Even in its boom days, Houston couldn't compare with Sheikh Zayed Road, the highway that connects downtown Dubai with the massive port and free-trade zone at Jebel Ali. On both sides of the road, a forest of construction cranes are at work on high-rise offices and condominiums. One Dubai-based magazine claims that one-quarter of the world's construction cranes are now in Dubai. A trip down Sheikh Zayed Road seems to confirm that assessment. The entire region is one big, dusty construction zone.
There are other indicators of Dubai's emergence as a world power. Office rents in the emirate are now among the highest in the world -- vying with London and Tokyo for that dubious distinction. Shipping volumes through the huge port at Jebel Ali, the largest man-made harbor between Singapore and Rotterdam, continue to soar. And feeding all of that growth is an enormous amount of financial activity. For the energy industry, the most important financial development is the emergence of the Dubai Mercantile Exchange (DME). Later this year, the exchange will begin trading sour crude futures based on Omani crude. Thus, for the first time, crude oil coming out of the Persian Gulf will have its own benchmark price Ã¢â‚¬â€œ one that is not reliant on West Texas Intermediate or North Sea Brent.
This is a big deal. Not only is it indicative of the decline of those two grades of crude in terms of their importance to the global oil supply, it also signals the ongoing shift in the global financial markets toward the Persian Gulf. Yes, London, New York, Singapore, and Tokyo will continue to be hubs of financial activity. But the flood of capital that is surging into the Persian Gulf, thanks to high oil prices and a booming real estate business, is reshaping the global financial landscape. And that shift should be noted by the isolationists in Washington who continue to demonize the Arab world and seek to impose America's will through militarization instead of economic engagement.
Over breakfast at the Emirates Towers Hotel, Gary King, the CEO of the DME, told me that the emergence of the new futures contract is indicative that the Persian Gulf is "the center of the world's biggest hydrocarbon province. Most of [the] growth in oil consumption is in Asia-Pacific. So it's a natural shift in gravity. Our timing is very opportune to be in that center of gravity."
While the center of gravity is shifting eastward, American politicians are stuck in the rhetoric of protectionism and xenophobia. A few months ago, Hillary Clinton, joined by a phalanx of Republicans, denounced the acquisition of a few American ports by Dubai Ports World, the company which runs Jebel Ali. A few months before that, indignant Congressional leaders, cheered on by the neoconservatives, blocked CNOOCÃ¢â‚¬â„¢s acquisition of Unocal. America is also closing its borders. Witness the increasing militarization of the Mexican border and the continuing use of illegal immigration as a wedge issue the Democrats.
While the U.S. closes its borders and its markets to foreigners, Dubai has opened both. Workers from all over the world -- skilled and unskilled -- are flooding into Dubai and they are finding work. The port at Jebel Ali is open to all comers. It not only hosts ships from the U.S. Navy, it also provides fueling and other services for warships belonging to the Chinese, Japanese, and British navies. The massive seaport will soon have a massive airport to go with it. Next year, the Jebel Ali airport will open -- and it will have six runways. Like the port, it will be a free-trade zone in which customs and duties won't be required unless the goods moved through the zone are actually imported into Dubai.
While Dubai invests in infrastructure, the U.S. bleeds cash. The wars in Iraq and Afghanistan are costing American taxpayers $2.5 billion per week. That war spending is a big reason why the U.S. government's total indebtedness is increasing at a rate of $1.7 billion per day. Then there's the burgeoning trade deficit, which will likely exceed the record $716 billion recorded last year.
Sometime in the fourth quarter of this year, the DME will begin trading sour crude. After that, it plans to trade jet fuel futures. After that, who knows? Natural gas, LNG, LPG, and other energy products are a natural for the DME. That sound you hear is the sound of the shifting world economy -- away from the U.S. and toward the Persian Gulf.