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OPEC’s China pivot

That prospect also ushers in a major shift in OPEC exports toward China and the rest of emerging Asia — especially as Iraq ascends once again as a game-changing exporter — in a development that also has important implications for the U.S., Mr. Yergin said. While triggering a potentially fundamental reordering of U.S. priorities in the Middle East, it also heightens the importance of the U.S. managing its relationship with China so that the competition between the two economic giants over securing energy supplies doesn’t turn into outright conflict over such issues as Beijing’s energy claims in the South China Sea, he said.

China already consumes more energy from all sources — coal, oil, gas and renewable fuels — than the United States, and it has an increasingly urgent need to secure its supplies much as the U.S. did when it shifted to heavy dependence on imports in the 1970s. Demand for oil continued to strengthen in China even during the recession, while oil consumption in the U.S. and other developed nations peaked years ago, with U.S. demand down 10 percent since 2005.

“The more confident the Chinese are about their sources of energy, the more comfortable everyone will be,” Mr. Yergin said.

Radical changes forecast

Others see even more radical implications as the U.S. breaks its dependency on Middle Eastern oil, with the potential to shatter some longtime assumptions in the global landscape.

“It has geopolitical implications that can be debated almost endlessly,” said John Kingston, global director at Platt’s Insight. “If the U.S. gets to the point where it is no longer importing any crude out of the Persian Gulf, why is the U.S. Navy patrolling the Strait of Hormuz?”

The U.S. for decades has had a major military presence in the Middle East to secure its supplies and those of its allies in Europe and Japan. But the cost of the military operations is large in an era when the U.S. is having to make major spending cuts to avoid the kind of sovereign debt crisis plaguing Europe. The U.S. military presence in the Middle East has had some undesirable side effects, such as stoking the indignation of militant Muslims in the region in a way that has helped feed support for the al Qaeda terrorist network — one of whose prime goals is to get the U.S. out of Muslim holy lands in Saudi Arabia and Iraq.

James Jeffrey, former U.S. ambassador to Iraq, said the U.S. will have to maintain its presence in the Persian Gulf despite the budgetary pressures.

“The region keeps erupting into one kind or another of violence or instability. So we have to be present,” he said on Platt’s Energy Week. “Oil is fungible. There is one international oil market. [If] prices go up because of shortages in one area, they are going to go up in every other area, even in the United States, even if we import from safer areas or produce it ourselves.

“Even more importantly, at the very core of America’s security relationship since World War II has been guaranteeing supplies of oil and gas to our friends and allies. Even if we are independent in energy, most of our friends in East Asia and certainly in Europe, and elsewhere in the world are not.”

Mr. Kingston sees another major question arising from the changing oil dynamics: “Why does the U.S. need to hold so much oil in the Strategic Petroleum Reserve if its import dependence is plummeting?” he asked.

President George W. Bush undertook to fill the reserve to a record 727 million barrels, often at prices of more than $100 per barrel. Yet the oil has rarely been used, even though the U.S. from time to time has been threatened with oil shutdowns because of wars and embargoes in countries such as Iraq, Libya, Venezuela and Iran. The reserve contains enough crude to cover 90 days of imports at the current, reduced rate of consumption, Mr. Kingston said.

Oil analysts expect that political leaders will be tempted to sell some of the oil in the reserve in the future either for political or budgetary reasons, to help at least temporarily reduce the budget deficit.