Sunday, July 23, 2006


The following column is from Newsweek, April 24, 2006, p.45:

[OPEN QUOTE] The U.S lives in an energy trap. We fell into it gladly, dug it deeper and sit fat and happy, with blinders on. We're fed daily meals of imported oil, from countries we pay in IOUs and think we can push around. But now we're starting to see the costs and risks of our dependency—and I don't only mean gasoline averaging $2.74 a gallon at the pump. [Wasn’t that a long time ago!]

For years to come, we'll be in the hands of some of the most dysfunctional governments in the world. Oil prices will rise [she got that right] and economic growth will slow—not this year, but almost certainly a few years out. We'll be paying in both treasure and blood, as we fight and parley to keep ever-tighter supplies of world oil flowing our way.

What has changed in the world? We're running out of the capacity to produce surpluses of oil. [Should read, ‘Have run out.”] Demand for crude is expected to rise much faster than new supplies. Developing nations, such as China and India, are glugging barrels at astounding rates. Meanwhile, most producer nations can't find enough new oil, or drill out more from their reserves, to replace what we're using up. Production from most of the large, older fields is in irreversible decline. About three years from now, the non-OPEC world will start pumping at slowly diminishing rates, says energy analyst Charles Maxwell of Weeden & Co. Most of the extra barrels needed to feed our economic growth will then have to come from OPEC nations—putting them in the driver's seat. Saudi Arabia is stepping up drilling and development, but the volatile market price suggests that it still won't have much capacity to spare. Within 10 or 15 years, it too may not pump enough to meet increased demand.

That puts the oil-dependent countries in a serious bind. We're all jockeying for control of oilfields, in a vast game that runs the risk of turning mean. China and Japan are running warships near disputed oil and natural-gas deposits in the East China Sea. China is doing deals in Sudan, Venezuela and Iran (our "bad guys"). Russia looks less friendly as we continue to invest in the oil countries around the Caspian Sea—Azerbaijan, Kazakhstan, Turkmenistan.

Nobody really knows how much oil there is. State-run companies don't disclose their true reserves. But clearly there's not enough to cover long supply disruptions, and that puts future economic development at increasing risk. "Terrorists have identified oil as the Achilles' heel of the West,” says Gal Luft, head of the Institute for the Analysis of Global Security. The world market is losing maybe 1.5 million barrels a day to political sabotage. In February, the Saudis foiled an attack on one of their major oil installations. Had it succeeded, it could have been an "energy Pearl Harbor,” Luft says. No one can foresee how world markets would respond if we attack Iran, but traders are clearly running scared (oil touched $70 a barrel last week).

This throws our Iraq wars into a different light. To an extent that most Americans don't yet understand, the U.S. military has become a "global oil-protection force," says Michael Klare, an expert on natural-resource wars and author of the book Blood and Oil. President Jimmy Carter declared the free flow of oil from the Persian Gulf to be a vital U.S. interest, enforced at the point of a gun, if necessary. Today, we patrol tanker routes not only in the gulf, but in the Indian Ocean and South China Sea. Troops and advisers help protect pipelines in chaotic countries such as Colombia and the Republic of Georgia. We're planting military bases near oil supplies in Asia and Africa. Gulf War I was billed as a war to save Saudi oilfields from Saddam Hussein. Gulf War II was elevated to a "war against terror". But it's arguably still about oil—the Carter Doctrine reigns. One of the prizes in Iraq was to have been British and American access to its huge and unexploited oil reserves, Klare says.

What does all this add up to? A future oil market drastically rationed by price. Farmers, truckers and people on lower incomes who have to drive to work will be squeezed, especially if they also need oil to heat their homes. But heating with natural gas won't save you either, says oil investment banker Matthew Simmons; natural gas supplies may grow even tighter and even higher priced.

On paper, we have alternatives, such as liquefied coal, oil sands from Canada and ethanol. But they're not anywhere close to production on a massive scale. For a smooth transition, mega-energy projects need to get started at least 20 years before oil supplies decline, writes Robert Hirsch of the consulting firm Salk in a study prepared for the U.S. Department of Energy. If we don't get a running start on the problem, he says, "the economic consequences will be dire." We're probably already behind. It takes leadership to address a potential crisis in advance.

Unfortunately, we're investing in war, not in crash projects to develop new energy sources. Maybe there's time to spare. But some events, like true civil war and collapse in Iraq, could change everything in a day. We're running a faith-based energy policy-still addicted to oil. If something goes wrong, it will go wrong big. —Jane Bryant Quinn (With reporters: TEMMA EHRENFELD with RAMIN SETOODEH) [CLOSE QUOTE]

No comments: