Prognosticating oil supplies
A rather alarming theory about oil supplies â which had been discussed mostly among fringe economists and on quirky Internet Web sites â has recently received much broader attention. Signs of the theory being taken seriously include a recent front-page story in the Wall Street Journal and advocacy by Matthew Simmons, a much-respected investment banker and former Bush energy adviser. Proponents' dire, near-term predictions are as yet unprovable, and they are widely refuted by all major energy companies and government oil ministries.
But I keep thinking of National Security Adviser Condoleezza Rice's statement that "No one could have imagined" the terrorist tactics used on September 11. Our national security managers need to "imagine" the consequences of this disturbing theory, watch closely as the data emerge, and prepare actions if it proves credible.
Very briefly, peak oil theorists state that world reserves of fossil fuels are much smaller and less recoverable than generally accepted estimates, and that prices will soon sharply increase as we reach a global halfway point in extraction of available supplies. Peak oil theory proponents track physical data from oil fields such as the Saudi Ghawar field and compare them with public data supplied by corporate and government sources. The theory was conceived by a contrarian geologist from Shell Oil in the late 1950s, and interested readers should judge for themselves the often-hyperventilated discussion of "Hubbert's peak" on myriad Web sites. Oil at $100 a barrel and climbing by 2006 is a typical scenario thrown around by some peak alarmists. At a high of $55 a barrel this month, we are finally getting close to the price spike that followed the 1979 revolution in Iran (about $61 a barrel in today's dollars).
Even if peak oil supply predictions are exaggerated, the risk of increasingly sophisticated supply disruptions by our adversaries, as global demand surges, is worrisome. Already, in Iraq, terrorists have moved away from horrific but largely symbolic terrorist acts towards attacks on supply lines â of oil pipelines, troop supply convoys, power and water distribution and most recently newly trained Iraqi army recruits. The extension of this supply choking strategy to global oil is a stated goal of al Qaeda, and related attacks in Saudi Arabia have already impacted world oil markets at the margins. If oil shortages and prices were to sharply increase, this strategy would have proportionally greater leverage to threaten the daily life of Americans, probably even more than direct physical attacks. The multiplier effects on U.S. supply chains and infrastructures would severely disrupt the manufacture and distribution of most goods and services. U.S. relations with politically unstable energy-supplier nations and energy-hungry competitors (particularly China) would be much further strained.
As prices at the pumps climbed and the impact spread to most facets of everyday life, many assumptions of liberals and conservatives would be challenged. Liberals would have to accept the necessity of crash investment in nuclear power, clean coal and energy-related defense efforts. Conservatives would have to accept the practical need for drastic energy conservation measures and renewable energy technologies that had previously been cost ineffective. The global warming debate would become irrelevant as fossil-fuel usage decreased due to purely market forces. In some dark way, maybe extreme self-interest would pull Americans together. Well, that's probably naive. "Peak oil" would more likely create a wrenching mess of our already troubled country. Hopefully it is just another flaky, Internet-stoked theory. But my advice to Miss Rice and the national-security folks would be to "imagine" the consequences now. Just in case.