Peak oil is here and we are facing the consequences now, is the conclusion of a recent report (pdf) from security think-tank Centre for a New American Security. ‘Peak Oil: A Survey of Security Concerns' shows how dwindling oil supplies threaten the entire American way of life, and pose a serious threat to international security.
Oil prices have soared to unprecedented levels this year. While previous oil crises have been sparked by political unrest, no single conflict can be identified as a cause this time around. "Deeper and more fundamental forces are driving prices this time," says the report author Dr. Neil King, "from galloping demand in Asia and the Middle East to the skyrocketing costs and complications to discover and develop new oil basins." The demand for oil is beginning to catch up with the limits of supply. In fact, King goes on to say, "historians may one day mark 2008 as the beginning of the end of the age of petroleum."
The timeframe for the end of oil is still a matter for dispute. The report suggests that supply will reach its full capacity in 2015. The IEA's World Energy Report for 2007 suggests this could be as early as 2012. Regardless of the exact year, an oil crunch is on its way. The consequences will impact every area of life, from dealing with urban sprawl and public transport, to airline bankruptcies, decline in the travel and tourism industries, to a drop-off in international trade: in 2000 it cost $3000 to ship a container of goods from China to the U.S. This year it costs $8000. Everything becomes more expensive. If prices continue to rise, imports will no longer be economically viable, starting with items such as air-freighted fresh fruits and flowers, or bottled water.
While environmentalists might celebrate some of these outcomes, there's no doubt peak oil could wreak havoc to our economy and our lifestyles. Much more serious than bottled water and fresh fruit however, are peak oil's challenges to national security, and it is these that the report focuses on: "Oil, and the need to protect it, secure it, or fight over it, has figured prominently in nearly every major war of the modern age" says King. "Those impulses will only increase in an age of scarcity."
Power has shifted in the world of oil. The U.S. not only enjoyed large reserves of its own oil, it has controlled a large percentage of everyone else's, with all the political influence of the world's only superpower. This has now been undermined on all fronts. U.S. oil peaked decades ago. Domestic supplies account for only a third of current consumption, and the U.S. needs to import an increasing amount every year - at a cost of $1.2 billion a day. The economies of China, India, Malaysia, and Japan also depend on oil for their continued growth, which means increased competition on the international market. This is complicated by national oil giants such as China's Sinopec or Russia's Gazprom, companies that wield considerable political power. A new balance of power is also emerging. China, India, and a Russia re-invigorated by energy wealth, are all superpowers in waiting. In this new chapter of international relations, the U.S. cannot afford to take anything for granted.
China is rapidly emerging as the most important competitor for resources, and "it doesn't require much of a leap to imagine a Cold War-style scramble between Washington and Beijing," warns King, "not for like-minded allies this time but simply for reliable and tested suppliers of oil." An early sign of this may be China's alliances with Iran, a sworn enemy of the U.S. Russia and India also have interests in Iran. Any conflict with Iran would result in a serious poisoning of relationships between the U.S. and the countries with oil and gas contracts in the region. (China and India have already been denied agreements they had made in Iraq, as all contracts with Saddam Hussein's government have been cancelled and the drilling rights given to U.S. oil companies.) Wars for oil look increasingly likely, and there is no knowing who will move first. "Soaring oil prices and market volatility could spark an outright oil war between major powers" King writes, "possibly ignited not by China or Russia, but by the United States."
Dr King leaves the report as a warning and does not make any recommendations, but we know the steps we need to take already. Greater fuel efficiency is step one, making the most of the oil that remains. Moving towards sustainable energy solutions, particularly in the area of transport, is the next challenge. Public transport will be increasingly important. Over time, we will need to re-design cities to reduce the need to drive, cutting back on long commutes and integrating commercial and residential areas.
Many U.S. military missions are currently about oil. (Somewhat ironically, the U.S. military currently uses 300,000 barrels of oil a day, an amount equivalent to the whole country of Portugal.) What would happen if the money spent on securing new oil by force was re-directed into investment in renewables?
Politically, it would surely be advisable to work with, rather than against, the other major powers. As Michael Klare suggests in his book ‘Rising Powers, Shrinking Planet', the U.S. and China could work together on solutions, co-funding research and sharing innovations. Money could be pooled to create an investment fund for renewable energy. The more cooperation there is between the powers, the less likely it is that we will end up in conflict. We're currently moving the other way, with increasing protectionism and nationalism, and a military build-up in oil-rich areas such as the Caspian Sea. But we can change direction. There is nothing inevitable about conflict for oil.
Further Reading:
What is the Peak oil argument for oil prices falling back below $75?... genuinely interested to see what impact this has on the peak point... will it push it further into the future?
Written in October 2008