12/21/16 11:00 AMBrenda Shaffer, Contributor
The tragic execution this week of Russia’s ambassador to Turkey, combined with two recent major terrorist attacks on Turkish soil, demonstrate that forces are working hard to destabilize the country.
While it’s well understood that major upheaval in Turkey would have monumental regional and global security consequences, it’s important to also pay attention to the serious implications for the global oil market and European energy security.
Turkey is arguably the global oil industry’s most important non-producing country because of its role as a critical oil transit state. On a daily basis, about five percent of the global oil supply passes through Turkey, and it is situated next to major oil producing regions — Russia, the Caspian and the Middle East — and also next to Europe, which is a major oil importer.
Nearly two million barrels of oil a day are exported via Turkey’s Ceyhan port in the Mediterranean, and another three million daily barrels go through Turkey’s Bosporus Straits. The Straits are a major oil and trade waterway and one of international trade’s most important potential chokepoints.
Turkey’s vital transit role means that oil prices would likely soar if there is a disruption of flow through Ceyhan port or the Bosporus Straits, or if there is a disabling of one of the oil pipelines that passes through East Turkey—either from Iraq or the Baku-Tbilisi-Ceyhan Pipeline.
In a world awash in oil, this may sound puzzling, but oil prices are produced in the margins, and it is that extra million barrels above consumption that creates a liquid oil market and moderate price trend.
This means that, if two-to-three million barrels a day of oil supply went offline because of problems in Turkey, the global market would quickly flip from one that is overproducing to one that is under-producing.
With immense supplies in oil storage, this would not create a shortage in the short run, however certain markets that routinely purchase crude oil via Turkey would scramble to find new supplies, contributing to the perception of shortage and a resulting price surge.
Turkey is also a major market and transit state for natural gas. In fact, for the first time in decades, new volumes of natural gas are entering Europe, and doing so by going through Turkey via the TANAP gas pipeline.
Additional volumes of gas to Europe that are under consideration — such as from Central Asia, Iraqi Kurdistan, Israel and from additional fields in Azerbaijan — are also very likely to transit Turkey.
Despite the clear, and potentially epic, implications of Turkish instability on the global oil market and European energy security, the world is not paying enough attention or appropriately planning for this possibility.
The Trump administration and, to a higher degree, Europe must begin to recalibrate their Turkey policies in ways that account for the oil market and energy security risks associated with instability.
It’s time to recognize that the “new normal” of plentiful and relatively cheap oil may be one major terrorist attack away from being a thing of the past. It could happen in Turkey or other major vulnerable spots, like Algeria or Iraq. There is no energy security without real security.
Professor Brenda Shaffer is a specialist on energy and foreign policy, energy security policies, Azerbaijan, the Caucasus, Caspian energy and Eastern Mediterranean energy issues. She currently is a Visiting Researcher at Georgetown University’s Center for Eurasian, Russian and East European Studies (CERES). Shaffer is also the author of a number of books, including Energy Politics (University of Pennsylvania Press, 2009), Borders and Brethren: Iran and the Challenge of Azerbaijani Identity (MIT Press, 2002) and editor of Beyond the Resource Curse (University of Pennsylvania Press, 2012).
The views expressed by contributors are their own and not the views of The Hill.
- Balkans Petroleum . 6-7 Sept 2017 . ATHENS
- Egypt Downstream . 25-27 Sept 2017 . CAIRO
- Global Oil&Gas . 26-28 Sept 2017 . ATHENS
- APPEX Regional . 26 Sept 2017 . ATHENS
- CEOGS . 3-4 Oct 2017 . LIMASSOL
- Global Petrochemicals . 13-15 Nov 2017 . ATHENS
- ERTC . 13-15 Nov 2017 . ATHENS
- EGYPS . 12-14 Feb 2018 . Cairo
- HAEE Conference . 3-5 May 2018 . ATHENS