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International Perspective: The Militarisation Of Oil
Australian politician goes on record about peak oil and gas
I AM NOT A POLITICIAN
THE FIRE IS NO LONGER ON ITS WAY
IT HAS BEGUN
An Important Announcement
Michael C. Ruppert
© Copyright 2005, From The Wilderness Publications, www.fromthewilderness.com. All Rights Reserved. May be reprinted, distributed or posted on an Internet web site for non-profit purposes only.
Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it. - Mark Twain
(special thanks to Bill Tamblyn for finding this quote.)
March 10, 2005, PST 0900 (FTW) -- I am not a politician. I will never be a politician.
With this article both I and the FTW family will never again think in terms of whom we might offend or what bridges we need to build, burn or fireproof. As Don Henley wrote in a song of profound spiritual gratitude, "Sometimes you get your best light from a burning bridge." I'm going to burn a few with this essay.
Peak Oil is no longer on the way. It is here. Forget for a moment whether or not global oil production has actually begun (see below) its hopelessly irreversible decline. We will not know that for certain until sometime after it happens. The political fact, however, is that global inertia in response to Peak has driven our species, all of it, past the point of no return. There is no changing course for us. We have committed to a path of bloody destruction that can no longer be postponed or evaded. Energy investment banker Matthew Simmons - long a smoke alarm for Peak Oil - has said repeatedly, "The problem is that the world has no Plan B." Simmons is right.
Seeing clearly that there is no Plan B, it is now also too late to come up with a Plan C or Plan D. What I had hoped to accomplish with Crossing the Rubicon is now a missed opportunity. Yet the map so many of us drew in Rubicon remains astonishingly accurate and unaltered. It may prove to be an indispensable survival tool in and of itself very shortly.
Politicians come in varieties. They are in business. They are sometimes activists. Many pose as journalists. Some are economists and academics. They work in think tanks and manage the editorial decisions of major press outlets. Many average citizens behave and think like politicians because they accept as their primary mantras: "Don't rock the boat," and "Don't offend anyone." Politicians are more deadly than any weapon. They see their primary mission as building consensus to improve outward appearances.
For a politician the questions are always: "How can I superficially address an immediate problem without going to its root causes? What is the least amount of work I have to do to make this go away while I'm on duty? How can I deal with this problem without burning bridges?" Lately, economists, business and religious leaders, and everyday people have been behaving more like politicians than politicians themselves. Much like the incestuous, sealed-off, fetid Bush administration, the politicians are going to other politicians to make policy - when they dare even to do that. Refusing to make policy is also a policy.
In fact, most people have become politicians and it may well be that political correctness (including the fear of speaking out) - to whatever degree it is observed - will be the sword on which we now (not tomorrow) impale ourselves.
Bridges are burning all around us; bridges to responses that might have mitigated the already brutal (and just beginning) ravages of Peak Oil; bridges to reduce the likelihood of war and famine; bridges to avoid our selectively chosen suicide; bridges to change at least a part of energy infrastructure and consumption; bridges to becoming something better than we are or have been; bridges to nonviolence. Those bridges are effectively gone.
Stan Goff was right when he warned activists that "the gun," in all its forms, would be brought out before this was over. It was inevitable. False flag terror attacks, a fake war on terrorism, routine political murders, stolen elections, and Republican traffic in pedophilia remain causes for outrage and defiance, but they can no longer be useful avenues to justice: the legal system is broken. It's broken for reasons far greater than what used to be called corruption. And it cannot be fixed when a world war and unprecedented economic and ecological collapse are smashing down every wall between humanity and the unthinkable.
Politicians are creatures of economics. Their success has always been measured first and only by what economic benefits they returned to constituents or themselves. The victim has been the future. We have all told the politicians what we really want them to do for us while speaking platitudes from the other side of our mouths. As I have said for so many years, we are all prisoners of the way money works. Until we change that, any solution is only temporal and illusory. No electoral change is possible now that elections all over the world have sworn their allegiance to privately owned software programs and obvious manipulation.
FOR THOSE WHO CAN READ THE MAP
As the evidence grows stronger that we are at Peak now (or very close to it), there is a distinct correlation between oil price hikes and military budget increases, weapons deployment, warfare and covert operations around the world. Economists don't consider such things so they don't report on them. Their orthodoxy scorns any integrated view of world developments outside their own discipline.
For long-time readers of FTW I need do little more than discuss a few recent developments to put this in perspective. For the rest I will provide you with some of a great many available dots you can connect if you care to. Most people find themselves unable to tolerate the sight of the pattern which the connected dots reveal. After this, FTW will no longer try to detail the dots of Peak Oil. What we have published over the last seven years is proof enough. We had it right. I refuse to go over it again. Those who get it now, get it. Those who do not may possibly be beyond saving, because their own choices have deprived them of critical months of preparation for the crisis - especially since most of this "preparation" is psychological in nature. It is very hard and very painful to get one's mind to accept this reality.
Nature does not grant time outs.
I recently had a conversation with someone who spent 17 years in the CIA's Directorate of Operations. Thinking of the purge and power shift that has - over the course of the last nine months - decimated the Central Intelligence Agency (long my Bête Noir) and shifted much of its power to the Pentagon, I asked the following question.
"Look, the agency does many things in many roles from raw intelligence gathering, to economic warfare, to satellite recon, to paramilitary operations requiring cover and deniability, to drug smuggling. But since its inception it was always focused in large part on medium and long-term intelligence gathering and covert operations through the costly, patient, expensive means of placing NOCs (non-official covers) or assets in missions where it might take five, ten or fifteen years to bear fruit. These programs were always centered on "what if" contingencies which inherently implied that multiple outcomes were possible; that there were alternative futures to be influenced and shaped.
"Battlefield intelligence is a different critter. It presupposes that there is nothing more important than the battle that has been joined at this moment. If the battle is not won, there are no future choices. Hence nothing matters other than the war that is being fought today. No Yaltas or Potsdams; no future deep cover moles will be needed.
"Every country in the world is betting everything it has on this one hand knowing that after 2007 or 2008 the game ends. The map of the future after that is unknowable and, to large extent, irrelevant. That's why Rumsfeld has won the battle to control American intelligence operations and why the new National Intelligence Director John Negroponte is getting the job.
"Is that right?"
Without the slightest hesitation the former CIA employee answered, "Yes."
It is the ultimate testimony to the madness of Donald Rumsfeld, Paul Wolfowitz and Dick Cheney that there are no more tomorrows left to fix anything. Since 9/11, and especially since a second presidential election was stolen four months ago, the setting for a real Armageddon has been locked in place. It may well have been for years before that.
A recent USA TODAY story, giving us the new word "Petronoia," warned that gasoline prices could jump by 25 cents per gallon within the next few days. That increase, it said, would take $90 million per day out of a consumer economy that relies on profligate spending to sustain already bursting bubbles. How are we getting the money to sustain these bubbles? We are, according to Bill Fleckenstein of MSN, using our houses as ATMs just to keep up, even as the housing bubble has already begun to burst.1 Our paychecks certainly aren't increasing.
Oil has topped $54 a barrel. It's gone up more than 25% in less than three months and fifty per cent over the last year; 400% since 1999. This amid strong signs that global oil production may have already peaked, as declines around the world are not being offset by new production. New fields may come online but the respite will be very short-lived. There may be a few "mega" projects (about a six-day supply for the planet in each) which may produce momentary price declines but the trend is irreversible. Official bodies like the International Energy Administration (IEA) are openly wishing that demand growth might slow in 2005, when actual figures already prove this wish utterly fanciful. China's oil demand is expected to grow by 33% this year. Industrialized and developing nations are expanding their economies as fast as possible to generate cash and liquidity as a means of securing more oil.
The vicious cycle is in full swing. And yet, according to economist Andrew McKillop…
We then move on to actual declines in production. For the majority of non-OPEC producers - (in fact nearly all except Russia and some Central Asian producers) rates of decline are stubbornly high, despite vaunted technology improvements…
One of the biggest problems facing the IEA [a UN sponsored agency], the EIA [a US government agency] and a host of analysts and 'experts' who claim that 'high prices cut demand', either directly or through damping oil economic growth, is that this does not happen in the real world. Since early 1999 oil prices have risen about 400%. Oil demand growth in 2004 at nearly 4% was the highest in 25 years. In each year since 1999 world oil demand growth has been higher than the previous year - as prices rise.2
McKillop's analysis, which essentially says that rising oil prices are either good or of no consequence, falls way short for two reasons. Energy investment banker Matt Simmons a year ago in Berlin stated that he saw the actual point at which price would curb demand at around $180 per barrel. The consumers are bearing most of the costs of these increases. Is this the consumers' choice, or is it simply the point beyond which "the American way of life" will become impossible, regardless of how many incremental cuts people accept?
Go ahead; try to choose to use less oil of your own volition. What reductions are available to you are minimal because the world in which you must make your house payments, feed your family, drive to work and pay your bills is leaving you little choice but to consume more and get less for your money. Only at around $180 a barrel will the consumer no longer be able to subsidize the corporate and economic superstructure on his/her shoulders. This is essentially what Simmons was saying.
The poor will be the first to suffer and they will suffer the most. They will be the first to die.
Secondly, McKillop assumes a "trickle down" benefit to consumers from high prices. International capital flows and your own checkbook should be enough to dispel this belief. Need I say more? Didn't we hear enough about trickle-down from Ronald Reagan?
Oil industry guru Jan Lundberg - who seems to be getting a lot less air time than he used to - recently wrote the following brilliant assessment for (ironically of all places) Electric Vehicle (EV) Magazine. Lundberg got it right.
The end of abundant, affordable oil is in sight, and the implications are colossal. About now in our hydrocarbon phase of human history, we have pulled out of the Earth approximately half of the available petroleum (crude oil and natural gas). The other half still in the ground is harder to extract and may not - as assumed - fuel the global economy or even provide a transition to another phase…
This means that the next tough oil shortage, even if it is not acknowledged as a post-peak oil extraction phenomenon of diminishing supply, will cripple the globalized economy. Understanding of both the economics and social dynamics of collapse is rare, and even when it is present there is an absence of taking into account the "market factor" in ushering in collapse…
Despite the need to be prepared for imminent, final energy shortage - which could happen now or in several years at the latest - people persist in focusing too much on the likely date of the passing of the peak. It is already clear that the oil industry and OPEC numbers on oil reserves are suspect.
The scenario I foresee is that market-based panic will, within a few days, drive prices up skyward. And as supplies can no longer slake daily world demand of over 80 million barrels a day, the market will become paralyzed at prices too high for the wheels of commerce and even daily living in "advanced" societies. There may be an event that appears to trigger this final energy crash, but the overall cause will be the huge consumption on a finite planet.
The trucks will no longer pull into Wal-Mart. Or Safeway or other food stores. The freighters bringing packaged techno-toys and whatnot from China will have no fuel. There will be fuel in many places, but hoarding and uncertainty will trigger outages, violence and chaos. For only a short time will the police and military be able to maintain order, if at all. The damage that several days' oil shortage and outage will do will soon wreak permanent damage that starts with companies and consumers not paying their bills and not going to work.
After an almost instant depression seizes the modern industrialized world, and nation-states break down, the frantic attempts of people to feed themselves, stay warm and obtain fresh water (pumped presently via petroleum to a great extent), there will be no rescue. Die-off begins. The least petroleum-dependent communities will survive best. These "backward" nations will be emulated by the scrounging survivors of the U.S. and the rest of the "developed" world, as far as local food production will be tried - in a paved-over, toxic landscape by people who have lost touch with the land...
The prospects of mitigating peak oil or avoiding collapse are almost nil. U.S. petroleum demand in 2004 grew at its strongest rate in five years. In December the daily consumption of refined oil was 21 million barrels in the U.S, a quarter of world use. The U.S. leads the industrialized world in population growth, part of a domestic policy to assure more car and oil sales…
… The Earth cannot, as of the world oil peak in extraction, give up ever greater quantities of black gold. Most of the world exporting companies are now reducing extraction rates due to fewer discoveries and depleted fields. Oil production in 18 producer countries has passed its peak and is declining faster than previously thought: at about 1.14 million barrels a day.
"International Energy Agency figures put the total spare capacity of all 11 countries in OPEC at just 330,000 bpd (down from 6 million bpd in 2002). Conventional Saudi spare capacity is zero... An IEA report from August 2004 indicates Saudi Arabia needs up to 800,000 bpd of newly discovered oil each year just to offset declining fields and maintain its current production level." [Al-jazeera] - This can't happen, so watch for the ensuing energy crisis.
The world needs to produce another 2,723,530.2 barrels per day by the end of 2005 just in order to stand still…
Petroleum is the Great Leveler, in the sense of "leveling" or flattening oil civilization. But petroleum will also be the Great Leveler in terms of equalizing everyone: People will go through a final, grasping petroleum grab with whatever funds and connections they have, before the attempt fails for good. Then all people will have no choice but to work together or perish. Until then, we have skewed values: for example, when a kindly old lady drives to a shop and has her charitable concerns, the use of oil makes her a killer of the planet and she is not pursuing a sustainable form of transportation. Meanwhile, a mean old man who scowls at little children who walks to the shop might be a much more valuable citizen in a practical fashion that matters to the world.3
THE MOST EVIL STATEMENT I HAVE EVER HEARD
Detroit News columnist Thomas Bray recently described an interview with two "experts"; authors who come from the corporate/industrial/Neocon camp. The aberration of his thinking is symptomatic of the guilt we all share and the consequences we all seem to be begging for.
"We will never stop craving more," say Huber and Mills, "nor should we ever wish to. Energy is what brings light out of dark, civilization out of disorder, prosperity out of poverty."4
What was the title of the book that Bray was so jazzed about? The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy.
Contrast all of the above with the following February 28 quotation from China's Xinhuanet news agency:
Global demand may average 84 million barrels a day in 2005, while daily production in January was only 83.6 million barrels, according to the International Energy Agency. Oil prices have risen 11 per cent in the past three weeks in New York on growing concern that OPEC and other exporters will fail to keep up with demand this year.5
That all of these factors are forming a perfect storm is now clear.
Marshall Auerback, a brilliant economist (www.prudentbear.com) who dares to see the world whole, notes:
"At the time of the 1929 stock market crash, total US credit was 176 percent of Gross Domestic Product. In 1933 with GDP imploding and the real value of debt rising even faster, total credit rose to 287 percent of what was left of GDP…In 2000 at the top of the late bull market, total credit was 269 of GDP. An extraordinary statistic to be sure but dwarfed by today's figure, in which total credit stands at a whopping 304 percent of GDP, according to a recent study by fund manager Trey Reik of Clapboard Hill Partners.
The title of Auerback's essay was, "Last Orders for the US Dollar."6
Auerback opened his treatise with a recent quote from former Federal Reserve Chair Paul Volcker that should have sent politicians (all of us) feverishly to work on a survival plan.
Below the favorable surface [of the economy], there are as dangerous and intractable circumstances as I can remember…. Nothing in our experience is comparable… But no one is willing to understand this and do anything about it… We are consuming… about six per cent more than we are producing. What holds the world together is a massive flow of capital from abroad… it's what feeds our consumption binge… the United States economy is growing on the savings of the poor… A big adjustment will inevitably become necessary, long before the social security surpluses disappear and the deficit explodes… We are skating on increasingly thin ice."7
MILITARY AND POLITICAL
THE NEW WORLD ORDER
The New World Order is not a monolith; no single group of rich folks sits together in one room debating our planetary future. It is, quite literally, a new order in which world power aggregates along geographic/geologic lines, forcing regions to become players against each other and running roughshod over the nationalist sentiments of their subject populations. The regions are Europe (including Britain), Asia, South America and North America. Woe to those nations who are stuck in between. In spite of Sino-Japanese tension, Japan, China and South Korea have urged the creation of a Free Trade agreement to cover the Western Pacific. Geography and money will prove to be the ultimate trump cards because geography is governing economic decision-making. There may be a war between China and Japan but ultimately Japan (like the UK vis-a-vis Europe) will find itself swallowed into regional hegemony, either as a winner or as a loser.
Take a look at Orwell's 1984 again. It is a wonder how he saw so much. Yet behind all of this realignment, enormous streams of wealth or capital are being expended and - most importantly - transferred behind the scenes. The people controlling that money are not seeing their control dissipate as the nation-states vanish. Money makes its own rules.
Profits were made during the cold war by continuing the controlled escalation of tensions between the superpowers while secretly preventing those tensions from reaching critically dangerous levels. The major players included Armand Hammer, the Rothschilds, the Bushes, Averill Harriman, inter alia.
These people always find ways to eke profits from a system that is in meltdown. They make money on the way up. They make money on the way down. Their appalling justification, their pact with the devil that makes this all possible, is that "As long as we're making money then everything must be OK." This is what the real PTB (Powers That Be) believe. This is the final distilled definition of "the bottom line".
The problem lies in the definition of "The Powers That Be." Most people still think in terms of nation states. I always think in terms of money, even to the point of looking at money (the way it functions now) as the PTB without attachment to a human or national identity.
Not too long ago I had a dialogue with Catherine Austin Fitts after which an epiphany struck. As the human race blows itself into extinction, or destroys the climate, or starves itself to death, the last corporate merger and acquisition will take place. And at the same moment as mankind dies, the CFO of "GlobalCorp" will be shouting, "Hooray! We did it!"
Those who win in a rigged game get stupid. We have all played this game (to one degree or another). And compared to the rational, far-sighted humanitarians that Jefferson and Whitman hoped for and expected, we are all frightfully stupid.
In spite of all the warning signs that demand and energy use must be curbed immediately, the only commercial effect of Peak Oil has been to increase consumption as much as possible - so as to get as much "money" as possible, as quickly as possible. This before the instant, possibly only months away, when money - because of a lack of energy - becomes valueless. Solutions that should enable a reduction in oil consumption are only functioning as an insane rationale for using more. The pity of this utterly unnecessary disaster is matched only by the arrogance that created it.
With unmistakable desperation, China, the US, Russia, Europe and the Middle East are fiercely jockeying for a measly 40 billion barrels of Caspian heavy-sour oil instead of the 350 billion we were promised by the major oil companies a decade ago. Caspian oil has some of the highest sulfur content on the planet. It is expensive and environmentally destructive to refine. The mountains of sulfur around the Caspian are now so large as to be visible from space. Do you not see the desperation here?
The only way to curb demand is to pull the plug on global economies, starting first with the already partially cannibalized US economy. Our manufacturing has been stolen or given away for "spare parts." So have our savings, our Constitution, our resources, our credit, our credibility, our confidence, our manufacturing base, our jobs; and soon our houses, our personal bank accounts and ultimately our hope. The United States is being liquidated after a fait accompli merger and acquisition.
The bottom line turns out to be the suicide of the human race as mergers and acquisitions lead to the final moment of malignant capitalism: "the last corporation standing."
GlobalCorp becomes Global corpse.
Hurray, we did it!
To look on the brighter side of this, my brother in arms Matt Savinar helped me to see the good in Peak Oil. He wrote, "When people ask me what is 'positive' about Peak Oil, I tell them (only half-jokingly) that: "well, if there is no collapse, we're all going to be chipped, tagged, drugged with FOX news being beamed into our brains while living in slums patrolled by robotic soldiers with strangely familiar Austrian accents."
The fire has begun.
FOR THE RECORD - FTW REORGANIZATION PENDING
I wake up now on a daily basis knowing that at any moment the story might break signaling that the collapse has been triggered. It is my mandate to scan the horizon for signs of this, to help discern where the blows will fall, how hard, how quickly and where they will have the most impact. Effective immediately (and taking into account stories FTW has already committed to publish), it is imperative that FTW transform itself into an informational / intelligence lifeboat for those who are listening.
I will not be writing for FTW for a period of approximately two months while I complete a corporate reorganization that is necessary to adapt to the world as it is, not as we might wish it or pray for it to be.
FTW now has tens of thousands of daily readers who understand what is happening and who are urging me to stop trying to convince the rest of the world. They want us instead, try to and help those who are already convinced. We cannot save everyone. We can only help those who are asking for it. That is our constituency - our contract. The doors will always be open for latecomers.
What you will see in two months or less is a new FTW; focused, precise, and more useful on a day to day basis. If I lose support from progressives or activists for this, so be it. If FTW falls from grace with some for failing to be politically correct, then all I can say is "Good luck to you."
We must all do what we must do and do it now. My conscience is clear that I have done all that is possible to warn. When a tsunami is coming there is a point at which one must stop trying to warn the indifferent and just get out of the way and help others who are also trying to get out of the way. For those who now see this, FTW hopes to become at least a partial bridge to your safety. In order to do that, other bridges must be abandoned.
1. Fleckenstein, Bill; Prerequisite to current events: Bubble 101; MSN, Feb. 28, 2005.
2. McKillop, Andrew; Fundamentals in the oil-pricing game; http://www.vheadline.com; March 2, 2005.
3. Lundberg, Jan; The Global Nutcracker Called Peak Oil; EV World, Feb. 20 2005.
4. Detroit News editorial by Thomas Bray, February 27, 2005 quoting authors (and Neocon / Bush allies) Peter W. Huber and Mark P. Mills.
5. Crude oil prices may rise as output trails demand; Xinhuanet, February 28, 2005; www.chinaview.cn.
6. Auerback, Marshall; Last Orders for the US Dollar; www.prudentbear.com, March 1, 2005.
The Militarisation Of Oil
by Marshall Auerback
March 8, 2005
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
Oil prices spiked to record levels last week, propelled by a rally in petrol prices and a cold snap in the northern hemisphere, against the backdrop of a tight balance between supply and demand. Yes, that's right, basic "supply/demand," not "political turbulence in the Middle East."
If anything, this simplistic relationship between Middle Eastern political tension and rising/falling crude prices has broken down over the past few weeks. As the FT's Philip Stephens noted, "The Middle East is becoming a different place. The world's sole superpower is unwilling any longer to accept the status quo. That of itself is a powerful agent for change. Images beamed by Arab satellite television, first of the Palestinian and Iraqi elections and now of the public clamour for Syria's withdrawal from Lebanon, are shaking the authoritarian preconceptions of the old order. Behind the scenes, the world-weary cynicism about the prospects of an Israeli-Palestinian peace deal is giving way, if not to optimism, then at least to glimmers of hope."
It is very telling that the price spike came during a most propitious backdrop: a popular uprising in Beirut, the growing isolation of Syria and small stirrings of change in Egypt and Saudi Arabia. Analysts said hawkish comments from the Organization of Petroleum Exporting Countries have contributed to the rally. Ali Naimi, the Saudi oil minister, last week forecast that oil prices would stay between $40 and $50 a barrel for the rest of this year. The acting OPEC secretary general, Adnan Shihab-Eldin, also added fuel to the fire (so to speak) when he said oil prices could rise to $80 in the next two years in the event of a major oil supply disruption, similar to the war in Iraq. (It is also worth noting that crude's strength is no longer simply a weak dollar phenomenon: as market analyst James Turk has noted, oil is now becoming more expensive in terms of both euros and dollars, reflecting the growing breadth of this particular bull market.)
But talk, unlike oil, is cheap. OPEC could no more "talk up" the market than it could talk it down last year. Obscured against the perennial geopolitical conflict that tends to characterise the oil producing regions of the world, or the endless theorising about whether the oil cartel is "cheating" on its quotas, is the fact that exploration success in global oil has been in decline for decades and that the world has been living off of the major fields discovered literally decades ago. Recent exploration has gone in large part toward exploiting more effectively these major fields, but such exploration has not been characterised by huge new discoveries. Announced increases in "reserves" merely reflect changes in reporting requirements as mandated by the SEC, rather than major finds of new sources of oil. Likewise, most advances in technology simply enhance extraction, but have done little to augment existing supply. As a consequence, the rate of depletion of these fields has increased, implying looming supply problems ahead. Add to this the fact that the vast majority of new projects will produce less refinable heavy oil and it is clear that major supply shortfalls loom, cold weather or hot weather.
We have arrived at the summit of "Hubbert's Peak," the oil geologist who in 1956 correctly prophesized that U.S. petroleum production would peak in the early 1970s, then irreversibly decline. In 1974 he likewise predicted that world oil fields would achieve their maximum output in 2000; a figure later revised by some of his acolytes, such as Henry Groppe, Colin J. Campbell, and Matt Simmons, to anywhere between 2006-2010.
If high oil prices are here to stay, it clearly has epochal implications for the global economy. Indeed, even if the recent rise puts paid to the notion that Middle Eastern political risk premiums in and of themselves bear tangential relationship to underlying movements in the oil market, the very lack of new supply will almost invariably lead to an increasing militarization of global energy policy, although perhaps not in the Middle East-centric manner in which this has been occasionally manifested in the past.
For Iraq is hardly the only country where American troops are risking their lives on a daily basis to protect the flow of petroleum. In Colombia, Saudi Arabia, and the Republic of Georgia, U.S. personnel are also spending their days and nights protecting pipelines and refineries, or supervising the local forces assigned to this mission. American sailors are now on oil-protection patrol in the Persian Gulf, the Arabian Sea, the South China Sea, and along other sea routes that deliver oil to the United States and its allies. In fact, as Michael Klare has noted (Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum), the American military is increasingly being converted into a global oil-protection service:
"Ever since the Soviet Union broke apart in 1992, American oil companies and government officials have sought to gain access to the huge oil and natural gas reserves of the Caspian Sea basin -- especially in Azerbaijan, Iran, Kazakhstan, and Turkmenistan. Some experts believe that as many as 200 billion barrels of untapped oil lie ready to be discovered in the Caspian area, about seven times the amount left in the United States. But the Caspian itself is landlocked and so the only way to transport its oil to market in the West is by pipelines crossing the Caucasus region -- the area encompassing Armenia, Azerbaijan, Georgia, and the war-torn Russian republics of Chechnya, Dagestan, Ingushetia, and North Ossetia.
"American firms are now building a major pipeline through this volatile area. Stretching a perilous 1,000 miles from Baku in Azerbaijan through Tbilisi in Georgia to Ceyhan in Turkey, it is eventually slated to carry one million barrels of oil a day to the West; but will face the constant threat of sabotage by Islamic militants and ethnic separatists along its entire length. The United States has already assumed significant responsibility for its protection, providing millions of dollars in arms and equipment to the Georgian military and deploying military specialists in Tbilisi to train and advise the Georgian troops assigned to protect this vital conduit. This American presence is only likely to expand in 2005 or 2006 when the pipeline begins to transport oil and fighting in the area intensifies.
"Or take embattled Colombia, where U.S. forces are increasingly assuming responsibility for the protection of that country's vulnerable oil pipelines. These vital conduits carry crude petroleum from fields in the interior, where a guerrilla war boils, to ports on the Caribbean coast from which it can be shipped to buyers in the United States and elsewhere. For years, left-wing guerrillas have sabotaged the pipelines -- portraying them as concrete expressions of foreign exploitation and elitist rule in Bogota, the capital -- to deprive the Colombian government of desperately needed income. Seeking to prop up the government and enhance its capacity to fight the guerrillas, Washington is already spending hundreds of millions of dollars to enhance oil-infrastructure security, beginning with the Cano-Limon pipeline, the sole conduit connecting Occidental Petroleum's prolific fields in Arauca province with the Caribbean coast. As part of this effort, U.S. Army Special Forces personnel from Fort Bragg, North Carolina are now helping to train, equip, and guide a new contingent of Colombian forces whose sole mission will be to guard the pipeline and fight the guerrillas along its 480-mile route."
Other countries are responding in kind, notably China. More expensive oil will undercut China's energy-intensive boom. The country is already experiencing sporadic power shortages against a backdrop of growing car ownership and air travel across the country. Energy is becoming vital to strategically important and growing industries such as agriculture, construction, and steel and cement manufacturing. Consequently, pressure is already mounting on Beijing to access energy resources on the world stage. As a result, energy security has become an area of vital importance to China's stability and security. China is stepping up efforts to secure sea lanes and transport routes that are vital for oil shipments and diversifying beyond the volatile Middle East to find energy resources in other regions such as Africa, the Caspian, Russia, the Americas and the East and South China Sea region.
To be sure, China's drive for energy security has nowhere come close to reaching the militarization of America's current energy policy. To the extent that it has engaged in competition, this has so far been limited to the economic sphere through state-owned oil and gas companies such as China Petroleum Chemical Corporation (Sinopec), China National Petroleum Corporation (C.N.P.C.), its subsidiary PetroChina and China National Offshore Oil Corporation (C.N.O.O.C.), all of which are actively seeking to accumulate overseas subsidiaries or offshore exploration rights. Sinopec, for example, has won the right to explore for natural gas in Saudi Arabia's al-Khali Basin and Saudi Arabia has agreed to build a refinery for natural gas in Fujian in exchange for Chinese investment in Saudi Arabia's bauxite and phosphate industry.
Chinese acquisitions are also extending closer to Washington's traditional sphere of influence in the Americas. China and Canada signed a joint statement on energy cooperation, which included accessing Canada's oil sands and uranium resources following Prime Minister Paul Martin's recent trip to the country. Moreover, while attending last November's annual Asia-Pacific Economic Cooperation (A.P.E.C.) summit in Chile, Chinese President Hu Jintao announced an energy deal with Brazil worth $10B supplementing a $1.3B deal between Sinopec and Petrobras for a 2000 km natural gas pipeline. China is also acquiring oil assets in Ecuador as well as investing in offshore petroleum projects in Argentina. During Venezuelan President Hugo Chavez's visit to Beijing in December and Chinese Vice President Zeng Qinghong's visit to Venezuela in January 2005, China also committed to develop Venezuela's energy infrastructure by investing $350M in 15 oil fields and $60M in a gas project in Venezuela.
However, as oil prices rise and China imports an increasing amount of its energy needs, the competition is beginning to spill over into the political and military spheres. The burgeoning energy trade with Saudi Arabia, for example, already complements a growing relationship in the military sphere as seen with China selling Saudi Arabia Silkworm missiles during the Iran-Iraq War in the 1980s,
There are also indications that Beijing's relations with Tokyo are taking on a more militaristic hue, particularly in relation to the issue of Taiwan. Although Taiwan has largely been viewed within the context of the so-called "One China" policy, analyzing the conflict through this narrow prism has obscured other important, energy-related facets underlying Beijing's hawkishness on the issue (and the corresponding response by both Tokyo and Washington). A territorial dispute between China and Japan in the East China Sea, which both sides claim as their Exclusive Economic Zone (E.E.Z.), is being further fueled by reports of vast supplies of oil and gas in the region. The disputed territory includes the Diaoyu or Senkaku islands and the Chunxiao gas field northeast of Taiwan, which according to a 1999 Japanese survey holds 200 billion cubic meters of gas. Japan regards the median line as its border while China claims jurisdiction over the entire continental shelf. In 2003, China began drilling in the area after the Japanese rejected a Chinese proposal to develop the field jointly. Although the Chunxiao gas field is on the Chinese side of the median line, Japan claims that China may be siphoning energy resources on the Japanese side.
The rising military tensions between the two countries manifested itself most recently in the form of a confrontation following the incursion of a Chinese nuclear-powered submarine into Japanese waters off the Okinawa islands on November 10, 2004. The intrusion was followed by a two-day chase across the East China Sea. Although China subsequently apologized, it was not an isolated occurrence: this was soon followed by the intrusion of a Chinese research vessel into Japanese waters near the island of Okinotori, which was believed to have been surveying the seabed for oil and gas drilling purposes. This was, according to a Power and Interest News Report by author Chietigj Bajpaee, the 34th such maritime research exercise by Chinese vessels within Japan's E.E.Z. in 2004, up from eight in 2003, with China not giving prior notification in 21 of the 34 cases.
Tokyo has responded in kind: Japan's most recent Strategic Defense Review named both North Korea and China as causes for security concern as it instigated an overhaul of defense priorities. The review is particularly notable for the inclusion of China as a country that needs "carefully watching" in the wake of the November 2004 submarine incident.
Adding to these tensions is Japan's shift from its post-war pacifist and defensive posture towards a more active military role in the region, as seen with the current deployment of its Self Defense Forces to Iraq. Last December, Prime Minister Koizumi extended by a year the deployment of 550 ground troops in Iraq, the biggest and most controversial dispatch since the Second World War. His government has also continued to push for a revision to the 57-year-old pacifist constitution that would enable more effective participation in such missions as a way of strengthening the U.S.-Japan alliance.
The Bush Administration has not remained a disinterested party in this rising dispute. After a temporary post Sept. 11-cessation of references to China as a "strategic competitor", the US has more recently again begun to express disquiet about the thrust of China's military policy, particularly in response to the proposed lifting of the European Union's arms embargo on China. A recent joint statement by the US and Japan last month named Taiwan as an issue of joint security concern for the first time. In response, China has noted that the US spends more on its defense than the next 18 countries combined, but this has not stopped Beijing from pushing to acquire a national fleet of Very Large Crude Carriers, or V.L.C.C.s, that could be employed in the case of supply disruptions brought on by a terrorist attack, the Malacca Straits (through which about 80 per cent of China's oil imports flow) or a U.S.-led blockade during a conflict over Taiwan.
Growing US-Chinese tensions (fuelled in large part by this ongoing competition for global energy resources) also help to explain China's less than enthusiastic support of US aims to discourage North Korea from developing its nuclear weapons program further. Indeed, in regard to the latter, the Chinese foreign minister, Li Zhaoxing, has recently expressed doubt about the quality of American intelligence on North Korea's nuclear program and said the United States would have to talk to North Korea one-on-one to resolve the standoff. Washington has repeatedly sounded the alarm about North Korea's nuclear efforts and has pressed China, North Korea's only significant ally, to be more active in seeking seek a solution. If the US insists on playing the "Taiwan card," Beijing seems equally happy to play the "North Korea card."
Oil, and the corresponding drive for energy security, therefore, is becoming an increasingly common, yet disruptive, thread driving policy in Washington, Beijing and Tokyo. The competition over energy resources is now becoming an additional area of contention over and above existing trade disputes between Washington and Beijing. China's growing presence on the international energy stage could ultimately bring it into confrontation with the world's largest energy consumer, the United States, where a growing number of American soldiers and sailors are being committed to the protection of overseas oil fields, pipeline, refineries, and tanker routes. Given the parlous state of America's national finances, it is clear why Tokyo, with its huge repository of savings, is being brought in effectively to help underwrite this policy (although why the Japanese have gone along so compliantly, other than a longstanding historic rivalry with China, is less clear). With these 3 global behemoths engaged in an increasingly fraught competition over an increasingly scarce resource, it is clear that the global economy will pay a higher price for oil, not only in dollar terms, but also in blood for every additional gallon of oil which we seek to consume. The great game has truly begun.
Published on Wednesday, March 9, 2005 by Global Public Media
Australian politician goes on record about peak oil and gas
By Andrew McNamara
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
Petroleum and Other Legislation Amendment Bill (No. 2)
Mr McNAMARA (Hervey Bay-ALP) (8.39 pm):
I rise to support the Petroleum and Other Legislation Amendment Bill. This bill is necessary to ensure consistency and efficiency in the administration of the petroleum and pineline [sic] industries in Queensland, including implementing our vital coal seam gas regime. I say 'vital' because we will soon be faced with the effects of the rundown of the world's oil reserves after the advent of peak oil. Peak oil represents the most serious and immediate challenge to our prosperity and security. It will impact on our lives more certainly than terrorism, global warming, nuclear war or bird flu. While it may not be a term with which members are familiar now, I predict it will come to dominate debate in this place over the next 10 years.
The concept of peak oil was identified in 1956 by the late US oil industry and government geologist M. King Hubbert. Dr. Hubbert suggested that the rise and fall of oil production in a nation, or indeed the world, would follow a pattern for individual wells; that is, rising sharply from when oil under pressure in the ground is first spiked, increasing as more wells are sunk, plateauing when half the oil has been extracted and tapering away as the remaining recoverable oil is pumped out. This is now referred to as the Hubbert curve. From the halfway peak, all oil flows decrease as the pressure in the oil basin declines. The cost of recovering the oil rises exponentially from this point as it has to be extracted with greater degrees of technical difficulty, such as flooding the reservoir with water to float residual oil into a recoverable position.
Dr. Hubbert worked for the United States Geological Survey as a senior research geophysicist for 12 years. He was employed as director of Shell's research laboratory in Houston for 20 years. He taught at Stanford University, the Massachusetts Institute of Technology and the Johns Hopkins University and made a number of outstanding contributions to the field of geophysics. Regretfully, his modelling of peak oil was ignored by government and rejected by industry, but he has been proven right.
As the US energy administration now concedes, oil production in the USA peaked in 1971, as he predicted it would, and has been in steady decline since. Production for all nations outside the Middle East peaked in 1997. The scientific community is currently involved in a vigorous debate about the anticipated date of world peak oil. I quote from an article published in the Scientific American of March 1998 by Dr. Colin Campbell and Jean Laherrere. It states-
Using several different techniques to estimate the reserves of conventional oil and the amounts still left to be discovered, we conclude that the decline will begin before 2010.
I will say more about the date of world peak oil in just a moment, but one fact is indisputable: when the Middle East peaks between 2006 and 2020 the world will have passed peak oil, and oil prices will commence to climb irreversibly until all recoverable oil reserves are exhausted within 50 years.
The advent of world peak oil will change our way of life forever. The concept of peak oil is now universally accepted by geologists and mining engineers. It has recently gained acceptance by highly respected oil industry experts such as banker Matt Simmons of Simmons and Co. International and the vastly experienced Washington based energy consulting firm PFC Energy. Matt Simmons has 30 years experience in one of the world's largest energy investment banking groups and served on President George W. Bush's Energy Advisory Committee between 2001 and 2004. I table an article by Mr. Simmons published in Petroleum News in August 2004 in which he concluded that peak oil 'could be the biggest energy issue the world has ever faced'. I also table a copy of an article from the Business Magazine of 7 November 2004 that contains confirmation of peak oil for the first time by a senior oil industry executive, Francis Harper of BP. He expects global oil production to peak between 2010 and 2020.
Picking the exact date of the peak is difficult because one has to rely on data from oil companies and OPEC members about their oil reserves. Members may be aware that the Royal Dutch/Shell Group on 5 February 2005 cut its 2002 published estimate of its total oil and gas holdings by one-third. It reduced its 2003 estimate of oil reserves by 1.4 billion barrels, or 9.8 per cent, and admitted that two-thirds of its listed prospective wells in 2004 were in fact dry holes. Shell has been fined $US151.5 million for misleading stock markets. The US justice department is undertaking a criminal investigation. Given that company value is directly related to oil reserves, it is not surprising that Shell has lost its top-tier credit rating. Oil companies have a vested interest in overstating reserves, and Australian company regulators should be especially vigilant in this regard.
What does it mean if peak oil is not 2020 but 2006 because oil companies and OPEC members have overstated reserves? In the late 1980s, six of the 11 OPEC members revised their reserve oil figures upwards by amounts ranging from 42 per cent to 197 per cent. If those estimates were merely an effort to manipulate OPEC production quota rules, it means that we have a serious problem right now.
There are many things the Beattie government is doing that will help soften the impact of peak oil whenever it occurs. We are supporting research and development in coal, hydrogen, solar, wind and biomass power. This is all important and must be continued and indeed accelerated. I note that the state development minister, Tony McGrady, recently announced a $250,000 grant to help the CSR mill at Sarina become Australia's chief ethanol producer. Ergon Energy is investing in wind farm technology, an energy source that has the best energy return on energy invested ratio of all the alternative energy sources. This is an excellent initiative.
But make no mistake: there is no silver bullet to defeat the most serious impacts of peak oil. We will not find sufficient new oilfields to meet current demand, let alone to feed the soaring demand of emerging economies like China. New oil discovery across the world peaked in 1960 and we now find one barrel of oil for every four we consume. The six giant Saudi oilfields that produce the entire eight million barrels a day of Saudi production are all aged between 40 and 65 years. Nothing approaching the giant Ghawar field's size has been found in the last 50 years.
We have coal for electric power for 200 years, but coal cannot effectively replace oil. While it is possible to make synthetic fuels from coal and while hydrogen extracted from coal can power a fuel cell, these processes use more energy than they produce. In other words, they are net energy losers. This is the unavoidable impact of the second law of thermodynamics. Nuclear power suffers from the same net energy loss problem, as well as the known radiation and waste storage risks.
The only effective replacement energy source for oil is liquefied natural gas, but it is subject to the same Hubbert curve as oil and may even be disappearing at a faster rate. All other energy sources combined cannot replace the volume of energy we derive from oil. For some alternative energy sources, such as ethanol, far more energy is expended in planting, fertilising, growing, harvesting and processing than its end product renders. No other energy source can fly planes or drive heavy trucks and machinery. Further, most of the world's fertiliser is now made from natural gas, and most of the world's pesticide is made from oil. As fuel prices double and then double again in the years after the peak, we will be faced with some very hard choices in the fields of agriculture, food distribution and transport generally.
I congratulate the government on its recent decision to preserve agricultural land in the south-east corner. The challenges we face after peak oil will require localised food production and industry in a way not seen for 100 years. Local rail lines and fishing fleets will be vital to regional communities. Self-contained communities living close to work, farms, services and schools will not be merely desirable; they will be essential.
There is much more to say on this topic. I note that it has now found its way into the mainstream media via a front-page story in the Wall Street Journal of 21 September 2004 and an editorial in the Washington Times of 2 November 2004. I welcome that public discussion and suggest that this topic should be considered in detail in Australia and in this place. For members who are interested in a very thorough treatment of this issue I recommend Richard Heinberg's detailed 2003 book The Party's Over.
Let me conclude with this simple statement of fact. Peak oil is coming-soon-and no alternative energy source available to us today or in the foreseeable future is going to make up the total energy shortfall. The beginning of the end of the oil age is upon us, and it is time to respond fully to that challenge. The petroleum bill before the House is a necessary step in that process. I congratulate the minister on this reform as well as on last year's Petroleum and Gas (Production and Safety) Act and the Petroleum and Other Legislation Bill that collectively regulate and encourage the exploration and development of petroleum and gas resources in Queensland. I commend the bill to the House.
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Global Public Media adds:
If you appreciate the stand Mr. McNamara is taking, we invite you to contact him and thank him at Tel: (07) 4124 1386 | Fax:(07) 4124 1443 | Email [email protected]
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