The fading Arab oil empire.

• Author: Miller, Paul D.

President Obama's pivot to East Asia is well-timed. The geostrategic importance of the Middle East is vastly overblown. The region matters to the United States chiefly because of its influence in the world oil market, but that influence has been in terminal decline for a generation, a fact almost wholly unnoticed by outside observers. A confluence of developments--including rising prices and production costs, declining reserves, and the availability of alternate fuels and unconventional sources of oil will decisively undermine the defining role of the Middle East in the global energy market. Meanwhile, the United States has vital interests at stake elsewhere in the world at least as pressing, if not more so, than its interests in the Middle East. These include thwarting the proliferation of weapons of mass destruction, fighting transnational terrorism and maintaining stability in key strategic locations of the world.

For centuries prior to World War II, the Middle East was considered strategically irrelevant. Alexander the Great marched across the impoverished Arabian Peninsula only because it lay between him and his goal: the fabled wealth of Persia and India. The region was merely an expanse to be crossed for traders on the Silk Road between Europe and China in the Middle Ages. The great empires of modern Europe turned to every other region in the world, including Africa, before colonizing the Middle East late in the age of empire because the vast desert appeared to be of little use to them. The British occupied Egypt in the nineteenth century and invested in the Suez Canal not because of anything Egypt had to offer but because it was the fastest way to get to India.

The contemporary strategic importance of the Middle East stems from its comparative advantage in producing oil, a commodity vital to the modern world economy. This comparative advantage is based on four factors. First, Middle Eastern oil is the cheapest in the world to produce because of simple geology. Middle Eastern oil lies under flat desert, not under an ocean or in the Amazonian river basin. In 2008, producing a barrel of oil cost between $6 and $28 in the Middle East and North Africa, compared to up to $39 elsewhere in the world and up to $113 per barrel of oil shale.

Second, most Middle Eastern oil is a superior product. The chemical properties of Middle Eastern "light sweet" crude oil make it easier and cheaper to refine than the "heavy" crude of Venezuela, for example. Third, Middle Eastern oil developers benefit from economies of scale because the cheap oil there is so plentiful. Even today, the region is still home to more than half the world's proven, commercially viable conventional oil reserves and a third of world oil production. Fourth, the Middle East's dominance of oil production and reserves makes it "too big to fail," which effectively lowers producers' risks. Buyers believe, with justification, that neither the governments in the region nor the developed world would allow a significant disruption to oil production (especially after the embargoes in the 1970s backfired).

This comparative advantage translates into global power and influence because of the modern world economy's high demand for oil. Oil was used for lighting and lubrication long before the industrial era, but the modern market for oil started in 1886, when Karl Benz invented a machine for automated mobility powered by an internal-combustion engine fueled by refined petroleum. In a remarkably short time, the world abruptly ceased using steam, coal and animals to power the transport of people and goods, transitioning almost entirely to petroleum products. One hundred twenty-five years after Benz patented the automobile, Americans consumed thirty-six quadrillion BTUs of energy from petroleum. This provided 94 percent of their transportation-energy needs and 40 percent of their industrial-energy consumption; it also accounted for more...