[A-List] Klare: The Twilight Era of Petroleum

[Erik Freye <efreye@xxxxxxxxx>]

http://www.tomdispatch.com/index.mhtml?pid=10216

Tomgram:  Michael Klare on Entering the Age of
Resource Wars


The Chevron ad began:  "It took us 125 years to use
the first trillion barrels of oil. We'll use the next
trillion in 30. Energy will be one of the defining
issues of this century. One thing is clear: the era of
easy oil is over..."


I rubbed my eyes and read on:


"What we all do next will determine how well we meet
the energy needs of the entire world in this century
and beyond.  Demand is soaring like never before. As
populations grow and economies take off, millions in
the developing world are enjoying the benefits of a
lifestyle that requires increasing amounts of energy.
In fact, some say that in 20 years the world will
consume 40% more oil than it does today. At the same
time, many of the world's oil and gas fields are
maturing. And new energy discoveries are mainly
occurring in places where resources are difficult to
extract, physically, economically and even
politically. When growing demand meets tighter
supplies, the result is more competition for the same
resources.


"We can wait until a crisis forces us to do something.
Or we can commit to working together, and start by
asking the tough questions: How do we meet the energy
needs of the developing world and those of
industrialized nations? What role will renewables and
alternative energies play? What is the best way to
protect our environment? How do we accelerate our
conservation efforts?..."


I rubbed my eyes again.  Most of this ad, part of a
new campaign by an oil major, might easily have been
taken more or less word for word from any of the
pieces Michael Klare -- author of the indispensable
Blood and Oil: The Dangers and Consequences of
America's Growing Dependence on Imported Petroleum --
has been writing for Tomdispatch over these many
months.  When Klare writes such passages and they
prove accurate somewhere down the line, they can
perhaps be called "prescient."  When the Chevron ad
people do the same, what you have is something like a
confession reflecting a seismic shift in mainstream
consciousness -- and we have to take our seismic
shifts where we find them.  After all this time, it
seems that "peak oil" may suddenly be on some part of
Big Oil's agenda, which tells you something about the
cul-de-sac into which we've blithely managed to drive
our SUVs.


Just to add a little footnote of my own:  During last
year's fierce hurricane season, after catching endless
TV and newspaper coverage of the destruction, and
finding hardly a passing mention of the possibility of
a link between the weather of that moment (commonly
referred to as "bizarre" or "strange") and global
warming, I wondered aloud whether our media (like our
President) wasn't living in something of a bubble
world (Xtreme weather meets Xtreme media bubble).
Numerous journalists promptly wrote in angrily to
suggest that I was off the wall; that, scientifically
speaking, such a linkage was not even worthy of being
raised in a respectable newspaper.


This year, with the first hurricanes arriving earlier,
fiercer, and in record numbers, and hurricane
prediction numbers for the rest of the season soaring,
the TV news finds itself more regularly switching from
scenes of destruction in the south to unnaturally
melting vistas in the north, and its reporters
regularly wondering on air about global warming
tie-ins.  And when, in a study which first appeared in
the British science magazine Nature, Kerry Emanuel, an
MIT ocean climatologist, suggested that the rise in
hurricane intensity might indeed be linked to global
warming, the news was not relegated to science
journals, anxious insurance company publications, or
on-line environmental websites.  It could be found in
USA Today ("Hurricanes have grown fiercer in recent
decades, spurred by global warming, and even tougher
storms are likely on the way, a researcher
predicts...") and a wide range of other major
publications.  This too represents at least a modestly
seismic shift worth noting.


Michael Klare, in the meantime, continues his
Tomdispatch exploration of the new era we've crept
into, upside down and backwards (at $61 dollars to the
barrel of crude oil), and what to make of it.  Tom


The Twilight Era of Petroleum
 By Michael T. Klare


Several recent developments -- persistently high
gasoline prices, unprecedented warnings from the
Secretary of Energy and the major oil companies,
China's brief pursuit of the American Unocal
Corporation -- suggest that we are just about to enter
the Twilight Era of Petroleum, a time of chronic
energy shortages and economic stagnation as well as
recurring crisis and conflict.  Petroleum will not
exactly disappear during this period -- it will still
be available at the neighborhood gas pump, for those
who can afford it -- but it will not be cheap and
abundant, as it has been for the past 30 years. The
culture and lifestyles we associate with the heyday of
the Petroleum Age -? large, gas-guzzling cars and
SUVs, low-density suburban sprawl, strip malls and
mega-malls, cross-country driving vacations, and so on
-- will give way to more constrained patterns of
living based on a tight gasoline diet.  While
Americans will still consume the lion's share of
global petroleum stocks on a daily basis, we will have
to compete far more vigorously with consumers from
other countries, including China and India, for access
to an ever-diminishing pool of supply.



The concept of a "twilight" of petroleum derives from
what is known about the global supply and demand
equation.  Energy experts have long acknowledged that
the global production of oil will someday reach a
moment of maximum (or "peak") daily output, followed
by an increasingly sharp drop in supply.  But while
the basic concept of peak oil has gained substantial
worldwide acceptance, there is still much confusion
about its actual character.  Many people who express
familiarity with the concept tend to view peak oil as
a sharp pinnacle, with global output rising to the
summit one month and dropping sharply the next; and
looking back from a hundred years hence, things might
actually appear this way.  But for those of us
embedded in this moment of time, peak oil will be
experienced as something more like a rocky plateau --
an extended period of time, perhaps several decades in
length, during which global oil production will remain
at or near current levels but will fail to achieve the
elevated output deemed necessary to satisfy future
world demand.  The result will be perennially high
prices, intense international competition for
available supplies, and periodic shortages caused by
political and social unrest in the producing
countries.


The Era of Easy Oil Is Over


The Twilight Era of oil, as I term it, is likely to be
characterized by the growing politicization of oil
policy and the recurring use of military force to gain
control over valuable supplies.  This is so because
oil, alone among all major trading commodities, is
viewed as a strategic material; something so vital to
a nation's economic well-being, that is, as to justify
the use of force in assuring its availability.  That
nations are prepared to go to war over petroleum is
not exactly a new phenomenon.  The pursuit of foreign
oil was a significant factor in World War II and the
1991 Gulf War, to offer only two examples; but it is
likely to become ever more a part of our everyday
world in a period of increased competition and
diminishing supplies.


This new era will not begin with a single, clearly
defined incident, but rather with a series of events
suggesting the transition from a period of relative
abundance to a time of persistent scarcity.  These
events will take both economic and political form: on
the one hand, rising energy prices and contracting
supplies; on the other, more diplomatic crises and
military assertiveness.  Recently, we have witnessed
significant examples of both.


On the economic side, the most important signals have
been provided by rising crude oil prices and warnings
of diminished output in the future.  A barrel of crude
now costs just over $60 -- approximately twice the
figure for this time a year ago -- and many experts
believe that the price could rise much higher if the
supply situation continues to deteriorate.  "We've
entered a new era of oil prices," said energy expert
Daniel Yergin in an April interview with Time
Magazine.  If markets remain as tight as they are at
present, "you'll see a lot more volatility, and you
could see prices spike up as high as $65 to $80."


Analysts at Goldman Sachs are even more pessimistic,
suggesting that oil could reach as high as $105 a
barrel in the near future.  "We believe that oil
markets may have entered the early stages of what we
have referred to as a ?super-spike' period," they
reported in April, with elevated prices prevailing for
a "multi-year" stretch of time.


Of course, the world has experienced severe price
spikes before -- most notably in 1973-74 following the
October War between Egypt and Israel and the Arab oil
embargo, as well as in 1979-80 following the Iranian
Revolution -- but this time the high prices are likely
to persist indefinitely, rather than recede as was the
case in the past.  This is so because new production
(in such places as the Caspian Sea and off the West
coast of Africa) is not coming on line fast enough or
furiously enough to compensate for the decline in
output from older fields, such as those in North
America and the North Sea.  On top of this, it is
becoming increasingly evident that stalwart producers
like Russia and Saudi Arabia have depleted many of
their most prolific fields and are no longer capable
of boosting their total output in significant ways.


Until recently, it was considered heresy for officials
of the oil industry and government bodies like the
U.S. Department of Energy to acknowledge the
possibility of a near-term contraction in oil
supplies.  But several recent events signal the
breakdown of the dominant consensus:


*On July 8, Secretary of Energy Samuel Bodman told
reporters from the Christian Science Monitor that the
era of cheap and abundant petroleum may now be over.
"For the first time in my lifetime," he declared,
major oil suppliers like Saudi Arabia "are right at
their ragged edge" in their ability to satisfy rising
world demand for energy.  Despite the huge increase in
international demand, Bodman noted, the world's
leading producers are not capable of substantially
expanding their output, and so we should expect a
continuing upward trend in gasoline prices. "We are in
a new situation," he asserted.  "We are likely at
least in the near-term to be dealing with a different
pricing regime than we have seen before."


*One week later, oil giant Chevron took out a two-page
spread in the New York Times, the Wall Street Journal,
and other major papers to signal its awareness of the
impending energy crunch.  "One thing is clear," the
advertisement announced, "the era of easy oil is
over."  This was an extraordinary admission by a major
oil company.  The ad went on to say that "many of the
world's oil and gas fields are maturing" and that "new
energy discoveries are mainly occurring in places
where resources are difficult to extract, physically,
economically, and even politically."  Equally
revealing, the ad noted that the world will consume
approximately one trillion barrels of oil over the
next 30 years -- about as much untapped petroleum as
is thought to lie in the world's known, "proven"
reserves.


Oil Shockwave


These, and other recent reports from trade and
industry sources, suggest that the anticipated
slowdown in global petroleum output will have severe
economic consequences.  If prices spike at $100 a
barrel, as suggested by Goldman Sachs, a global
economic recession is almost unavoidable.  At the same
time, the slowdown in output is sure to have
significant political and military consequences, as
suggested by another set of recent events.


The most notable of these, of course, is the domestic
brouhaha triggered by the $18.5 billion bid by the
Chinese National Offshore Oil Corporation (CNOOC) for
U.S.-based Unocal, originally known as the Union Oil
Company of California. Unocal, the owner of
substantial oil and gas reserves in Asia, was
originally wooed by Chevron, which offered $16.8
billion for the company earlier this year.  The very
fact that a Chinese firm had been prepared to outbid a
powerful American firm for control of a major
U.S.-based oil company is immensely significant in
purely economic terms.


Since abandoned by the Chinese because of fierce
American political opposition, the effort, if
consummated, would have represented the largest
transaction ever by a Chinese enterprise in the United
States.  But the bid triggered intense political
debate and resistance in Washington because of CNOOC's
ties to the Chinese government -- it is 70% owned by
the state -- and because the principal commodity
involved, oil, was considered so vital to the U.S.
economy and was thought to be less plentiful than once
assumed.  Fearing that China might gain control over
valuable supplies of oil and gas that would someday be
needed at home or by U.S. allies in Asia, conservative
politicians sought to block CNOOC's acquisition of
Unocal by recasting the matter in national security
terms.


"This is a national security issue," former CIA
Director R. James Woolsey testified before the House
Armed Services Committee in July.  "China is pursuing
a national strategy of domination of the energy
markets and strategic dominance of the western
Pacific" -- a strategy, he argued, that would be
greatly enhanced by CNOOC's acquisition of Unocal.
Seen from this perspective, CNOOC's bid was considered
a threat to U.S. security interests and thus could
have been barred by Congress or the President.


The notion of blocking a commercial transaction by a
major foreign trading partner of the United States
obviously flew in the face of the reigning economic
doctrine of free trade and globalization.  By invoking
national security considerations, however, the
President is empowered to bar the acquisition of a
U.S. company in accordance with the Defense Production
Act of  1950, a Cold War measure designed to prevent
the flow of advanced technologies to the Soviet Union
and it allies.  This is precisely what was being
proposed by a huge majority in the House of
Representatives.  On June 30, the House adopted a
resolution declaring that CNOOC's takeover of Unocal
could "impair the national security of the United
States" and therefore should be barred by the
President under terms of the 1950 law. This outlook
then made its way into the omnibus energy bill adopted
by Congress before its summer recess: Citing potential
national security aspects of the matter, the bill
imposed a mandatory 120-day federal review of the
CNOOC bid -- effectively ensuring its demise.


Further evidence of a growing amalgamation between
energy issues and U.S. national security policy can be
found in the Pentagon's 2005 report on Chinese
military power, released on July 20.  While in
previous years this report had focused mainly on
China's purported threat to the island of Taiwan, this
year's edition pays as much attention to the military
implications of China's growing dependence on imported
oil and natural gas.  "This dependence on overseas
resources and energy supplies... is playing a role in
shaping China's strategy and policy," the report
notes.  "Such concerns factor heavily in Beijing's
relations with Angola, Central Asia, Indonesia, the
Middle East (including Iran), Russia, Sudan, and
Venezuela... Beijing's belief that it requires such
special relationships in order to assure its energy
access could shape its defense strategy and force
planning in the future."



The unclassified version of the Pentagon report does
not state what steps Washington should take in
response to these developments, but the implications
are obvious: The United States must strengthen its own
forces in key oil-producing regions so as to preclude
any drive by China to dominate or control these areas.



Just how seriously American policymakers view these
various energy-related developments is further
revealed in another recent event: the first
high-profile "war game" featuring an overseas oil
crisis.  Known as "Oil Shockwave," this extraordinary
exercise was chaired by Senators Richard Lugar of
Indiana and Joe Lieberman of Connecticut, and featured
the participation of such prominent figures as former
CIA Director Robert M. Gates, former Marine Corps
Commandant General P. X. Kelley, and former National
Economic Adviser Gene B. Sperling. According to its
sponsors, the game was conducted to determine what
steps the United States could take to mitigate the
impact of a significant disruption in overseas
production and delivery, such as might be produced by
a civil war in Nigeria and a terrorist upsurge in
Saudi Arabia.  The answer: practically nothing.  "Once
oil supply disruptions occur," the participants
concluded, "there is little that can be done in the
short term to protect the U.S. economy from its
impacts, including gasoline above $5 per gallon and a
sharp decline in economic growth potentially leading
into a recession."


Not surprisingly, the outcome of the exercise produced
a great deal of alarm among its participants.  "This
simulation serves as a clear warning that even
relatively small reductions in oil supply will result
in tremendous national security and economic problems
for the country," said Robbie Diamond of Securing
America's Energy Future (SAFE), one of the event's
principal sponsors. "The issue deserves immediate
attention."


Entering the Era of Resource Wars


>From what is known of this exercise, "Oil Shockwave"
did not consider the use of military force to deal
with the imagined developments.  But if recent history
is any indication, this is sure to be one of the
actions contemplated by U.S. policymakers in the event
of an actual crisis.  Indeed, it is official U.S.
policy -- enshrined in the "Carter Doctrine" of
January 23, 1980 -- to use military force when
necessary to resist any hostile effort to impede the
flow of Middle Eastern oil.


This principle was first invoked by President Reagan
to allow the protection of Kuwaiti oil tankers by U.S.
forces during the Iran-Iraq War of 1980-88 and by
President Bush Senior to authorize the protection of
Saudi Arabia by U.S. forces during the first Gulf War
of 1990-91.  The same basic principle underlay the
military and economic "containment" of Iraq from 1991
to 2003; and, when that approach failed to achieve its
intended result of "regime change," the use of
military force to bring it about.


A similar reliance on force would undoubtedly be the
outcome of at least one of the key imagined events in
the Oil Shockwave exercise: a major terrorist upheaval
in Saudi Arabia leading to the mass evacuation of
foreign oil workers and the crippling of Saudi oil
output.  It is inconceivable that President Bush or
his successor would refrain from the use of military
force in such a situation, particularly given the
historic presence of American troops in and around
major Saudi oilfields.


In setting the stage for its simulated crisis, Oil
Shockwave identified a set of conditions that provide
a vivid preview of what we can expect during the
Twilight Era of Petroleum:


*Global oil prices exceeding $150 per barrel
 *Gasoline prices of $5.00 or more per gallon
 *A spike in the consumer price index of more than 12%
 *A protracted recession
 *A decline of over 25% in the Standard & Poor's 500
stock index
 *A crisis with China over Taiwan
 *Increased friction with Saudi Arabia over U.S.
policy toward Israel



Whether or not we experience these precise conditions
cannot be foreseen at this time, it is incontestable
that a slowdown in the global production of petroleum
will produce increasingly severe developments of this
sort and, in a far tenser, more desperate world,
almost certainly threaten resource wars of all sorts;
nor will this be a temporary situation from which we
can hope to recover quickly.  It will be a
semi-permanent state of affairs.


Eventually, of course, global oil production will not
merely be stagnant, as during the Twilight Era, but
will begin a gradual, irreversible decline, leading to
the end of the Petroleum Age altogether.  Just how
difficult and dangerous the Twilight Era proves to be,
and just how quickly it will come to an end, will
depend on one key factor: How quickly we move to
reduce our reliance on petroleum as a major source of
our energy and begin the transition to alternative
fuels.  This transition cannot be avoided.  It will
come whether we are prepared for it or not.  The only
way we can avert its most painful features is by
moving swiftly to lay the foundations for a
post-petroleum economy.


Michael T. Klare is the Professor of Peace and World
Security Studies at Hampshire College and the author,
most recently, of Blood and Oil: The Dangers and
Consequences of America's Growing Dependence on
Imported Petroleum (Owl Books) as well as Resource
Wars, The New Landscape of Global Conflict.


Copyright 2005 Michael T. Klare





		
____________________________________________________
Start your day with Yahoo! - make it your home page
http://www.yahoo.com/r/hs