Oil and World Politics after the World Trade Centre Attacks
High income and consumption lifestyles in the major economies are based on burning huge amounts of fossil fuels and, particularly, oil and gas. The oil and gas are not mainly sourced in the countries using them - so that military-diplomatic mechanisms, to achieve control and compliance over local elites in producing countries, is central to the geo-politics of the USA, the UK, and other industrial economies. This is true, both in regard to oil producing countries, and in regard to countries that are strategic for the transport of oil and gas. The conflicts generated in these attempts to maintain compliance and control, and the struggle over oil rights and transport corridors, makes the presence of oil and gas a source of misfortune, human rights violation and misery for milions of people. In the coming years this generator of human oppression and misery is set to go into higher gear.
60% of world oil reserves are in the Middle East and the USA is highly dependent on Saudi Arabia and a small number of Middle Eastern OPEC suppliers. Saudi Arabia is a country whose royal family the USA has armed to secure its oil supply, and the Saudi regime has one of the worst human rights records in the world. The depletion currently occuring in non OPEC oil fields is likely to intensify dependence on the Middle East. Finding a technological fix to get more oil out of non OPEC reservoirs would be immensly expensive and may not be technically feasible. Partly for these kind of reasons, there has also been, over the last ten years, great hopes put in the Caspian Sea basin as alternative source of oil and gas to counter Middle Eastern dominance. It is this that partly underlies the US energy elites agenda in relation to Afghanistan. Ironically, the reserves in the Caspian sea basin are not as large as originally hoped, and some oil companies have been pulling out. The USA will be thrown back on Saudi Arabia whether it likes it or not - though it is prepared to rape the environment in Alaska to secure its position - and will wish to squeeze every last drop of oil out of the Americas.
A struggle for a more peaceful world, for human rights, and against environmental degradation has a energy dimension. As oil supplies deplete, the conflicts generated to secure access to remaining oil reserves are likely to become even more intense. Energy efficiency, and the development of renewable energy, are a package that must go together with the human rights and peace agendas. So too, must a "sufficiency agenda" and a demand for equal shares for all for the world's remaining energy supplies. The technical fixes, to develop renewable energy sources, and for a more energy efficient production system, do exist. Yet they are not a panacea. There are feasibility limits to them. A sufficiency agenda, which means a low energy lifestyle, in a low energy communities, with more needs supplied locally, are a necessary part of a juster future for the world - both as a policy agenda and as a personal life style choice.
Introduction - Energy in the Industrial Economy
Let us start off by considering work. The reference is to work, not as sitting at a desk taking decisions and writing letters, but in its physical sense - the use of energy to transform the physical world. Before the industrial age most work was done by human labour power - augmented by horse power and wind and water power. We still use horse power as a measure of engine power. However if you want to measure human labour power then a physically fit human being labouring for 7 days a week and 12 hours a day can do the equivalent of about 6 or 7 kilowatts of energy work, in the physical sense, each week. You can buy that nowadays, as electricity, for less than £1 and, in fact, every individual European nowadays enjoys the standard of living as if supported by about 30 of these kind of "energy labourers" and every American by about 55 labourers. These are not real human workers, of course - these are notional labourers which can be called "energy slaves" - they do not have to be fed, watered and clothed but they are numbers to represent the consumption of non renewable fuels as well as the machines created by, and run from, the fossil fuels. (c.f. Malcolm Slesser, Jane King and David C Crane, "The Management of Greed. A Bio-physical appraisal of environmental and economic potential" Resource Institute Limited, Dunblane, 1997 p 43).
That largely explains how the leading industrial economies get their high standard of living. From the same source too, however, we get the toxic by-products of the petroleum, coal and petrochemical industry, which create a growing amount of environmental havoc - not the least of which is the Greenhouse Effect.
Since 1850 humans have burnt 850 billion barrels of (conventional) oil, 2200 trillion cubic feet of gas and many million tonnes of coal. The human population has increased sixfold and cattle tenfold. The oil burnt is probably 35-50% of what is left (reserves plus estimated left to find), the gas burnt is probably 15-30% of what is left. For coal we have probably burnt around 15-30% of ultimately available supplies.
However you add it up, virtually every aspect of a modern industrial society requires oil, gas and electricity, largely created from these fossil fuels. The economic history of the last two hundred years has been a succession of technological transformations in the mode of delivery of energy to the production, transport and communications system - firstly based on coal and steam; then on oil and petroleum; then on electricity and electronic communications - which is based on a mixture of fossil fuels (oil, gas and coal) and nuclear.
Inequality of energy access and inequality of income
This access to fossil fuels is highly unequal and it is the Americans who consume the most. With just 4% of the world's population, they use 25% of the world's oil - that is about 3 gallons per person per day. In America each week 150 million Americans fill up their cars. An average American drives 1,000 miles a month, 12,000 miles a year, the distance to the Moon every 20 years. The Oil Tribe numbers 265 million. Together they weigh about 34 billion pounds and consume their own weight in petroleum every 7 days." (When will the Joy Ride End? , Randy Udall, 1999)
Unequal access to the technologies of power means growing world inequality. In the USA and the other industrial countries it has been the rich who have reaped the benefits of this fossil fuel powered growth process - whereas the poor and the world's environment have suffered. Between 1960 and 1998 the richest 20% of the worlds population increased their share of world income from 70% to 86%, whereas the poorest 20% of the world's population saw their share of world income decline from 2.3% to 1.3%. (Source: United Nations Development Programme, quoted in Der Spiegel 23.07.01).
Oil in the USA - the Growing Dependence on Foreign Supplies
Although oil was for many years available in large quantities in the USA itself - this is no longer so. The discovery of oil reached a peak in the 1930s In 1956, a petroleum geologist, called M. King Hubbert, realised that this peak in discoveries would eventually be followed by a peak in production as the oil was taken out of the most productive wells and they depleted leaving the less productive wells to pump He proved right. As King Hubbert predicted, a peak occurred in US oil production about 1970, and oil production in the USA has been falling ever since. The USA has therefore been becoming more and more dependent on foreign supplies. Most other industrial countries are likewise dependent on foreign supplies. .
Securing Oil Supplies - Oil and International Politics
Now let us turn to the question of what this means to the societies and communities from whence the oil comes. An important point here is that the source of oil is mostly not located in the same countries as the industrial countries using it - therefore oil politics is international politics. Because the security of oil is so vital to economic stability and planning, the key question has usually been how can foreign oil companies ensure the security of their capital investments in what are, for them, foreign countries, as well as the security of the resultant oil flow. In the foreign countries, the oil companies, as well as their supporters in the states in their countries of origin, have a variety of strategies. Nowadays the mechanisms are usually those of neo-colonialism, that is to say a relationship is built up with local elites whose aim is to try to ensure their compliance and dependence. If necessary, steps are taken to block any of their moves that would be damaging to oil interests - while largely leaving formal political control to the local elite.
The Co-option and control of local elites as policy goal
We can describe this using the words of US Foreign Policy adviser Zbigniew Brzezinski in his book, published in 1997, "The Grand Chessboard - American Primacy And It's Geostrategic Imperatives," The aim, according to Brzezinski, is to "decipher the central external goals of the political elites and the likely consequences of their seeking to attain them;. second, to formulate specific U.S. policies to offset, co-opt, and/or control the above....To put it in a terminology that harkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together." (p.40)
The conflict that arise in the policy practice
Co-option and control of local elites is not, however, a simple, or a trouble free, strategy. Virtually all the major oil producing countries in the Third World are either in a conflict with the USA itself, or have been at wars with their neighbours over oil rights and/or are involved in often quite long running civil wars and/or are involved in quite severe forms of civil, religious or ethnic strife which often have an oil dimension - that means involving a demand for a greater share of the wealth, or of the jobs, or opposition to environmental damage. Sabotage against pipelines and oil installations is not uncommon in such conflicts.
Although there are often multiple influences in conflicts, and oil is not always the main one, there is an oil dimension in all of the following crises - Algeria's civil war since 1992; the long running conflict with Lybia; the Angolan Civil war since 1975; the conflicts and guerrilla struggles in Ecuador and Colombia; the conflicts and break up of Indonesia, including the conflict with East Timor; the British and American conflict with Iran and the conflict with Iraq; the ethnic and religious strife in Nigeria and the conflict with the Sudan. The Chechyan conflict is also related to oil, as we shall see. It is difficult not to feel that, from the point of view of ordinary people, hardly a worse thing can happen than the discovery of oil in your country. Your riches lead to destructive social and environmental change.
The transport of oil - choke points
The key role of oil as a generator of world conflict is also an issue in the control of oil transport routes - there being, in the jargon of the US Department of Energy, certain key "choke points", which are narrow sea lanes, or pipelines which are vulnerable to being blocked up. At these places a blockage would have big, and virtually immediate, effects on the world oil market, and on world oil prices. You can, in fact, go on the web and find a discussion of these choke points on the web site of the US Department of Energy. They are - Bab El-Mandab where the the Red Sea flows into the Gulf of Aden with access to the Suez Canal and the Sumud oil pipeline; The Suez Canal itself; the straits of Hormuz connecting the Persian Gulf with the Gulf of Oman and Arabian sea; the Bosphorus connecting the Black Sea with the Mediterranean; the Panama Canal; a variety of Russian oil and gas pipelines through Eastern and Central Europe into Western Europe; The Malacca Straits connecting the Indian Ocean and the South China Sea and Pacific where there have been increased worries about sea piracy.
I mention all of these because sometimes the influence of oil politics is not at first visible when a country is not, as such an oil producer but is located in a strategically important oil transport route - as for example Turkey which controls the Bosphorus, whose ruling elite has been the recipient of huge amounts of military aid which it has used to crush the Kurds.
Oil Politics in the Persian Gulf
In trying to understand the background to the attack on the World Trade Centre the crucial area to focus upon is the Persian Gulf. This means Iran, Iraq, Kuwait, Oman, Saudi Arabia, the United Arab Emirates and several adjacent countries. Oil was discovered here early in the last century and the Middle East was "divided up" after World War One. Iran was exclusively British (BP) while Saudi Arabia was exclusively American (Aramco, originally Chevron). Kuwait and Iraq were both British and US. These were agreements all signed before 1933. An agreement with Oman was after made after World War Two - mainly with Shell. Further north, in the Caspian Sea basin, Czarist Russia, and then the Soviet Union, established a significant foothold in the oil-rich Baku area (now a part of Azerbaijan. The relationship with the Saudi royal family was particularly important here - basically the USA agreed to prop up the Saudi Royal family with billions of dollars worth of modern weapons, has trained and advised the Saudi army and paramilitary police, and, since 1990, has deployed large numbers of American combat personnel in the kingdom. The resultant regime is, according to Amnesty International, one of the most repressive in the world and has one of the worst human rights records. This cannot, it should be said, be entirely put down to the Americans. It was always that bad under the Wahhabbi religious police and now there is a problem with the rapidly expanding population, falling income, and a growing disaffected youth living on a royal handouts - with Muslim clerics articulating discontent about the corruption of the regime and its alliance with the American infidels.
Oil politics in and around the Caspian Sea
The other region that is critical to an understanding of the current conflict is the Caspian Sea basin. As is often the case with oil regions, there are considerable geo-political problems in securing this as an oil producing zone. For one thing there is the issue of how oil and gas is to be transported out, for another, there are problems as to the countries around the Caspian Sea agreeing to who actually has the rights to the oil. There are five countries bordering the Caspian - Iran, Turkmenistan, Kazakhstan, Russia, and Azerbaijan and all must be satisfied in order for an oil production deal to last. This is, in fact, no simple thing as these countries disagree about development rights to oil in the Caspian Sea itself. In international law if the Caspian is deemed a lake, its mineral rights have to be produced as a common resources share by contiguous countries - something Russia and Iran would prefer. If it is a sea then it is divided, as was the North Sea.
On the transport issue - as you can see from looking at a map, the Caspian sea is landlocked and oil must be transported by pipeline to where it can pumped into tankers for sea transport. Iran would be off limits to any US funded pipeline given the conflict between Iran and the USA - although there is something of a thaw going on at the moment. A route through the Caucacus takes pipelines through, or near, the troubled regions of Chechnya and Dagestan. In Azerbaijan there are conflicts with neighbouring Armenia. The problem with a route through Turkey would be that it would go through the Kurdish areas. Meanwhile Turkmenistan and its neighbours are embroiled in the Afghan conflict.
The Afghan Pipeline Project
To pursue the Afghan connection further - in 1997 the Taliban signed a £2 billion contract with an American oil company led consortium to build a 876 mile gas pipeline from Turkmenistan to Pakistan across Afghanistan at a cost of $1.9billion. This was to supply gas to Pakistan, and possibly India. It was Unocal, a Houston based company, that did the bidding and hosted the Taliban delegation in Texas. The consortium to do this was called the Central Asia Gas Pipeline Project. UNOCAL had a controlling interest of 46.5% but aborted the project in December 1998 because of the security situation - leaving the other partners still wanting to go ahead. These other partners were the Delta Oil Group of Saudi Arabia, the Turkmenistan government, Indonesian Petroleum, ITOCHU of Japan, Hyundai of South Korea and the Crescent Group of Pakistan.
The Bush administration and the pipeline project
According to a recent book, published in France, the pipelines across Afghanistan agenda was taken up again immediately George Bush came to power in the USA in February of this year. The Bush administration brought a strong oil interest into control in the White House. Apart from Bush himself,Vice President Dick Cheney, the director of the National Security Council Condoleeza Rice, the Ministers of Commerce and Energy, Donald Evans and Stanley Abraham, have all worked for a long time for U.S. oil companies. In fact between them thay have a variety of personal interests in these oil projects.
In their book ''Bin Laden, la verite interdite'' (''Bin Laden, the forbidden truth''), authors, Jean-Charles Brisard and Guillaume Dasquie, reveal that the Federal Bureau of Investigation's deputy director John O'Neill resigned in July 2001 in protest over the obstruction of the FBI investigation into bin Laden. The obstruction was by the oil interests who dominate the government because they wanted to negotiate with the Taliban. Until August, the U.S. government saw the Taliban regime ''as a source of stability in Central Asia that would enable the construction of an oil pipeline across Central Asia'', from the rich oilfields in Turkmenistan, Uzbekistan, and Kazakhstan, through Afghanistan and Pakistan, to the Indian Ocean. Until that time, says the book, ''the oil and gas reserves of Central Asia have been controlled by Russia. The Bush government wanted to change all that''. Confronted with Taliban's refusal to accept U.S. conditions, ''this rationale of energy security changed into a military one'', the authors claim. 'At one moment during the negotiations, the U.S. representatives told the Taliban, 'either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs','' Brisard said in an interview in Paris. Please note this was before the attack on the World Trade Centre.
Blocking the FBI investigations - a carpet of gold or a carpet of bombs
Brisard claim that deputy director of the FBI, O'Neill, told them that ''the main obstacles to investigate Islamic terrorism were U.S. oil corporate interests and the role played by Saudi Arabia in it''. This might explain too why there were other reports in the French press, (Le Figaro repeated in the Guardian) leaked by the French secret service, that the CIA actually met with bin Laden in the summer when he was in the American hospital in Dubai, but took no steps to arrest him.
U.S. and Taliban diplomatic representatives met several times in Washington, Berlin and Islamabad. The last meeting between U.S. and Taliban representatives took place in August, five weeks before the attacks on New York and Washington, and the UN were involved in these discussions. ''Several meetings took place this year, under the arbitration of Francesc Vendrell, personal representative of UN secretary general Kofi Annan to discuss the situation in Afghanistan,'' says the book.
''Representatives of the U.S. government and Russia, and the six countries that border with Afghanistan were present at these meetings,'' it says. ''Sometimes, representatives of the Taliban also sat around the table.'' These meetings, also called ''6+2'' because of the number of states (six neighbours plus U.S. and Russia) involved, have been confirmed by Naif Naik, former Pakistani Minister for Foreign Affairs. In a French television news programme two weeks ago, Naik said during a ''6+2'' meeting in Berlin in July, the discussions turned around ''the formation of a government of national unity. If the Taliban had accepted this coalition, they would have immediately received international economic aid.'' ''And the pipe lines from Kazakhstan and Uzbekistan would have come,'' he added.
Naik also claimed that Tom Simons, the U.S. representative at these meetings, openly threatened the Taliban and Pakistan. ''Simons said, 'either the Taliban behave as they ought to, or Pakistan convinces them to do so, or we will use another option'. The words Simons used were 'a military operation','' Naik claimed. So before the strike on the World Trade Centre the US had threatened the Taliban.
The Caspian Sea as a counter to Middle East control
What is the significance of the efforts to secure Caspian Sea supplies? The answer is that there is a very considerable hope at the moment that the Caspian sea will be a way of countering Middle Eastern control of oil. But estimates of how much oil there might be in the area have been downgraded in recent years. One retired oil geologist Colin Campbell argues that "It seems that the Kashagan East well in the northern Caspian has made a discovery of about 10 billion barrels (another Prudhoe Bay) in an immensely expensive operation. It is however a solitary huge structure and does not herald further major discoveries capable of having a world impact. The potential of the Caspian has been generally exaggerated in a pitiful example of wishful thinking as the West dreams of countering Middle East control." (Campbell. "Oil Price and Depletion" June2001)
"The US certainly thought that the Caspian offered them an escape from Middle East control, and there was a great spasm of geo-political and military planning about pipelines to get it out. In fact the record of discovery over the past 10 years has been poor. BP found a large gasfield in Azerbaijan but nothing much else and Exxon-Mobil have now pulled out of the country. Kashagan was found to have about 10 Gb of high sulphur deep sub-commercial oil in Kazakhstan (less than the 200 Gb claimed by the US Geol. Survey). BP and Statoil have pulled out. And the Russians have found another 2 Gb nearby. So the dream of a huge new oil supply did not materialise......"(personal communication from retired oil consultant).
We should remember that the Middle East has 60% of the worlds known reserves so that American power has an Achilles Heal - its dependent upon this oil supply remaining available. It difficult not to notice that Britain and the US are busily damaging their relationships with some of the biggest producers in the region by their bullying and interfering approach to foreign policy. This leaves the Americans dangerously dependent on Saudi Arabia - with that dependence actually set to increase even more.
Depletion will increase dependence on the Middle East
The reason that dependence is set to increase is to be discovered when we look at what is happening in the rest of the world, in the oil supply from the non-OPEC countries. There is a problem here - depletion is setting in - something that will follow too in the Middle East. Production in the North Sea, for example, has started to decline in the last few months.There was an article about oil depletion in the November 1st issue of the London Economist which reflects the fact that, for some time, a debate has been raging. The CIA's web site denies there is a problem - however, others do not agree. The International Energy Agency admits there is an issue, but thinks it can be solved by technological means.
On the surface, the article in the Economist is patronising and sarcastic about the depletion argument. It counters with the view that new technologies of extraction are on hand. According to the Economist, the average recovery rate of oil taken out of an oil reservoir is around 30-35%. Industry optimists think that, with new techniques, they can get 50-60% of the oil from a reservoir to the surface within a decade. This they will need to do in order to prevent decline in the non OPEC oil fields.
" The industry has systematically under-reported the size of discovery for good commercial and regulatory reasons, but under-reporting leads to upward reserve revisions which presents a much better image of gradual growth to the stockmarket and may carry tax advantages. Since they can't admit to under-reporting, they companies attribute the upward revision to technological advances. In fact the impact of so-called technology such as gas injection, horizontal drilling etc (none particularly new) has been to hold production higher for longer, which makes good economic sense, but has minimal impact on the reserves. Average recovery is now about 40% (not the traditional rule of thumb 30%). The recovery percentage related primarily to the density of the oil and the type of reservoir, and does not have much to do with technology. Enhanced recovery with such methods as steam injection have been long known, but apply only to specific reservoirs, adding a bit to the tail end of depletion It is more complicated than this, with greater scope to under-report the old large fields than the new smaller ones, and there are always special cases that can be paraded , but it gives the general idea." (source: retired oil man)
How much is $1 trillion?
The advocates of new technologies, to get more out of the reservoirs, admit that it will not come cheap. The technology requires investment and a figure mentioned by the International Energy Agency, quoted in the Economist article, is of $1trillion. A trillion is one thousand billion. $1trillion is about one tenth of the USA's GDP in a year. The UK's GDP is £934.92billion X 1.4 = $1.3 trillion so this is a figure about equal to 77% of the UK's GDP.
Other figures to compare this to are US expenditure on fixed capital formation on all machinery and equipment (but not construction) in 2000 = $1.2 trillion.
Perhaps most relevant of all, however, is to compare this to annual capital and exploratory expenditure by the major oil companies taken together. These are collected by OPEC in its Annual Statistical Review which is available on-line. OPEC statisticians take the figures from oil company reports and add them together. The major oil companies covered in this are: BP Amoco; Exxon Mobil; TotalElfFina; RoyalDutchShell; Chevron and Texaco and cover all capital formation and investment in exploration, production, transportation, refinery and chemicals, marketing and other. In the year 2000 the total for all these companies in all of these fields was $43,410 million - i.e. £43.4 billion.
A quick calculation shows then that $1trillion is 23 times the current yearly investment sum by all the major existing oil companies together in all their areas of investment. So, if this investment programme is to happen over the next ten years, it will mean a huge hike in the current rate of capital formation in the oil industry.
There must be serious doubts whether an investment programme of this magnitude is technically achievable. It isn't as if the new technology of oil extraction is to be found, waiting to be purchased, on the shelves of oil equipment superstores, for quick and simple installation. Such investment would presumably involve a very considerable logistical operation and require huge amounts of additional trained personnel. Are such personnel there in sufficient numbers? Has there been a massive increase in training programmes in oil technology to increase the trained labour supply that is coming on stream now? Looked at in this way a $1trillion investment programme is a fantasy solution for a very severe problem.
Depletion means increased dependence on the "Swing Countries"
In the absence of this technological solution what will happen? The answer is that as other oil fields decline there are only certain oil fields that may be able to take up the slack - that is those controlled by the five middle east OPEC countries, and Saudi Arabia in particular. To use the jargon of the oil experts the five middle east OPEC countries function as "swing producers" making up the difference between world demand, under various scenarios, and what the rest of the world can produce. At present the "swing share" provides about 30% of world oil production but as other oil fields deplete their production could rise to 50% eventually. This would give these countries immense power but, of course, it is also true that would speed the depletion in the OPEC oilfields themselves, plus make the US and Europe dangerously dependent on Russian oil and gas - which will also be accelerating down their own depletion curves.
At the moment the Saudis control 25% of world oil reserves and the US pay the Saudi royal family up to $100bn a year for it. This has guaranteed a stable flow of petrol and oil to the US at relatively low prices and the Saudi regime recycles its petrodollars back to the west in the shape of construction projects and arms purchases. Saudi Arabia also holds its money in US banks, mainly Chase Manhattan, which has given these banks the collateral to extend excessive US domestic credit. In fact, surprisingly, the cost of US imports exactly measures the amount of US consumer debt. This is "funny money" not matched by goods and services, but just flowing out of the ground almost for free. So the absorption of oil revenues is a big financial issue, even if it nominally belongs to the Middle East governments.
The Instability of Saudi Arabia
And yet the Saudi regime is unstable, partly because of its relationship with the USA. This is partly a phenomena of "blow back" - since the late 70s the US through the CIA have built up and armed radical Islamic groups to be, what they saw as pawns in a game against the Soviet, and later Russian, dominance in Central Asia - now it has rebounded as the groups have displayed an unwanted agenda of their own.
As a religious monarchy, Saudi Arabia's government tries to balance the state's cooperation with the secular West with its strict religious society. It is finding that very difficult - in current conditions fears are growing that the country faces a coup. "The Saudi royals have been paying off the terrorists with danegeld for a long while," says one well-placed source. "There is a danger that well-educated returnees from US colleges who cannot get work will make common cause with the people of the souks and overthrow them." (London Guardian Nov 21st). The Saud clan - now estimated to number more than 7,000 privileged tribesmen - are still clinging to absolute power. However, much of their oil wealth has been frittered away, and unemployment among young Saudis is rising. Per capita income in the early 1980s was $28,000. It is now below $10,000.
The people who make policy are very worried about this and what it might then mean for world oil supplies. As most people are by now aware Osama bin Laden and most of the WTC hijacker came from Saudi Arabia. They are very aware of oil economics and politics. In 1998 bin Laden gave an interview when he said that the United States had carried out the "biggest theft in history" by buying oil from Persian Gulf countries at low prices. According to bin Laden, a barrel of oil today should cost $144. Based on that calculation, he said, the Americans have stolen $36 trillion from Muslims and they owe each member of the faith $30,000. "Do you want (Muslims) to remain silent in the face of such a huge theft?" Bin Laden said. (Donna Abu-Nasr, Associated Press Writer).
The following quotation from the Spectator of 20th October points to the wide popular sense of injustice, especially in Middle East countries, which lies behind the conflict.
"Throughout the cafes of the Muslim world, hundreds of thousands of young men are saying.. "We have all this oil, yet what happens? It is sold cheaply to westerners, who despise us, to pay the night club bills of decadent pseudo-Islamic rulers. Given our control of oil, we could squeeze the world economy's windpipe. Yet we have not even been able to dislodge the Israelis from the lands they stole. Our current leaders are wasting our substance and our opportunity; let us rise up against them".
In the Tapai Times Online Rudi Dornbusch, one time IMF economist, quotes Brookings Institute studies by George Perry which look at the impact of a serious contraction of oil supplies. A reduction of 1 million barrels per day would raise prices to US$32 per barrel; an extreme cut of 7.5 million barrels -- a cut equal to 10 percent of world production -- would increase the price of a barrel to US$161. Such a price hike would create the worst recession in the last 50 years.
These are the nightmares of the world economic leaders. A number of weeks ago a short news item in the London Guardian noted that Saudis, when polled, feared nuclear strikes most of all. The article did not say from who but there have been plenty of crazy commentators in the USA who have talked about using nuclear weapons in the current situation. The most frightening scenario of all in this crisis, is one in which an radical Islamic revolution did "choke off" the US (and other industrial) economies, by denying them oil - followed by a nuclear strike in retaliation......
The Convention Wisdom of the Policy Makers
US policy makers and the oil industry have been aware of the dangers of this exposure for some time. The damaged relationships with Iran, the confrontation with Iraq, the depletion in other countries and the possible fragility of dependence on Saudi Arabia, are all pressures to find new sources of oil and gas. It is this that partly explains the enthusiasm for the Caspian Sea. This enthusiasm has been there since the early 1990s - and at that time it was even fantasised that the amount of oil available would be a counter to the Middle East. So it has become part of the conventional wisdom of the strategic interferers that they have to control this region.
Thus it is a big irony is that there probably is not that amount of oil around the Caspian Sea basin anyway.
"A growing number of wells are coming up dry in the Caspian Sea, raising questions about the reserves in a region that some have promoted as a potential Middle East of the next millennium .... In the six years since this chunk of the former Soviet frontier opened to outside investment, major oil companies have spent billions of dollars drilling for oil, and haven't yet hit a new discovery significant enough to repay the investment .... In a report last year, the U.S. State Department estimated that the Caspian region's possible oil reserves could reach 178 billion barrels, ... [But] several independent consulting firms now place total probable reserves in the Caspian region at about one-tenth the original U.S. government estimates .... at between 15 billion and 31 billion barrels of crude, ... That would be a good strike, but even at the high end of that range, the Caspian would contribute about 3% of the world's oil supply. By contrast, the Middle East holds about 60% of the world's known reserves."[Cooper & Pope, Wall Street Journal, October 12, 1998
To go into this in more depths: the Kashagan structure is a large offshore structure in which Permian salt seals a Carboniferous carbonate reservoir, which was charged by Devonian oil. The onshore Tengiz Field found by the Soviets in 1979 was the first discovery on this geological trend. Had the whole thing been full of oil, it might have contained the 200 Gb originally talked about, making it by far the world's largest field. But in reality the carbonate reservoir is not uniform, containing isolated reefs (as at Tengiz) separated by poor quality rocks (the clays in the lagoons between the reefs). The first reef was tested by the immensely expensive Kashagan East well and informed rumour has it that it found about 6 billion barrels. The second reef was later tested adding almost as much, so that a total of about 10 Gb has been found. one may assume that these first two wells were located on the prime locations, but there may still be further smaller traps to test. So it looks as if at most it might contain 15-20 Gb to be optimistic. The reservoir lies at a depth of 4500 m and the oil contains 16% sulphur, meaning that they have to use special steel. Adding to the problems is that fact it lies in very shallow water, so it is difficult to get the drilling equipment in. It is also a spawning ground of sturgeon. Lastly, an icy wind blows in coating everything with ice. These are the reasons BP and Statoil have pulled out. The Caspian has been a disappointment, apart from the nightmare problems of getting the oil out. (source: personal communication)
Perhaps it is awareness of this that has led the Bush administration to search around in North America for the last drops that would enable it to weather a strategic crisis. Perhaps this is the significance of the steps to develop oil in Alaska even it could probably provide perhaps 2% of the US's oil needs - as well as more recent steps to develop oil in the Yellowstone Park., which has led to protests by people like film star, Robert Redford and others. (London Guardian 3rd August 2001 and Internet reports).
Once Again on Oil Depletion in World Politics
Earlier I mentioned that in the USA, following the predictions of Shell geologist King Hubbert a peak in oil discoveries in the 1930s was followed, 40 years later, by a peak in production in 1970 and a decline since then. Many petroleum geologists are now predicting just this process on a world scale. The facts are these - the peak of world discovery was at the end of the 1960s and the rate of discovery as been falling since - by up to 70%. 70% of to-day's production comes from fields found more than 30 years ago and their production is in decline. It is becoming harder and harder to increase production and estimates of yet to find fields, based on extrapolating the rate of past discoveries do not suggest big new resources.
In an article in the FEASTA Review, Number One, published by the Foundations for the Economics of Sustainability in May 2001, Colin Campbell quotes the investment bank Goldmann Sacks, bankers for BP Amoco which said in 1999 that "The great merger mania is nothing more than a scaling down of a dying industry in recognition of the fact that 90% of the global conventional oil has been found". He also cites the chief executives of Arco and Agip "who when they felt free to speak on leaving office, both stated that they expected global production to peak by 2005".
To a degree, of course, gas is a substitute for oil and gas will remain available. However, there are forecasts that gas production will peak about 2020.
Gas depletes differently to oil bcause of its higher molecular mobility. Unconstrained production would be very high and short. In practice, production is capped at a set level by the facilities and pipeline capacity. The problem is that when the in-built spare capacity is drawn down, production falls abruptly. The US has discovered this recently, to its great cost. They are drilling for gas furiously, but now have to produce flat out, meaning they deplete in a matter of months. Europe is shifting to Russian, North African and eventually Middle East gas, but it will face the same depletion pattern as the USA has already faced, with an abrupt end, with no market signals, as the last cubic foot costs less to produce than the first. (source: personal communication from retired oil consultant).
Much of what is happening in the world at the moment can be read as the early stages of complicated manoevring as the USA, with their ally, the United Kingdom, approach this issue in their traditional manner - ensuring the security of remaining supplies through trying to establish their place through military force. This is being combined with steps to quell the inevitable discontent to which conflicts and armed struggle will give rise to, as the chickens come home to roost back home, in new anti terror laws.
The Rich will live and the poor will die
In his book Developed to Death, Ted Trainer remarks that "A market economy is an ingenious device for ensuring that when things become scarce only the rich can get them." Left to its own devices the world market will drive up oil prices as oil reserves are depleted and the poor will die in greater and greater numbers. Because this will be done impersonally, by "the oil price", and not by any individual or agency, it will held to be just and fitting and there will always be plenty of economists to say why genocide, by economic means, is not a crime against humanity at all, but the sacred operation of unchallengeable market forces.
On the other hand it is already clear what the alternative must be. If there is one political and economic demand that must unite humanity in this century, if there is to be any hope of collective survival, any hope for the world's poor, and any hope of not tearing each other apart in bloody conflicts over access to this dwindling resource, it has to be that we are all entitled equally to access the remaining oil supplies.
Colin Campbell comments on his own "proposal for an Oil Depletion Protocol - which is now being taken up by the group of international lawyers responsible for Kyoto. This is that each producing country would produce at his current depletion rate (ie annual production as a percentage of what is left to produce). Many, countries, such as the UK or USA, which are past the midpoint of depletion and into decline cannot do so in any case, but some of the Middle East countries could, given the investment, increase production for a while. The important point is that the importers agree not to buy infringements. It would recover control from the Middle East and moderate the price of oil in international markets, thereby allowing the Third World to afford some. The importers are left with the task of allocating what amounts to their ration, by fiscal measures or auction under market principles or in other more socially responsible ways. The end consumer would be paying the scarcity charge but at least it would remain in his country, reducing the call for other sources of revenue. There could be specific exemptions for gas, non-conventionals and perhaps small or new producers, so that the industry could continue to win as much as possible and keep their games going. It would indirectly encourage energy saving and promote alternative energy.
"So far as making the protocol stick is concerned, there would of course be cheating on all sides. But in, for example, Europe or the USA it should be easy for the governments to licence imports and monitor the flow. Whether or not it really works in practice, it would at least alert everyone to depletion. It would make a lot more sense than Kyoto and be much easier to administer. Falling oil supply might reduce the need for Kyoto as the noxious emissions would fall in parallel." (personal communication)
A Slogan for the World - Equality of Access to Remaining World Oil Supplies
Various practical schemes have been worked out, as to how oil and gas energy could be kept equally available for all. How these rationing schemes would be administered are described in the FEASTA journal and in Richard Douthwaite's book "The Growth Illusion". They were originally worked out as ways of administering reductions in carbon emissions as a response to the Greenhouse effect. By international agreement they could set the total ceiling on fossil fuels to be allowed each country depending on its population who would allocated the ration down to its individual citizens and national economic organisations. Then, those who do not use their permitted rations (under-consuming countries, organisations and individuals) could trade their rations with countries, organisations and individuals who are over-consuming their fossil fuel rations. This Contraction and Convergence model has the support of the EU and the 113 nations of the non aligned group and India and China have said that they will sign up to such a scheme. The main resistance is coming from the USA, Canada and Australia as well as the Middle Eastern oil states.
It is, in my view, above all this demand, that should be at the heart of the globalisation debate. For two hundred years growing world inequality has been underpinned by technologies of peace and war which were powered by coal and then by oil. Socio-economic power is based on unequal access to, and application of, fossil fuel based technologies. Now that this fuel source is going into inevitable decline it must be shared equally in a process that allows the world to even out the imbalances that have evolved in the last 200 years - in a development process which brings into being a solar based lean economy, where life satisfactions are created, not on access to more and more trivial energy guzzling toys, but on improved human relationships, creativity and intellectual development, the creation of beauty through the arts, culture and play, the creation of beautiful living environments and through a deeper understanding of ourselves.
The later we leave this, the harder will be the process of adjustment. Unfortunately, as one would expect, the oil establishment that currently controls the US government is not currently prepared to play ball and the UK political military establishment is still playing the same imperial oil games it has for the last century - offering British troops as mercenaries to the USA.
The Green Energy Agenda
To reduce dependence upon oil, with all the knock-on political consequences that the oil industry has on world conflicts, on human rights and on environment there are three techno-political agendas. These are, I would suggest, not only political agendas for nation states but for us as individuals. They are part of a package which is needed if we are serious about human rights and the environment: (1) we must move over to solar and renewable electricity generation (2) we must move over to hydrogen fuel technologies for transport - that means splitting water into hydrogen and oxygen using electricity from renewable sources to do this - not from fossil fuel resources and finally (3) we must switch to energy saving technologies in buildings, energy saving in industrial and agriculural production systems, and reductions in the high energy options in our choice of food, transport and leisure. This is partly what has been termed a dematerialisation agenda and partly what has been termed the sufficiency agenda.
Renewable Energy - Feasibility Limits
It gives me no pleasure to say that the renewable energy agenda, and hydrogen fuel agenda, will probably not be as easy to pursue as we might like to think. Renewables like wind and solar are have a low capability because wind and sun is unreliable. That does not mean that developing renewables is futile but it means that it will take a long time, and be costly. A number of academics have done the sums as to how long this will take and how much it will cost - working out the consequences for the standard of living in developed countries and in Third World countries. This is one of the main purposes of a book by Malcolm Slesser, Jane King and Malcolm Crane, "The Management of Greed. A Bio-physical appraisal of environmental and economic potential". They looked at what would happen if a certain fraction of fossil energy consumption is always diverted to building a renewable-sourced energy supply, initially by replacing fossil and fissile generated electricity, and then when that had been achieved, by expanding the investment and using the electricity to make hydrogen as the basis of a new fuel source. In 1992, globally, just under 1% of fossil fuel consumption was used to maintain and expand the world's electricity production system (not the fuel to run it, but the fuel to build it). So they explored 1%, 2%, 4%, 8% and 16% as the fractions ('royalties')of energy diverted to building the renewable alternatives. They used a mix of 51% photo-voltaic, 9% wind, and 40% nuclear to replace the fossil sources.
They found, as one would expect, that higher the royalty, the more rapid the move towards a physically sustainable energy supply. Royalties of 8% and 16% even manage a full substitution by hydrogen in the developed world within the time-frame of their study (105 years) but at a huge cost to the material standard of living.
Let me briefly quote their conclusion "To answer question posed at the outset 'Can renewable energy fuel the world?' the answer is probably yes, but the time horizon is of the order of a century or more. In the meantime we shall need all the oil and gas we can lay our hands on to keep the system going and build the renewable replacements. Moreover, for a full hydrogen economy we shall need coal as a carbon source for some uses where portable liquid fuels are essential." (Slesser, King and Crane )
Energy Saving - Technical Fixes
So, although it is important to get started on this policy agenda, there will be severe limits on what can be achieved by reliance on renewables. There is, therefore, also an important agenda for energy saving. Here the issues of energy saving are partly technological, but partly also social and psychological - coming down to life style changes.
The fight for the political principle of equal shares of a declining oil and gas resource, must be combined with steps to develop the energy technologies of the future. To use the jargon, there is an agenda to "dematerialise the economy." Since energy is used to transform materials, and to transport materials around, the dematerialisation agenda is an attempt to reduce the energy needs of the economy, partly by reducing the physical weight of products, partly by new, more efficient, materials, engines and designs, and partly by new forms of organisation. Various detailed proposals are being made to radically re-engineer production to make it lightweight and therefore reduce energy and materials requirements. For example, 200 mile to the gallon "hypercars" are not at all infeasible if one changes away from metal car bodies to lighter contruction materials for vehicles, as well as streamlining them and developing new engine technologies. There are a variety of technologies waiting in the wings for other products too. Together, it is argued, these could radically reduce energy consumption in the production and use of a variety of products, of buildings and agricultural products.
Technical innovations would be combined with new social and economic forms in the organisation of production and consumption. Companies would be less focused upon selling higher volumes of material products, and more on selling service solutions to people's needs. An example would be switching from selling carpets to providing floor covering services. In the latter arrangement the carpet would be owned, not by the user, but by the floor covering company, which would have an interest in maintainings its product, could recycle parts of it as needed. The pressure to sell more and more carpets would be removed and replaced by a less energy intensive move to keep existing resources in good condition, repairing and recycling them.
The strategy focused upon reducing material and energy inputs per unit of output is called the Factor 4 or even Factor 10 option. Factor 4 means the adoption of technologies which would give us twice the production with half the materials and energy consumption. These ways forward, which are heralded as options for a new industrial revolution, are most famously expounded by the Wuppertal Institute in Germany and the Rocky Mountain Institute in the USA. Bill Clinton was an enthusiastic fan of the writings of the Rocky Mountain Institute and it seems likely that this would have been part of the Al Gore agenda had he come to office. (The chief text for this perspective is Paul Hawken, Amory B Lovins and L Hunter Lovins "Natural Capitalism. The Next Industrial Revolution" Earthscan, London 1999. It is packed full of technical fixes and has a dust jacket with praising quotes from Bill Clinton)
The criticism of this strategy is that Factor 4 technological advances would not lead to a half the energy and materials requirement being used, to produce twice the volume of goods, but, given the way capitalism works, the technology would be used to produce 4 times the volume of goods. Moreover Factor 4 has been criticised, among other reasons, on grounds of technical feasibility by Slesser and others. In the FEASTA Review No.1 Malcolm Slesser has reviewed the Natural Capitalism book. He notes that he worked with some Wuppertal Institute members on a European Union funded research project. "However hard we tried, using their data, we could never achieve more than a factor 2 reduction in input per unit output" (p 176)
Looking at the facts of the last few years, moreover, there is no great grounds for optimism about dematerialisation. On the web one can download essays and articles from the Wuppertal Institute. In one paper, of July 2000, on "Green Accounting and Material Flow Analysis" by Peter Bartelmus and Andre Vesper, we learn that studies have been done on physical material flows in the economy, termed TMR (Total Material Requirement) measured as tonnage of materials per capita per annum processed and transported in the economic process. The idea is to find out if any delinkage is occuring between increased production, as economic growth occurs, and increasing material (and therefore energy ) requirements. It turns out that things are improving, but only marginally - "TMR per capita seems indeed to be levelling off for selected industrial countries at 75 to 85 tons per annum, except for Japan at 45 tons, because of its low per capita use.....Given that GDP per capita is increasing in all countries there is some delinkage, albeit far from the prescriptions of Factor 4 and Factor 10. We have therefore concluded that current delinkage cannot be equalised with sustainability as specified by these physical/ecological standards".
That is why the contraction and rationing scenario is needed as well. How fuel rationing might work and be administered inside countries is discussed in Richard Douthwaits book The Growth Illusion (p 220-221), also in the FEASTA Review and also on a web site created by Green economist David Fleming.
It is doubtful, however, given the way capitalism works, that the energy elite will be rational about such things. This is something that concerned citizens will have to work for...
Energy Saving - Life style Changes
Is it possible to have a good life without the huge oil and energy input? I think it is, but it will not look much like the capitalist consumer society we have at the moment. At the moment energy goes mostly into food, heating and transport. Radical scarcity of energy, ideally adminstered through a fair system of fuel rationing, would means the following life style adjustments. These are things we can be getting on with now.
Food - a move towards vegetarianism. It takes one tenth of the energy to produce a vegetarian diet as a meat diet. Organic foods - this will mainly require recycling human faeces as compost, as well as development of soils through sustainable methods. The need for a radical reduction of transport, means supporting the policy and life style goal of a return to using largely local food supplies. That also means some self supply - for example through encouraging community gardening. Not only food should be self supplied but, as transport of heavy goods becomes dearer, many other products too. A sustainable economy would have a far greated emphasis on local production for local needs - although encouraging greater communication of ideas between people and cultures. There would be a greater emphasis too on shared and pooled transport. This means public transport but it also means organising car sharing. In fact a huge number of journeys, currently taken in cars, are very short distances that are better taken by foot, or by bicycle. That would improve people's health. Heating would use passive solar thermal technologies more and there is a need energy saving. So this means economic development focused on household renovation. When you add these things together they add up to a redevelopment of localities and communities.
A further dimension is the move away from the high consumption/ high workload and high stress life style. For a very long time many people in industrial countries have been trading their time, working in high stress jobs, for more income, in order to buy energy guzzling toys to impress their neighbours. Nowadays, however, many people are finding the 24 hour society so stressful they want to work less hours and find that, when they do, this is more than worth the fall in income and consumption. Much consumption expenditure is akin to comfort eating - a compensation for their stressed miserable lifestyle. Once they give that up they need a lower income and "throughput" less energy intensive consumption anyway. They can spend their time, educating themselves, for example - e.g. learning about the gangster like antics of the energy elite. Far from egging people on to the futile idea of rising in armed rebellion, as certain wild revolutionaries want, the solution is to turn to helping more disadvantaged people make the transition to the low energy lifestyle. A gentle cultural revolution is needed, which turns people away in disgust from the murderous antics of the power and money junkies.
All this is an agenda for local economic development. It is a turn away from globalisation. These are the necessary compliments to struggles around human rights and against the brutality of the high energy way of life. They are both policy agendas and things we can all be getting on with as individuals, here and now.
End November 2001 - further essays on these themes are to be found on
A Strategy For Losers
© BRIAN DAVEY