The Permanent Energy Crisis

Published on Friday, February 10, 2006 by TomDispatch.com

by Michael T. Klare

President Bush's State of the Union comment that the United States is "addicted to oil" can be read as pure political opportunism. With ever more Americans expressing anxiety about high oil prices, freakish weather patterns, and abiding American ties to unsavory foreign oil potentates, it is hardly surprising that Bush sought to portray himself as an advocate of the development of alternative energy systems. But there is another, more ominous way to read his comments: that top officials have come to realize that the United States and the rest of the world face a new and growing danger – a permanent energy crisis that imperils the health and well-being of every society on earth. To be sure, the United States has experienced severe energy crises before: the 1973-74 "oil shock" with its mile-long gas lines; the 1979-80 crisis following the fall of the Shah of Iran; the 2000-01 electricity blackouts in California, among others. But the crisis taking shape in 2006 has a new look to it. First of all, it is likely to last for decades, not just months or a handful of years; second, it will engulf the entire planet, not just a few countries; and finally, it will do more than just cripple the global economy -- its political, military, and environmental effects will be equally severe. If you had to date it, you could say that our permanent energy crisis began, appropriately enough, on New Year's Day, 2006, when Russia's state-owned natural gas monopoly, Gazprom, cut off gas deliveries to Ukraine in punishment for that country's pro-Western leanings. Although Gazprom has since resumed some deliveries, it is now evident that Moscow is fully prepared to employ its abundant energy reserves as a political weapon at a time of looming natural gas shortages worldwide. It won't be the last country to do so in the years to come. In just the few weeks since then, the world has experienced a series of similar energy-related disturbances: * The sabotage of natural gas pipelines to the former Soviet republic of Georgia, producing widespread public discomfort at a time of unusually frigid temperatures; * An eruption of oil-related ethnic violence in Nigeria, resulting in a sharp reduction in that country's petroleum output; * Threats by Iran to cut off exports of oil and gas in retaliation for any sanctions imposed by the U.N. Security Council over its suspect nuclear enrichment activities; * And as result of such developments, a series of mini-spikes in crude oil prices as well as reports in the business press that, if this pattern of instability continues, such prices could easily rise beyond $80 per barrel to hit the once unimaginable $100 per barrel range. Vectors of Crisis Events like these will certainly spread economic pain and hardship globally, especially to those who cannot afford higher transportation and heating-fuel costs. As it happens, though, these are not isolated, unrelated events. Think of them as expressions of a deeper crisis. Like the tremors before a major earthquake, they suggest the dangerous accumulation of powerful energy forces that will roil the planet for years to come. Although we cannot hope to foresee all the ways such forces will affect the global human community, the primary vectors of the permanent energy crisis can be identified and charted. Three such vectors, in particular, demand attention: a slowing in the growth of energy supplies at a time of accelerating worldwide demand; rising political instability provoked by geopolitical competition for those supplies; and mounting environmental woes produced by our continuing addiction to oil, natural gas, and coal. Each of these would be cause enough for worry, but it is their intersection that we need to fear above all. Energy experts have long warned that global oil and gas supplies are not likely to be sufficiently expandable to meet anticipated demand. As far back as the mid-1990s, peak-oil theorists like Kenneth Deffeyes of Princeton University and Colin Campbell of the Association for the Study of Peak Oil (ASPO) insisted that the world was heading for a peak-oil moment and would soon face declining petroleum output. At first, most mainstream experts dismissed these claims as simplistic and erroneous, while government officials and representatives of the big oil companies derided them. Recently, however, a sea-change in elite opinion has been evident. First Matthew Simmons, the chairman of Simmons and Company International of Houston, America's leading energy-industry investment bank, and then David O'Reilly, CEO of Chevron, the country's second largest oil firm, broke ranks with their fellow oil magnates and embraced the peak-oil thesis. O'Reilly has been particularly outspoken, taking full-page ads in the New York Times and other papers to declare, "One thing is clear: the era of easy oil is over." The exact moment of peak oil's arrival is not as important as the fact that world oil output will almost certainly fall short of global demand, given the fossil-fuel voraciousness of the older industrialized nations, especially the United States, and soaring demand from China, India, and other rapidly growing countries. The U.S. Department of Energy (DoE) projects global oil demand to grow by 35% between 2004 and 2025 -- from 82 million to 111 million barrels per day. The DoE predicts that daily oil output will rise by a conveniently similar amount -- from 83 million to 111 million barrels. Voilá! -- the problem of oil sufficiency disappears. But even a cursory glance at the calculations made by the DoE's experts is enough to raise suspicions: Behind such estimates lies the assumption that key oil producers like Iran, Iraq, Nigeria, and Saudi Arabia can double or triple their oil production -- unlikely in the extreme, according to most sober analysts. On top of this, the DoE has been lowering its own oil-production estimates: In 2003, it predicted that global oil output would reach 123 million barrels per day by 2025; by the end of 2005, that number had already dropped by12 million barrels, reflecting a growing pessimism even among the globe's great oil optimists. This is not to say that oil will disappear in the years ahead: There will still be adequate supplies for well-heeled consumers who can afford higher fuel bills. But much of the world's easy-to-acquire petroleum has already been extracted and significant portions of what remains can only be found in places that present significant drilling challenges like the hurricane-prone Gulf of Mexico or the iceberg-infested waters of the North Atlantic -- or in perennially conflict-ridden and sabotage-vulnerable areas of Africa, Central Asia, and the Middle East. No Escape from Scarcity To make the energy picture grimmer, "spare" or "surge" capacity seems to be disappearing in the major oil-producing regions. At one time, key producers like Saudi Arabia retained an excess production capacity, allowing them to rapidly boost their output in times of potential energy crisis like the 1990-91 Gulf War. But Saudi Arabia, like the other big suppliers, is now producing at full tilt and so possesses zero capacity to increase output. In other words, any politically inspired (or sabotage related) cutoff in oil exports from countries like Russia or Iran will produce instant energy shock on a global scale and send oil prices soaring to, or through, that $100 a barrel barrier. A chronic shortage of oil would be hard enough for the world community to cope with even if other sources of energy were in great supply. But this is not the case. Natural gas -- the world's second leading source of energy -- is also at risk of future shortages. While there are still major deposits of gas in Russia and Iran (potentially the world's number one and two suppliers) waiting to be tapped, obstacles to their exploitation loom large. The United States is doing everything it can to prevent Iran from exporting its gas (for example, by strong-arming India into abandoning a proposed gas pipeline from Iran), while Moscow has actively discouraged Europe from increasing its reliance on Russian gas through its recent cutoff of supplies to Ukraine and other worrisome actions. In North America, the supply of natural gas is rapidly disappearing. In a reflection of our desperate (and demented) condition, Canada is now starting to divert some of its remaining natural gas to the manufacture of synthetic oil from tar sands, so as to ease the pressure on supplies of conventional petroleum. Given the prohibitive cost of building gas pipelines from Asia and Africa, the only practical way to get more gas supplies to North America would be to spend several hundred billion dollars (or more) on facilities for converting foreign sources of gas into liquified natural gas (LNG), shipping the LNG in giant doubled-hulled vessels across the Atlantic and Pacific, and then converting it back into a gas in "regasification" plants in American harbors. Although favored by the Bush administration, plans to construct such plants have provoked opposition in many coastal communities because of the risk of accidental explosion as well as the potential for inviting terrorist attacks. As for renewables -- wind, solar, and biomass -- these are still at a relatively early stage of development. With a trillion dollars or so of added investment they could indeed ease some of the strain on fossil fuels in decades to come; however, at present rates of investment, this is not likely to occur. The same can be said of "safe" nuclear power and "clean" coal -- even if the severe problems associated with both of these energy options could be overcome, it would take several decades and a few trillion dollars before they could possibly replace existing energy systems. The only source of energy that can compensate for a shortage of oil and gas at this time is conventional (unclean) coal, and a rise in its consumption would increase the risk of catastrophic climate change. The New "Great Game" With looming energy shortages, the risk of conflict over energy access (and the wealth fossil fuels generate) is certain to grow. Throughout history, competition over the control of key supplies of vital raw materials has been a source of friction between major powers and there is every reason to assume that this will continue to be the case. "Just at it did when the Great Game was played out in the decades leading up to the First World War, ongoing industrialization is setting off a scramble for natural resources," John Gray of the London School of Economics observed in a recent article in the New York Review of Books. "The coming century could be marked by recurrent resource wars, as the great powers struggle for control of the world's hydrocarbons." As in the Great Game, such conflicts most likely would not arise from head-on clashes between the great powers, but rather through the escalation of local conflicts sustained by great power involvement, as was the case in the Balkans prior to World War I. In their competitive pursuit of assured energy supplies, today's great powers -- led by the United States and China -- are developing or cementing close ties with favored suppliers in the Middle East, Central Asia, and Africa. In many cases, this entails the delivery of large quantities of advanced weaponry, advisors, and military technology -- as the United States has long been doing with Saudi Arabia, Kuwait, and the United Arab Emirates, and China is now doing with Iran and Sudan. Nor should the possibility of a direct clash over oil and gas between great powers be ruled out. In the East China Sea, for example, China and Japan have both laid claim to an undersea natural gas field that lies in an offshore area also claimed by both of them. In recent months, Chinese and Japanese combat ships and planes deployed in the area have made threatening moves toward one another; so far no shots have been fired, but neither Beijing nor Tokyo have displayed any willingness to compromise on the matter and the risk of escalation is growing with each new encounter. The likelihood of internal conflict in oil-producing countries is also destined to grow in tandem with the steady rise of energy prices. The higher the price of petroleum, the greater the potential to reap mammoth profits from control of a nation's oil exports -- and so the greater the incentive to seize power in such states or, for those already in power, to prevent the loss of control to a rival clique by any means necessary. Hence the rise of authoritarian petro-regimes in many of the oil-producing countries and the persistence of ethnic conflict between various groups seeking control over state-oil revenues -- a phenomenon notable today in Iraq (where Shiites, Sunnis, and Kurds are battling over the allocation of future oil revenues) and in Nigeria (where competing tribes in the oil-rich Delta region are fighting over measly "development grants" handed out by the major foreign oil firms). "Up to this point," Senator Richard G. Lugar told the Senate Foreign Relations Committee on November 16, "the main issues surrounding oil have been how much we have to pay for it and whether we will experience supply disruptions. But in the decades to come, the issue may be whether the world's supply of oil is abundant and accessible enough to support continued economic growth…. When we reach the point where the world's oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict than it already is." Averting Environmental Catastrophe In addition to this danger, we face the entire range of environmental perils associated with our continuing reliance on fossil fuels. Consider this: The DoE predicted in July 2005 that worldwide emissions of carbon dioxide (the principal source of the "greenhouse gases" responsible for global warming) will rise by nearly 60% between 2002 and 2025 -- with virtually all of this increase, about 15 billion metric tons of CO2, coming from the consumption of oil, gas, and coal. If this projection proves accurate, the world will probably pass the threshold at which it will be possible to avert significant global heating, a substantial rise in sea-levels, and all the resulting environmental damage. The surest way to slow the increase in global carbon emissions is to reduce our consumption of fossil fuels and accelerate the transition to alternative forms of energy. But because such alternatives are not currently capable of replacing oil, gas, and coal on a significant scale (and won't be, at present rates of investment, for another few decades), the temptation to increase reliance on fossil fuels is likely to remain strong. We are, in fact, caught in a conundrum: the world needs more energy to satisfy rising global demand, and the only way to accomplish this at present is to squeeze out more oil, gas, and coal from the Earth, thereby hastening the onset of catastrophic climate change. In turn, the only way to avert such change is to consume less oil, gas, and coal, which would involve severe economic costs of a sort that most national leaders would be reluctant to consider. Hence, we will be trapped in a permanent crisis brought on by our collective addiction to cheap energy. The sole way out of this trap is to bite the bullet and adopt heroic measures to curb our fossil-fuel consumption while embarking upon a massive program to develop alternative energy systems – an effort comparable to, and in some sense a reversal of, the coal-and-oil-fueled industrial revolution of the nineteenth and twentieth centuries. In the United States, this would, at an utter minimum, entail the imposition of a hefty tax on gasoline consumption, with the resulting proceeds used to fund the rapid development of renewable energy systems. All funds now slated for highway construction should instead be devoted to public transit and high-speed inter-city rail lines and all new cars sold in America after 2010 should have minimum average fuel efficiencies of 50 MPG or higher. This will prove costly and disruptive -- but what other choice is there if we want to have some hope of exiting the permanent global energy crisis before the global economy collapses or the planet becomes uninhabitable by humans. Michael T. Klare is the Professor of Peace and World Security Studies at Hampshire College and the author, most recently, of Blood and Oil: The Dangers and Consequences of America's Growing Dependence on Imported Petroleum (Owl Books) as well as Resource Wars, The New Landscape of Global Conflict. © 2006 Tom Engelhardt