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Planning for
geopolitical and/or natural disruptions in the era of decline, post-cheap oil.
With SA admitting that OPEC won’t meet world demand in the future, the resource
oil Iraq invasion becomes almost undeniable. “Insurgents in their last throes”? Bah, humbug. KwC I forgot to
add the link to the Financial Times piece about the Saudis/OPEC yesterday,
never mentioned in the G8 summary statement today, although it was the ghost in
the room. Saudis warn of shortfalls
http://news.ft.com/cms/s/e0cdc282-ee47-11d9-98e5-00000e2511c8.html Simulated oil meltdown shows U.S.
economy's vulnerability WASHINGTON - Former
CIA Director Robert Gates sighs deeply as he pores over reports of growing
unrest in Nigeria. Many Americans can't find the African nation on a map, but
Gates knows that it's America's fifth-largest oil supplier and one that
provides the light, sweet crude that U.S. refiners prefer. It's 11 days before Christmas 2005, and the turmoil is preventing about 600,000
barrels of oil per day from reaching the world oil market, which was already
drum-tight. Gates, functioning as the top national security adviser to the
president, convenes the Cabinet to discuss the implications of Nigeria's
spreading religious and ethnic unrest for America's economy. Should U.S. troops be
sent to restore order? Should America draw down its strategic oil reserves to
stabilize soaring gasoline prices? Cabinet officials agree that drawing down
the reserves might signal weakness. They recommend that the president simply
announce his willingness to do so if necessary. The economic effects
of unrest in faraway Nigeria are immediate. Crude oil prices soar above $80 a
barrel. June's then-record $60 a barrel is a distant memory. A gallon of
unleaded gas now costs $3.31. Americans shell out $75 to fill a midsized SUV. If all this sounds
like a Hollywood drama, it's not. These scenarios unfolded in a simulated oil
shock wave held Thursday in Washington. Two former CIA directors and several
other former top policy-makers participated to draw attention to America's need
to reduce its dependence on oil, especially foreign oil. Fast-forward to Jan. 19, 2006. A blast rips through Saudi Arabia's
Haradh natural-gas plant. Simultaneously, al Qaida terrorists seize a tanker at
Alaska's Port of Valdez and crash it, igniting a massive fire that sweeps
across oil terminals. Crude oil spikes to $120 a barrel, and the U.S. economy
reels. Gasoline prices hit $4.74 a gallon. Gates convenes the
Cabinet again. Members still disagree on whether America should draw down its
strategic oil reserves. Homeland Security chief James Woolsey, who ran the CIA
from 1993 to 1995, argues that a special energy czar is needed with broad
powers to bypass the bureaucracy and impose offshore oil drilling and construction
of refineries. That won't help now,
though, or resolve any short-term issues, counters Gene Sperling, who was
President Clinton's national economic adviser. The energy secretary
suggests that relaxing clean-air standards could help refiners squeeze out
every last drop of gas. That makes the interior secretary, former Clinton
Environmental Protection Agency chief Carol Browner, bristle. She blames
Detroit for the mess because automakers failed to develop hybrids and other
fuel-efficient cars. The Cabinet can't
agree on even the simplest short-term solutions. There aren't many options
beyond encouraging car pools and lowering thermostats. There's no
infrastructure in place to deliver alternative fuels such as ethanol or diesel
made from soybeans or waste products. Fast-forward again, to
June 23, 2006. Emboldened Saudi insurgents attack foreign oil workers, killing
hundreds. A mass evacuation follows from the world's pivotal oil producer, the
one country that could be counted on to boost production during shortages in
global supplies. A take-charge guy with
a Texas accent who led the CIA from 1991 to 1993, Gates calls yet another
war-room meeting. Global recession looms. The world economy turns on cheap oil.
Without foreign oil workers, how will Saudi Arabia meet its production targets
and quench the oil thirst of America, China and India? Oil prices have
reached an unthinkable $150 a barrel. In Philadelphia, Miami and Kansas City,
Mo., gas prices reach $5.74 a gallon. Now it takes $121 to fill that midsized
SUV. You get the picture.
The scenario is intended to show how vulnerable the U.S. and world economies
are because of dependence on oil from places where political instability
threatens orderly production and distribution. This year the world is consuming about 84
million barrels of oil a day. America alone guzzles about 20.8 million barrels
a day. Experts think oil-producing nations have only 1.5 million barrels a day
or less of unused production capacity right now. A disruption anywhere could
cause market panic and spiking prices. That's largely why oil and gasoline prices are so high
right now. Saudi Arabia and other
countries are trying to increase production, but that won't help much before
next year at the earliest. Meanwhile, any hiccup in production, delivery or
refining could cause disaster. "A million or a million
and a half barrels of oil a day off the market is a very realistic kind of
scenario. You can think of a dozen different countries around the world ...
where you can see that happening. Or even a natural disaster could do that," Gates said in an interview. Former CIA chief
Woolsey described as "relatively mild" the scenarios that the
National Commission on Energy Policy and the advocacy group Securing America's
Future Energy simulated. Both groups are pushing for reduced dependence on
conventional oil. "It was striking that by taking such small
amounts off the market, you could have such dramatic impact" on
world oil prices, said Robbie Diamond, the president of Securing America's
Future Energy. Richard Haass was a
top adviser to former Secretary of State Colin Powell until 2003. The
simulation taught him how little influence policy-makers would have in
reversing an oil shock wave. "I think where most of the work has to happen
now, both intellectually and politically, is on demand" reduction,
Haass said. http://www.realcities.com/mld/krwashington/11979395.htm |
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