[The Guardian] Blood and oil Europe and America are taking increasingly divergent approaches to the unreliability of the Middle Eastern petroleum supply - one green, the other unrepentantly black, writes Randeep Ramesh
Thursday October 17, 2002 The question of whether oil is worth spilling blood over has been quietly raised by the foreign office minister, Peter Hain. In a speech today to the Royal United Services Institute in London, Mr Hain notes that the cost of protecting the Middle East's oil reserves, paid for mostly by the US and without which the west would grind to a halt, is as high as $25 (£16) a barrel - about the same as it costs to buy. Mr Hain, seen as an outrider for Blairite thinking, goes on to warn that no amount of money will guarantee petrol supplies to the west and consumers should be weaning themselves off the black stuff. At present the world remains so dependent on oil for transport, it cannot stand any disruption in supplies. Remember the chaos and gridlock that the fuel protests brought to Britain? Tony Blair does and now recognises the explosive nature of rising petrol prices. The potency of the oil weapon is not lost on Osama bin Laden, either, who has stated that crude oil should sell at $144 a barrel - about five times the price at which it currently trades. The attack on the Limburg oil tanker off Yemen's coast may prove to be al-Qaida's first targeting of the global economy. The Bush administration prefers not to discuss the economic effects of the war on terrorism as this could sap support domestically and abroad, especially in the Arab world where critics suspect, with good reason, the US of wanting to seize its vast petroleum riches. Instead the White House prefers to talk about imposing democracy and ridding the world of weapons of mass destruction. These are noble aims, but they are undermined by leaks suggesting a bolder grab for oil riches. Mr Bush's senior adviser on the Middle East, Zalmay Khalilzad, has pushed the idea of a post-Saddam Iraq as a colonial outpost of the American empire. Its large oil reserves, second only to Saudi Arabia, could be tapped more efficiently than at present and pay for the 75,000 troops required to administer the new Iraq. This both overestimates the ease of producing oil from a battle-scarred Iraq, which only manages to pump 1m barrels a day, and underestimates the risk of a global financial shock, a serious concern given that the last three big global recessions have been preceded first by a crisis in the Middle East followed by a spike in the oil price. While bombing Iraq would not in itself cause the oil price to rise sharply, an attack by Saddam on Saudi or Kuwaiti oil fields or an uprising in Riyadh would. The loss of, say, 5m barrels a day of oil production cannot be made up quickly or easily. A big crude producer paralysed by revolution can see production fall precipitously because its workforce is out on the streets rather than manning the taps in the terminal. This is what happened in Iran during the 1979 revolution. Iranian oil production fell from 6m barrels a day to 3m and never recovered. If the same happened in Saudi Arabia, the world would see oil prices spurt upwards. America's addiction to oil is difficult for Europeans to stomach. It is not just the consumption - a US citizen consumes 2.5 times the oil required by a British one - but the differing cultural and political beliefs of two continents. For example, green parties hold power in several nations, notably Germany, whereas Mr Bush's administration prides itself on being drawn from the oil industry. The EU has already committed itself to seeing 12% of all energy by 2010 coming from low-carbon, renewable sources in a bid to prevent climate change. Although the US Congress is considering a proposal to require utilities to supply 10% of power from renewables, the White House is suspicious of the theory of global warming and refuses to sign up to international treaties on climate change. European politicians are increasingly concerned over the reliance on oil and gas imports from unstable regions. As production from Britain and Norway decreases, Europe will have to import more of its petroleum. More than 92% of the continent's oil and 81% of its gas will come from abroad by 2030 - putting the continent at the mercy of Opec and a nascent gas cartel led by Russia, Iraq and Algeria. The message from Europe is the need to move faster to renewable energies - more than 2bn euros will be spent on green fuels such as hydrogen in the next three years. The US response is to build up its strategic reserve of oil, prospect for new fields in Alaska and consider launching a war for control of the world's biggest petrol pump. Given the diverging paths taken by the two power blocs, America should be wary of taking Europe's support for its military adventures for granted. Email [EMAIL PROTECTED]
