Bill Totten's Weblog

Saturday, December 11, 2004

No Escape from Dependency

Looming Energy Crisis Overshadows Bush's Second Term

by Michael Klare (December 08 2004)

When George W Bush entered the White House in early 2001, the nation was suffering from a severe "energy crisis" brought on by high gasoline prices, regional shortages of natural gas, and rolling blackouts in California. Most notable was the artificial scarcity of natural gas orchestrated by the Enron Corporation in its rapacious drive for mammoth profits. In response, the President promised to make energy modernization one of his top concerns. However, aside from proposing the initiation of oil drilling in Alaska's Arctic National Wildlife Refuge, he did little to ameliorate the country's energy woes during his first four years in office. Luckily for him, the energy situation improved slightly as a national economic slowdown depressed demand, leading to a temporary decline in gasoline prices. But now, as Bush approaches his second term in office, another energy crisis looms on the horizon - one not likely to dissipate of its own accord.

The onset of this new energy crisis was first signaled in January 2004, when Royal Dutch/Shell - one of the world's leading energy firms - revealed that it had overstated its oil and natural gas reserves by about 20%, the net equivalent of 3.9 billion barrels of oil or the total annual consumption of China and Japan combined. Another indication of crisis came only one month later, when the New York Times revealed that prominent American energy analysts now believe Saudi Arabia, the world's largest oil producer, had exaggerated its future oil production capacity and could soon be facing the wholesale exhaustion of some of its most prolific older fields.

Although officials at the US Department of Energy (DoE) insisted that these developments did not foreshadow a near-term contraction in the global supply of energy, warnings increased from energy experts of the imminent arrival of "peak" oil - the point at which the world's known petroleum fields will attain their highest sustainable yield and commence a long, irreversible decline.

How imminent that peak-oil moment may in fact be has generated considerable debate and disagreement within the specialist community, and the topic has begun to seep into public consciousness. A number of books on peak oil - Out of Gas by David Goodstein, The End of Oil by Paul Roberts, and The Party's Over by Richard Heinberg, among others - have appeared in recent months, and a related documentary film, The End of Suburbia, has gained a broad underground audience. As if to acknowledge the seriousness of this debate, the Wall Street Journal reported in September that evidence of a global slowdown in petroleum output can no longer be ignored. While no one can say with certainty that recent developments portend the imminent arrival of peak oil output, there can be no question that global supply shortages will prove increasingly common in the future.

Nor is the evidence of a slowdown in oil output the only sign of an unfolding energy crisis. Of no less significance is the dramatic increase in energy demand from newly-industrialized nations - especially China. As recently as 1990, the older industrialized countries (including the former Soviet Union) accounted for approximately three-quarters of total worldwide oil consumption. But the consumption of petroleum in developing nations is growing so rapidly - at three times the rate for developed countries - that it is soon expected to draw even.

To meet the needs of their older customers and satisfy the rising demand from the developing world, the major oil producers will have to boost production at breakneck speed. According to the DoE, total world petroleum output will have to grow by approximately 44 million barrels per day between now and 2025 - an increase of 57% - to satisfy anticipated world demand. This increase represents a prodigious amount of oil, the equivalent to total world consumption in 1970, and it is very difficult to imagine where it will all come from (especially given indications of a global slowdown in daily output). If, as appears likely, the world's energy firms prove incapable of satisfying higher levels of international demand, the competition among major consumers for access to the remaining supplies will grow increasingly more severe and stressful.

To further complicate matters, many of the countries the Bush administration considers potential suppliers of additional petroleum, including Angola, Azerbaijan, Colombia, Equatorial Guinea, Iran, Iraq, Kazakhstan, Nigeria, Saudi Arabia, and Venezuela, are torn by ethnic and religious conflict or are buffeted by powerful anti-American currents.

Even if these countries possess sufficient untapped reserves to sustain an increase in output, as long as they remain chronically unstable, the desired increases are unlikely to appear. After all, any significant increase in day-to-day energy output requires substantial investment in new infrastructure - investment that is not likely to materialize in countries suffering from perpetual disorder. At best, production in such countries will remain flat or rise sluggishly; at worst, as in Iraq today, it may even threaten to fall. Indeed, the persistence of political turmoil in countries like Angola, Colombia, Iraq, Nigeria, and Venezuela has largely been responsible for the higher gasoline prices still evident, despite recent modest decreases, at the neighborhood pump.

If anything, the potential for conflict in such countries is likely to grow as demand for their petroleum rises. The reason is simple. Increased petroleum output in otherwise impoverished nations tends to widen the gap between haves and have-nots - a divide that often falls along ethnic and religious lines - and to sharpen internal political struggles over the distribution of oil revenues. Because the wealth generated by oil production is so vast, and because few incumbent leaders are willing to abandon their positions of privilege, internal struggles of this sort are prone to trigger violent clashes between competing claimants to national power.

In many cases, these clashes may take the form of attacks on the oil infrastructure itself, further jeopardizing the global availability of energy. As shown in Colombia and Iraq, where raids on oil pipelines and pumping stations have become a near-daily occurrence, such infrastructure - stretched out over miles and miles of jungle or desert - represents an unusually vulnerable and inviting target for terrorism. Not only do such attacks deprive the prevailing regime of vital revenues, but they also constitute an assault on the United States and the large multinational corporations that are deemed responsible for so many of the developing world's afflictions.

With oil demand regularly outpacing supply and disorder spreading in major producing areas, global shortages and resulting high prices are likely to become the norm, not the exception. Ideally, the United States could compensate for any shortfalls in the global availability of petroleum by increasing its reliance on other sources of energy. When producing electricity, for example, it is often possible to switch from coal to natural gas and back again. But most of our petroleum supplies are used in transportation - mainly to power cars, trucks, buses, and planes - and, for this purpose, oil has no readily available substitutes. Indeed, we have so organized our economy and society around the availability of cheap and abundant petroleum that we are severely ill-equipped to deal with the sort of shortages and supply disruptions that are likely to become the norm in the years ahead.

It is here that the performance of the Bush administration should come in for close scrutiny. In response to the earlier energy crisis of 2001, the President appointed a National Energy Policy Development Group (NEPDG), headed by Vice President Dick Cheney, to analyze America's energy predicament and devise appropriate solutions. The NEPDG issued its final report, the National Energy Policy (also known as the Cheney Report), in May 2001. How the group arrived at its final assessment is a matter of some speculation, as the administration has refused to make its deliberations public, but its conclusions are incontrovertible: rather than stress conservation and the rapid development of renewable energy sources, the report called for increased US reliance on petroleum. And because domestic oil production is in an irreversible decline, any rise in American oil usage necessarily entails an increased reliance on imported petroleum.

In a crude attempt to mislead the public about the nature of our oil dependency, the Cheney Report called for increasing US energy "independence" by exploiting the untapped oil reserves of Alaska's Arctic National Wildlife Refuge (ANWR) and other protected wilderness areas. But ANWR only possesses sufficient petroleum to provide this country with (at most) one million barrels per day for an estimated fifteen to twenty years, a tiny fraction of the twenty million barrels of additional oil that will be needed to supplement domestic output in 2025. What this suggests is that the overwhelming bulk of this additional energy will have to be acquired from foreign sources. To obtain all this imported energy, the Cheney Report calls on the President and his chief associates to place a high priority on acquiring additional petroleum from producers in the Persian Gulf, the Caspian Sea basin, Africa, and Latin America - that is, from regions especially susceptible to instability and anti-Americanism.

As a result, we are more dependent on foreign oil in 2004 than we were in 2001, and all the indicators suggest that this dependency will only become more pronounced during Bush's second term. Yes, the administration has proposed modest investment in the development of hydrogen-powered fuel cells and other new energy systems; but, at current rates of development, these new technologies will not prove capable of substituting for oil on a significant scale during the next few decades. This means that we will face our looming energy crisis with no viable fallback measures in sight. We remain trapped in our dependence on imported oil. In the long run, the only conceivable result of this will be sustained crisis and deprivation.

When, and in just what form, the United States enters the coming energy crisis cannot be foreseen. Perhaps it will be provoked by a coup d'etat in Nigeria, a civil war in Venezuela, or a feud among senior princes in the Saudi royal family (possibly brought on by the impending death of King Fahd). Or it could be thanks to a major act of terrorism or a catastrophic climate event. Whatever the case, our existing energy system, already stretched to its limits, will not be able to absorb a major blow like this without considerable readjustment and pain - or worse. While President Bush is likely to respond to a new energy crisis, as he has in the past, with renewed calls for drilling in ANWR and the further relaxation of US environmental standards, nothing he has proposed to date even suggests a viable exit strategy from perpetual crisis.

Michael Klare is a professor of peace and world security studies at Hampshire College in Amherst, Massachusetts, and the author, most recently, of Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency (The American Empire Project, Metropolitan Books).

Copyright 2004 Michael Klare

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Bill Totten