18 October 2008

Confronting our thirst for oil

By Liam Carroll

"Soaring oil prices and loss of wealth in 2008 to the tune of $1.2-$1.9 billion each and every working day, depending on the price of crude, not only helped pop the US mortgage bubble but have also helped create the economic conditions that brought the US economy to its current dire straits", explains Gal Luft an energy analyst on a web-based discussion forum called Middle East Strategy at Harvard (MESH). The "dire straits" refer to the current financial crisis, but the general topic of discussion at MESH, which "brings together some of the most original strategic thinkers in academe, research centers, and government", is US strategy in the Middle East, of which the role of oil is a significant topic.

Indeed, elsewhere on the MESH website, further interesting comment on the role of oil can be found under the topic heading America's Interests (a Presidential briefing). Martin Kramer, a well known analyst has this to say; "The Middle East is home to 60 per cent of the world's remaining oil; the United States has less than 2 per cent. Transferring energy from there to here - and elsewhere to people who depend on us - is our primary interest in the Middle East."

To narrow the focus yet further, and to shed light on what Washington's highest priorities are, Mr Kramer adds with some humour "And within the Middle East, Mr President, the epicenter of our interest is the Persian Gulf. The name 'Persian Gulf' is a very old one, you'll find it on every map. But it might as well be called Lake Michigan, so integral is it to the lubrication of American life. This means that the US must secure the Gulf, and can't allow any part of it to be dominated by any other power, global or regional."

After a very concise review of US involvement in the region, Mr Kramer explains that "by 2003 our grip on the Gulf was loosening", and thus when the US "finally invaded Iraq, we were in search of a foothold". The President is then advised "not to fritter away our advantage in Iraq", as, "there aren't many alternative platforms." Other MESH analysts also advise the President that the US must "maintain strong economic and political involvement to help ensure that Iraq is a moderate, pro-American force in the region", or even that "America's main investment and hope (in the Middle East) is Iraq".

Walter Laqueur, another contributor to the Presidential briefings (The first 100 days), has additional advice on the oil topic: "One issue which ought to have top priority is reducing the dependence on imported oil and finding new sources of energy. This is the Achilles' heel not only of the United States but of Europe and the developing countries." The solutions he proffers are "technological breakthroughs" for which "it will always be difficult to find the huge sums needed", but is resigned to the fact that "this is the only way to remedy a fatal weakness."

Gal Luft however, is not so optimistic, and is prepared to deliver a harder bottom line (to the President): "The reality is that neither efforts to expand petroleum supply nor those to crimp petroleum demand will be enough to materially address America's strategic vulnerability." The problem being "oil's monopoly in the global transportation sector" and "the stranglehold of OPEC over the consuming nations' economies."

Should we blame OPEC then for our economic woes then? "The problem with laying the blame for our economic calamity on OPEC is that it hides the plain truth that this crisis is about our greed, not theirs", Gal Luft concludes.

Clearly then, oil supply remains of huge importance, specifically Iraq's which is, according to Dr Salameh, director of the Oil Market Consultancy Service, "the only one of the world's biggest producing countries with enough reserves to substantially increase its flow. Production in eight of the others has peaked, while China and Saudia Arabia, the remaining two, are nearing the point of decline."

These conclusions, from credible establishment sources, tend to suggest that, sure, the Iraq invasion wasn't all about oil, but one can't avoid the obvious, it certainly wasn't all about WMD and terrorism. Should we therefore lay the blame on the Bush administration for not being up front and frank about America's real needs? The Council on Foreign Relations, an establishment think tank, in a report called Strategic Energy Policy Challenges, certainly seems to think so, "virtually every American recession since the late 1940s has been preceded by spikes in oil prices. The American people need to know about this situation and be told as well that there are no easy or quick solutions to today’s energy problems."

1 comment:

  1. Great column Liam - but don't forget the UK's involvement. British Petroleum has done all right our of the conflict!
    I'm afraid we are relatively just as bad as the US regarding our greed for oil.