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Saddam, Oil and Empire

 

(An excerpt from LARRY EVEREST’s new book Oil, Power and Empire.)

World oil markets have become increasingly tight and volatile, and this has become a major potential problem. Several trends are responsible: global supplies have not been growing as fast as demand, key energy-producing regions are highly unstable, and there is heated competition for control of oil and natural gas sources.

The demand for energy has been rising by some 2.5 percent a year as industrialization spreads around the world. In 2003, global consumption stood at 77 million barrels of oil a day; by 2010, if these trends continue, it could rise to over 90 million barrels a day, a 17 percent increase.

However, petroleum output–and especially production capacity–are not growing nearly as fast. (Of course, immediate demand for petroleum oscillates with the ups and downs of the global economy; here we are focusing on longer-term trends in capacity and demand.)
An April 2001 report by the U.S. Council on Foreign Relations and the Baker Institute for Public Policy, two high profile establishment think-tanks run by former government officials, was commissioned by Vice President Dick Cheney to help shape a new U.S. energy strategy. Their report, “Strategic Energy Policy Challenges For The 21st Century” (hereafter the “Baker report”), singled out the lack of spare production capacity as a key concern:

Perhaps the most significant difference between now and a decade ago is the extraordinarily rapid erosion of spare capacities at critical segments of energy chains. Today, shortfalls appear to be endemic. Among the most extraordinary of these losses in spare capacity is in the oil arena.

The Baker Report noted that in 1985, OPEC spare production capacity stood at 25 percent of global demand, but in 1990 it had fallen to eight percent, and by 2001 was a mere two percent. Without an adequate cushion of spare capacity, shortages could occur and prices could spike:

the world is currently precariously close to utilizing all of its available global oil production capacity, raising the chances of an oil supply crisis with more substantial consequences than seen in three decades.

A related problem is that energy sources are concentrated in some of the most tumultuous areas in the world. According to energy forecasts, by 2050 the Persian Gulf/Caspian Sea region will account for more than 80 percent of world oil and natural gas production. The region’s reserves are estimated to be 800 billion barrels of oil and an energy equivalent amount in natural gas. Meanwhile, total oil reserves in the Americas and Europe are less than 160 billion barrels and will be exhausted in the next 25 years.

Former Carter official Zbigniew Brzezinski calls the Persian Gulf/Central Asian region “the global zone of percolating violence” and warns that it will likely be “a major battlefield, both for wars among nation-states and, more likely, for protracted ethnic and religious violence.” In his book Jihad vs. McWorld, Benjamin Barber calculates that 69 percent of the total world production of oil and 92 percent of the world’s proven oil reserves are “in nations that are at a high and moderate risk for current or future ethnic conflicts”–located mainly in this same region. Pentagon officials talk of an “arc of instability” running from the Andes in South America through North Africa, the Middle East, into Southeast Asia.

This volatility, which results from many factors including resistance to oppressive U.S.-backed regimes, presents a number of challenges to U.S. power. First, America faces difficulties maintaining its hold on the Middle East, which remains the world’s premiere oil-producing region. Second, another center of world energy production has opened up in the former Soviet Republics of Central Asia. The region’s geopolitical “tectonic plates” are in motion and its future economic and political orientation is now being fought out. Third, these and other developments have impeded investment in oil and natural gas production and hindered their expansion. The Baker Report points to political difficulties and under-investment in oil-producing countries as prime culprits in a crisis of energy production growth:

[T]he US government has operated under the assumption that the national oil companies of these countries would make the investments needed to maintain enough surplus capacity to form a cushion against disruptions elsewhere. For several years, these assumptions appeared justified.

But recently, things have changed. These Gulf allies are finding their domestic and foreign policy interests increasingly at odds with US strategic considerations, especially as Arab-Israeli tensions flare. They have become less inclined to lower oil prices in exchange for security of markets, and evidence suggests that investment is not being made in a timely enough manner to increase production capacity in line with growing global needs. A trend toward anti-Americanism could affect regional leaders’ ability to cooperate with the United States in the energy area.

The Baker report argued that these problems “highlight the concentration of resources in the Middle East Gulf region and the vulnerability of the global economy to domestic conditions in the key producer countries.” The U.S. agenda includes reshaping these “domestic conditions”–by force if need be.

The world’s major energy multinationals are blocked from investing in many of the world’s richest producing countries–mainly by nationally-owned oil companies which were a product of the anti-colonial upsurges of the 1950s and 1960s. In February 2003, the chairman of ExxonMobil stated that his company’s output was not keeping up with demand: “When we consider, that as demand increases, our existing base production declines, we come squarely to the magnitude of the task before us. About half the oil and gas volume needed to meet demand 10 years from now is not in production today.” The New York Times concluded that ExxonMobil’s problems stem from “flat” production, the decline of its existing fields in North America and the North Sea, and the fact that “more than 90 percent of the world’s proven oil reserves are owned by countries, national oil companies and the Russian oil companies”–many of which are closed to direct foreign investment. “As competition in the oil industry gets tighter, the challenge is accessing the reserves in the new areas, and every issue counts,” one energy company executive commented.

In Iraq, non-Arab foreign investment was outlawed by the Ba’ath regime, and in 2000, investment in the Middle East accounted for only 70 cents of every $100 spent by U.S. companies for oil and gas exploration and development.

Feeding America’s Petro-Dependence

The U.S. government has made clear that it is incapable of dealing with these mounting problems through conservation, ending the petro-dependence of the U.S. economy, or energy self-reliance. In May 2001, the Bush administration issued a “National Energy Policy,” often referred to as the Cheney report, which emphatically declared that the U.S. economy would continue to consume a grossly disproportionate share of the planet’s natural resources: “Our prosperity and way of life are sustained by energy use.”

A year later, the Environmental Protection Agency reported that average fuel economy for U.S. cars and trucks fell to its lowest level in 22 years.

The Cheney report made no bones about the fact that domestic oil production won’t come close to meeting U.S. consumption, even if the Arctic wilderness was exploited. The same will soon be true for natural gas, so the U.S. will have to import more and more of each. “Over the next twenty years, U.S. oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent. If America’s energy production grows at the same rate as it did in the 1990s, we will face an ever-increasing gap,” the report states, noting that the U.S. produces “39 percent less oil today than we did in 1970.” It concludes that if current trends continue, the U.S. will be importing two-thirds of its oil within 20 years — up from 37 percent in 1980.

The U.S. Energy Information Administration (EIA) predicts that natural gas imports will more than double between 2001 and 2025, and imports of liquefied natural gas, much of it from Third World countries, will increase more than 10 fold. Shortly after the 2003 war, the director of Rice University’s energy program told The New York Times, “We’re on the verge of discovering that natural gas is almost as important as oil for our energy supplies…Once we wake up to this, we’ll have to deal with the geopolitical implications of importing natural gas from some of the more unsavory parts of the world.”

The Cheney report’s solution is to gain access, leverage, and control of energy sources across the planet, from Colombia and Venezuela — where the U.S. has been maneuvering against guerrilla insurgents and a nationalist-oriented government — to the Middle East, the Caspian Basin and east Asia. The report argues that “energy security must be a priority of U.S. trade and foreign policy.”

The new National Security Strategy echoes this orientation. It calls enhancing “energy security,” a major goal and commits the U.S. to “expand the sources and types of global energy supplied, especially in the Western Hemisphere, Africa, Central Asia, and the Caspian region.”

Oil, Power and Empire is now available at bookstores (distributed by Consortium and Ingram) or through Common Courage Press: 800.497.3207
To purchase online or contact author LARRY EVEREST: www.larryeverest.com

ISBN: 1-56751-246-1 paper $19.95
390 pages, appendix, chronology, index

LARRY EVEREST will be discussing his book on KPFA’s Morning Show this Monday, Dec. 15 at 8:30 a.m. (94.1 FM)

 

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