Some scholars regard the Twentieth Century as being shaped by the “Politics of Oil.” From the First World War to the War in Iraq, industry’s dependence on oil has heretofore been a crucial factor in determining the foreign policy stances of the large oil-devouring countries of the West and the nations who supply them with this precious resource. But with developing nations requiring increasing amounts of oil to fuel their rapid industrial growth, Western hegemony over the global oil supply and its pricing will no longer be sustainable.

If last year’s hysteria over oil prices is any indication, the valuable fuel may still hold the power to incite political turmoil, spur hyper-inflation, and significantly reduce economic growth. The price of crude oil hit $55 a barrel last October, causing the Consumer Price Index in the US to shoot up 0.6%. It was expected that if prices remained at that level, yearly growth could slow down from 3.5% to 3%. Such a precipitous upsurge in prices evoked fears of an imminent energy crisis, like the ones in 1973 and 1979. While a 1970s scenario, when OPEC trade embargoes caused a worldwide economic slump, is unlikely, such price increases may become more common in the future.

Myriad explanations have been offered for last year’s spike including the ‘terror premium’ of the Iraq war, Russia’s Yukos affair, Hurricane Ivan’s destructive effects on Caribbean oil-fields, and the usual suspect: price-gouging by the Saudis. While all these are liable to be factors in the price-spike, it has now become apparent that increased demand from developing nations – especially China and India – was also a major factor, one that is likely to become more important in the near future.

In 2000, the BBC reported that developing countries, who used to account for 26% of oil demand in the early 1970s, now claim a share that is close to 40% and growing. Edward Morse, author of “Power Plays: How Energy Fuels World Politics” attributes the increment in world oil demand, from 60 million barrels a day in 1985 to 77.5 million in 2000, to growth in the Asia-Pacific region. He predicts that 80 percent of future increases in demand will continue to come from this region.

Diplomatic pressures from Washington and other nations kept supply at its peak last year. It was speculated that Saudi Arabia’s much touted spare capacity was no longer enough to satisfy the demands of a fast-growing, oil-fueled world economy. America’s foreign policy in the Middle East has been a function of its dependence on oil imports from the region. The domestic economy’s appetite for oil has forced the US government to see the stability of the region as a vital security interest. All that may soon change.

Western nations have seen their oil bills fall in the last two decades. The BBC reports that oil accounted for as much as 13% of the import bill in the 1980s. It was down to 4% a decade later. That’s not to say that Western economies are no longer oil-dependent. The United States is still the largest oil importer, consuming upwards of 18 million barrels a day. But in today’s economy, price upsurges that cause mild discontent in Western nations can become sources of strife in the Third World.

Energy demands have already begun to affect the political climate in developing countries. India, whose energy demands, both in oil and gas, are expected to double by 2020, imports 75% of its crude oil from the Middle East, according to the BBC. It has begun to assert itself regionally and pursue interests in the Gulf.

Last year the divisive relationship between India and its Islamic neighbour Bangladesh was put to the test as they negotiated a transit gas pipeline from Burma. While issues like water-sharing and terrorism allegations still strain relations between the two countries, economic necessities have led to a compromise.

Likewise, India has redoubled efforts to build a gas pipeline from Iran. But arch-rival Pakistan would have to be party to any such negotiations, since an overland pipeline would necessarily go through Pakistani territory. In order to minimize backlash from Pakistan’s Islamic hardliners, India has proposed separate agreements for the purchase of gas (between India and Iran) and the building of the pipeline (between Iran and Pakistan).

India isn’t the only Asian power courting Iran. In November of last year, China signed an agreement to buy oil and gas from Iran and develop an oil-field in the country. This came as no surprise as China has been continually diversifying its oil import partners.

China has been leading the world in growth in oil demand over the past decade. According to Energypulse.net, a website devoted to analysis and commentary on the global power industry, China’s oil imports increased by 25% in 2003. China’s Ministry of Commerce expects a 21% increase in 2004. In 1993, China was a net oil-exporter and the fifth largest oil producer in the world. But liberal market reforms, resulting in vigorous economic growth, have dramatically changed the picture. It is now the second largest oil-consuming nation in the world, behind only the United States.

China’s economic growth, which topped 9% last year, doesn’t look to be slowing down in the near future. Industrial production continues to swell as incomes rise and Chinese citizens demand greater amenities, leading to higher energy consumption.

Accordingly, China has pursued an aggressive international strategy in order to secure supply for its energy needs. It was recently alleged that the nationalization of Yukos by the Russian government was financed by Chinese banks, who lent $6 billion to the Russian state bank VEB that in turn funded the state-owned buyer of Yukos, Rosneft. It is in China’s interest to gain some leverage in the Kremlin as it competes with Japan over the terminating location of an oil pipeline from Russia. But closer Sino-Russian relations are contrary to the interests of Western nations who have recently expressed discontent over Mr. Putin’s dictatorial style of government.

China’s strategy to deal with its growing appetite for oil isn’t restricted to Asia. In a recent visit to Latin America, Chinese premier Hu Jintao announced China’s intentions to invest heavily in Venezuela’s oil sector. A trade deal, giving China broad access to the Venezuela’s oil reserves, was recently struck between the two countries.

China’s and India’s aggressive actions in securing its oil supply from abroad have wide implications on geo-politics. China’s increasing reliance on Iranian oil is troublesome to Europe and the US. As the EU and America join in an international effort to curb Iran’s nuclear ambitions, possibly referring its nuclear program to the Security Council in hopes of sanctions, Chinese cooperation maybe essential, as it is one of the five permanent members of the Security Council.

Similarly, a growing influence in Latin America may prompt a change in American foreign policy in that region. As Chinese interests grow and the need for energy security becomes more pronounced, Washington will need to adopt a multi-lateral approach to intervention in the continent or deal with Beijing.

While such supply diversification measures may work in the short-term, in the long-term both China and India will have to look to the Middle-East for their oil demands, as over two-thirds of the world’s known oil reserves lie in that region. India has argued for pan-Asian trading bloc in order to increase influence in the region and bolster bargaining power with OPEC. Consolidation among China, India, South Korea, and Japan would serve as a counterweight to America’s status as the largest purchaser of Middle-Eastern oil.

The Western interest in securing the free flow of oil from the Middle East has been reduced and the interest of developing nations has increased. In such a scenario, the unilateral foreign policy actions pursued by Western nations, such as the Iraq war, will no longer elicit meek condemnations from the Asia-Pacific region. If American involvement has the potential to disrupt oil supply, countries like India will no longer deem it kosher to sit back and watch. Accommodations will need to be made, especially if the Asia-Pacific sector begins to act as a bloc. The power of Black Gold to influence global politics has only gotten greater.