EIA data divides up the world into seven major categories:

As the data makes clear, the Middle East dominates global oil supplies, with Saudi Arabia as the largest player in the global market (26 percent).

* For the purposes of this report, we’re defining Asia to include the following states: Afghanistan, Bangladesh, Bhutan, Brunei, Cambodia, China, Fiji, French Polynesia, Hong Kong, India, Indonesia, Japan, Kiribati, Laos, Malaysia, Macau, Maldives, Mongolia, Myanmar, Nauru, Nepal, New Caledonia, Niue, North Korea, Pakistan, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, South Korea, Sri Lanka, Taiwan, Thailand, Tonga, Tuvalu, Vanuatu, and Vietnam. Note that Australia and New Zealand are not included in this definition. Like Japan, they are considered part of "Industrialized Asia," but we exclude them on the basis of the strong political and cultural ties to the West—meaning they already adhere to a Western-defined rule set.

As the data makes clear, the Middle East and Former Soviet Bloc combine to account for almost three-quarters of the known proven gas reserves, with the Russian Federation as the single most dominating presence in the global market (33 percent).

Iran leads the Middle East with 16 percent of the global total.

As the data makes clear, coal is the one great energy source not concentrated in the Middle East, but spread rather evenly between three main regions:

To the surprise of many, it’s the United States which stands as the single largest presence in the global coal market, with 25 percent of the total. The U.S. holds the greatest amount of both types of coal.

Russia is the largest former Soviet Bloc player at 16 percent, and China leads Asia at approximately 12 percent of the global total.

Here we present the regional breakdown of total energy use for 1999 and expected demand for the year 2020. The measure used is quadrillion British thermal units (Btu).

A good rule of thumb for thinking about Quad Btu is that you can take the annual number for a region, divide it by two, and that would give you the rough equivalent in millions of barrels of oil per day the region would need to burn if it was achieving that entire energy amount by oil alone. For example, North America used 116 Quad Btu in 1999, so that would equate to approximately 58 million barrels of oil a day (mbd) if that entire amount was achieved by oil alone. For point of comparison, we’ll note that the United States currently uses about 20 mbd, importing roughly half that number.

The major impression one takes away from the data is that a changing of the guard is happening in global energy consumption, if the projections regarding Asia are to be accepted. Currently, North America accounts for the largest regional share of energy use at 30 percent of the global total. Asia stands in second place for 1999 at 24 percent.

By 2020, however, Asia will surpass North America and occupy the top share at 31 percent, while North America will decline to 26 percent. The other regions of the world will shift only a percentage point or two, keeping the same order throughout the time period.

LEGEND: NA = North America, WE = Western Europe, AUS = Australia, EE/FSU = Eastern Europe/Former Soviet Union, ASIA = Asia (excluding Australia), SWA = Southwest Asia, AFR = Africa, LAC = Latin America/Caribbean

Global energy use is expected to increase by roughly 60 percent from 1999 to 2020, but the bulk of that increase will be centered in Asia, where energy demand is expected to roughly double by 2020 (103 percent). In comparison, the world minus Asia will increase only 45 percent over the same timeframe.

Asia’s expected plus-ups are significant no matter what the energy category:

When members of the Western financial community talk about Asia’s economic development between now and 2020, they describe it as basically the greatest massing of private capital in human history. As these numbers suggest, much of that capital employment will focus on meeting the region’s burgeoning energy requirements, primarily in terms of generating the massive growth in energy distribution infrastructure required to reach these very ambitious targets.

We decided to focus our first NewRuleSets decision event on Asian energy precisely because of the huge numbers involved: not only in terms of energy growth, but the unprecedented external capital flows needed to pull it off over a relatively short historical time frame. In short, new rule sets will inevitably emerge from this much structural change in the global economy.

Projecting ahead from our current starting line to Asia’s expected energy requirements in 2020, we begin our cursory review with coal.

Currently, Asia gets virtually all of its coal from in-region, with the four largest suppliers being:

Asia’s relative autonomy on the subject of coal will continue through 2020, as it will "self-supply" almost all of its expected coal requirements, which are projected to roughly double over that time span.*

In essence, Asia has all the coal it needs within the region to meet both its current and projected needs. To the extent that coal is the answer, there are no difficult questions regarding access to supply in this decade or the next.

Our review of natural gas offers a similarly sanguine picture regarding near-term access to supply. By way of example, Japan currently accounts for the largest share of natural gas use in Asia (almost a third). It imports methane almost exclusively in liquid form (liquid natural gas, or LNG) via tankers, with the overwhelming bulk (79 percent) coming from just four in-region countries:

In terms of the total gas exports shipped by those four countries, Japan imports almost three-quarters (72 percent). That means not only does Japan get the vast majority of its gas from these four in-region states, but it buys the vast majority of their exports (the rest going almost exclusively to South Korea and Taiwan).**

If, as expected, the region’s natural gas demand increases 191 percent by 2020, the bulk would apparently have to come from out of area, since three Asian states currently buy up 99+ percent of what’s available for sale in region. Where does that additional amount of roughly 16 trillion cubit feet come from? Logic says it comes from SW Asia and the Former Soviet Bloc states.

Assuming it would be too large a bulk to import exclusively via LNG shipping, then Asia is looking at significant infrastructural expansion in intra- and inter-regional gas pipelines, and that means foreign direct investment in very large sums.

* The remainder comes from the United States, Qatar, and the United Arab Emirates.
** Calculated from EIA’s World LNG Imports by Origin, 1999 (Billion Cubic Feet), available online at <http://www.eia.gov/emeu/international/LNGimp99.html> (last updated on 09/25/2001).

Before we discuss where Asia will get its oil over the next decade, we want to explain how we arrive at these million barrels per day (mbd) numbers.

For purposes of comparison, we start with the U.S.’s oil equation for the year 1998, which, as you will see, is very similar in rough numbers to that of Asia as a whole.

The United States used roughly 19 million barrels per day in 1998. It achieved that number by producing roughly half and importing roughly half. The one "barrel" it sold went in the form of refined oil products.*

Turning to Asia’s equation for the same year, we see a similar requirement at 19 mbd, with roughly the same percentage of both production and imports (because most of what’s sold by Asia remains in region).

So, from today’s perspective, Asia and the U.S. are essentially similar in terms of oil profiles:

The big difference is that, of the roughly 10 mbd each imports from "outside," 90 percent of what Asia imports comes from the Middle East, while about one-fifth of U.S. imports originate from the Persian Gulf.** The U.S. gets the bulk of its imports from four western hemispheric sources (in descending order of volume):

* Calculated from EIA’s World Petroleum Supply and Disposition, 1998, found online at <http://www.eia.doe.gov/emeu/iea/table31.html> (last updated on 01/29/2001).
** As noted in Fereidun Fesharaki, "Energy and the Asian Security Nexus," Journal of International Affairs, Fall 1999, vol. 53, no. 1, pp. 90 & 97; also EIA’s International Energy Outlook 2000, p. 38.
*** Calculated from Matthew Wald, "The United States, OPEC and Oil: A Snapshot," New York Times, 26 March 2000, p. B3. Saudi Arabia exports oil to the U.S. at a rate roughly equivalent to that of Canada, or 1.5 mbd.

Asia’s import requirements diverge significantly from that of the U.S. come 2020. While the U.S. is expected to use a total of 26 mbd in 2020 (importing in the range of 18 mbd, or roughly two-thirds), Asia’s total requirement is expected to jump to 36 mbd. As estimated by Cambridge Energy Research Associates, Asia will be fortunate to produce approximately 8 mbd at that point (their expected peak rate for 2000-2005), meaning a shortfall of approximately 28 mbd that will have to be met from extra-regional sources.*

While the U.S. import requirement will increase by 7 mbd by 2020, only 2 of that 7 will come from the Persian Gulf, meaning U.S. dependency on the region will remain relatively stable over the time frame, measured as a percentage of imports. The Mideast’s share of Asian imports cannot increase much from its currently high percentage (90%), but clearly the volume is likely to jump dramatically higher (upwards of 12 mbd). Is this an unrealistic projection of the Mideast’s productive capacity? Most experts say no. In short, it’s not the geology that generates the uncertainty here, but the politics and the economics.

But one thing is clear: Asia will have less control over its energy future. Today it produces roughly 40 percent of what it needs in oil, but in 20 years it will produce somewhere between a quarter and a third of what it needs.

* These calculations are obtained from EIA’s International Energy Outlook 2001, p. 39, Fesharaki, "Energy and the Asian Security Nexus," p. 97; and Daniel Yergin, Dennis Eklof & Jefferson Edwards, "Fueling Asia’s Recovery," Foreign Affairs, March/April 1998, pp. 38-39.

If Asia is already overwhelmingly dependent on the Persian Gulf for its oil imports, then conversely the Persian Gulf is becoming increasingly dependent on Asia as its primary market.

In 2000, the Persian Gulf will export roughly 19 mbd, of which almost two-thirds (63 percent) will be exported to Asia. The West (defined here as the U.S. and Western Europe), in contrast, will account for only 24 percent of the Gulf’s global market.*

In short, the Persian Gulf is largely Asia’s oil and not—as is commonly assumed—the West’s. So, if Asia is rightly described as hooked on Gulf oil, we can likewise describe the Gulf as hooked on Asia’s energy market. This relationship, while increasing in strategic importance, is hardly one-sided, but rather a co-dependency that portends rising Asian interest in Middle East stability and rising OPEC interest in Asia’s continued economic growth.