KEY POINTS:
The leaders of the world's most powerful energy cartel have been meeting in Saudi Arabia in recent days, an event underlining the Asia-Pacific region's increasing reliance for vital oil supplies on the politically volatile Middle East.
The summit, only the third in the 47-year history of the Organisation
of Petroleum Exporting Countries, has been seeking long-term assurances of demand for Opec oil.
Only then will Opec be prepared to invest in new production capacity. The US and Europe are trying to cut their dependence on foreign oil by developing alternative sources of energy, such as biofuels and nuclear power. They are also implementing energy saving measures. So is the Asia-Pacific region. Japan has led the way in energy efficiency.
However, the region's big emerging economies, China and India, rely heavily on oil for transport fuel as they seek to raise the living standards of more than two billion consumers. They have difficulty imposing restraints on growth.
The International Energy Agency warned in its annual report this month that if unfettered energy demand in China and India continues, they will more than double their oil consumption by 2030. As a result, they will be importing more oil - 23 million barrels a day - than the US and Japan do now. Together, China and India would account for 45 per cent of the increase in global energy demand in this period.
So Asian and Pacific buyers will be keen to give the assurances that Opec seeks. Overall, the Middle East supplies nearly 75 per cent of Asia's oil imports, making the region by far the most important customer.
Australia and New Zealand also rely heavily on oil from the Gulf. The bargain with Opec is one the Asia-Pacific region cannot avoid. It comes with benefits but also economic and political risks.
Opec controls 42 per cent of the world's oil output. The energy agency which monitors the global energy outlook for industrialised nations says this share is set to rise to 52 per cent by 2030 as oil supply from outside the Middle East declines and global demand, especially from Asia, rises.
Opec's crude oil revenues this year are forecast to hit US$658 billion, thanks to the surge in oil prices. As a result, trade between Asia and the Middle East is booming as Asian economies sell manufactured goods to the region and buy oil and natural gas in return.
Millions of Asians work in the Gulf and Middle East investors are increasingly active in Asia. However, Asia's addiction to Gulf oil is creating a dangerous dependence.
In the short term, it is showing up in the form of higher inflation as rising fuel costs for transport feed into price increases for food and services.
Soaring food prices drove Chinese inflation to its highest level in more than a decade last month. China lifted Government-set prices for petrol and diesel by nearly 10 per cent on November 1 after holding off for more than a year for fear that it would stoke inflation and popular resentment. The recent protests in Myanmar started after diesel prices doubled overnight. Hefty subsidies on politically sensitive fuel prices cost taxpayers tens of billions of dollars a year in countries such as China, India and Indonesia.
As the oil price has risen this year, these subsidies have mounted to unsustainable levels. The longer-term risk for Asia and the Pacific of growing dependence on Opec oil is that it gives the cartel more power to dictate prices to the region.
And if any of the Middle East's conflicts erupt into war, Asia and the Pacific will suffer most from a disruption in oil supply.
* The writer, a former Asia editor of the International Herald Tribune, is a security specialist at the Institute of South East Studies in Singapore.
