from shifting wind patterns that allowed them on specific times during the year to cross the ocean blue to reach far-away locations. The Indian Ocean was small enough to be crossed within a year, taking account of the monsoon, but big enough to connect different continents and imperial centers. Various hubs located along the periphery of the Indian Ocean exchanged goods with places in the Eastern Mediterranean and East Asia.
Technological advances have made it possible to exploit the existing oil and gas reserves in the Gulf region.In this region we have the largest hydrocarbon producers in the world, which has an oversized influence on the world energy markets and can influence prices by expanding or reducing the supply of oil. The economic decisions that Saudi Arabia and Iran make will have a significant impact on today’s world energy markets. Their position in the world energy markets is likely to remain so for the foreseeable future. One factor to consider is supply chain disruptions.
OUTLOOK 2020 – 2030: Much has changed in the last 200 years. Today the Gulf region is the energy hub par excellence and the most important producer of hydrocarbons such as oil and gas. It is the sheer quantity and quality that puts this region in a good position to remain a major player in the global energy markets for the foreseeable future, as demand, particularly for oil and gas, is likely to increase in the future.
4. East Asian trade networks
ENERGY HISTORY:China has historically been the greatest force in this region. Chinese traders have maintained business relations in Southeast Asia and beyond. Their extensive connections in this region have led to Chinese communities in Southeast Asia, including Singapore. The Strait of Malacca has played a key role as a hub between the trade routes of the Indian Ocean and the trade networks of the Western Pacific. Trade naturally flowed through the South China Sea up to Shanghai. The end point of this energetic network reached as far as South Korea.
OUTLOOK 2020 – 2030: The main argument is that the current recession has triggered the biggest economic shift in the history of energy markets. The gravitational center of the energy world will slowly shift from the Atlantic to East Asia. This trend is likely to accelerate from 2020 onwards, as more and more economic activity will focus on East Asian markets.
5. The future of the energy world lies on the Strait of Malacca.
COMPREHENSIVE OUTLOOK: This article shows that after the pandemic the center of the energy world will largely revolve around the Strait of Malacca. This does not mean that there will be no other energy market centers, but activities will be largely concentrated in Singapore and the surrounding areas.
This is really part of a continuing trend that will take us into the 2050s. We have experienced a significant geopolitical shift in the last 20 – 30 years, East Asia has become a central economic region. In general, there are two major destinations for Chinese exports. The United States is one import region and the other is the European Union. Chinese demand has left its mark on the global energy system. In terms of energy flows, the main direction is from the Middle East to East Asia. Europe, and Germany in particular, obtains most of its hydrocarbons from Russia. This once again underlines the importance of the Strait of Malacca.
Geopolitically, the New Silk Road is both land and sea-based. It has a maritime component, which shows how important the Indian Ocean is for international energy markets. When it comes to Chinese exports to Europe, we sometimes have problems with backlog because fewer goods are now exported from Europe to East Asia. The new Silk Road shows a similar trend, more goods are exported to Europe, less goods are exported back to China.
An important factor for overall success will be the question of how energy brokers such as Iran and the natural gas hub Qatar can be integrated into this extensive network. It is of crucial importance to create a holistic concept that includes all parties involved.
We can see that for centuries the Indian Ocean was the main trading hub and benefited from wind energy to facilitate trade on its shores. Its importance grew with the discovery of hydrocarbons in the Gulf, the recent discovery of hydrocarbons in the Eastern Mediterranean and the economic rise of China as a key player in global energy markets.
Many thanks for the shared interest in the energy world!