by John Gault
03-05-06
President George W. Bush's recent admission that "America is addicted to oil"
and his vow to use new technologies "to replace more than 75 % of our oil
imports from the Middle East by 2025" attracted considerable attention in the
United States and abroad.
While the President avoided the term "energy independence" in his 2006 State of
the Union speech, his aspiration to disconnect America from its dependence on
Middle Eastern oil echoes the stated desires of leaders from both major US
political parties over the past thirty years.
While a reduction in American reliance on imported oil has been promoted
domestically as being good for the United States, oil and energy consumers
worldwide would also benefit, because any decline in global oil demand (or in
its rate of growth) will help to relieve pressure on limited crude oil
production capacity. Moreover, a reduction in US oil imports should improve
America's image abroad.
Viewed from the outside, America is seen as an energyglutton, consuming a
quarter of the world's oil production. Americans should, in the eyes of the rest
of the world, be able to reduce their oil consumption without reducing their
standard of living.
So, if the President is proposing a reduction in America's dependence on
imported oil, shouldn't the rest of the world applaud this latest US energy
security ambition? Instead, the new emphasis has elicited only lukewarm
response, for two main reasons:
-- First, the new emphasis appears to be a retreat following the demise of
previous US energy security policies. The President's new emphasis is seen as
arising not from choice but from desperation.
-- Second, the new emphasis lacks the essential elements for real, long-run
energy security: creating idle capacity at critical nodes in the energy supply
chain, allowing the market to determine which new technologies are most
promising, and removing the causes of Arab and Islamic hostility toward America.
The new emphasis is an admission that other strategies have failed
The Bush "addiction to oil" statement raised eyebrows both inside and outside
America because his explicit emphasis on reducing imports from the Middle East
implicitly recognizes that Gulf oil supplies cannot be militarily secured. Such
an admission, while hardly revolutionary, seems to contradict what many assumed
was the real motivation for invading Iraq: to secure Gulf oil supplies for the
indefinite future.
The Bush administration, for obvious reasons, never touted energy security as a
central justification for the invasion, even as other pretexts -- from weapons
of mass destruction to the linkage between Saddam Hussein and 9/11 -- were
discredited.
Nevertheless, oil long hovered in the background. When White House Economic
Adviser Laurence Lindsey told the Wall Street Journal in September 2002 that the
cost of the Iraq invasion could be as high as $ 100 to $ 200 bn (an estimate the
White House quickly disavowed as too high), he indicated that one could expect
an additional 3 to 5 mm bpd of Iraqi oil production following the ouster of
Saddam.
To date, the United States government has spent over $ 250 billon on the Iraq
invasion and occupation. Linda Bilmes of Harvard University and Joseph Stiglitz
of Columbia University estimate the eventual budgetary and non-budgetary cost of
the Iraq intervention will be between $ 1 and $ 2 tn.
This expensive adventure, far from improving US energy security, has actually
rendered security more precarious. So far, the Iraqi invasion has contributed to
the demise of the old US energy security quid-pro-quo in the Middle East. This
arrangement had two parts: friendship with traditional regimes ruling the oil
producing states, and willingness to use military might to protect their power
and their oilfields.
In return, the US received assurances of ample oil supplies at moderate prices.
For decades this quid-pro-quo endured, although at increasing cost to the United
States, which had to rescue Kuwait and thenceforth to maintaina stronger
military presence in the region.
The ongoing incursion in Iraq forever changed this equation. It revealed that
even a US military occupation could not adequately protect oil installations
from sabotage. It revealed that the US, tied down in Afghanistan and Iraq, might
not be able to come to the rescue of another regime at the same time.
It revealed that the Bush Administration would now promote democratization in
the Greater Middle East, tacitly criticizing some of America's oldest allies.
And it continues to reveal and augment the strength of anti-American feelings
throughout the region, putting governments friendly to the US in an awkward
position.
Even an increase in Iraq's oil production capacity has not been achieved.
Iraqi experts, soon after the invasion, spoke of capacity rising to 6 mm bpd by
2010 given sufficient investment. In fact, Iraq's oil output is today well below
pre-invasion levels. Major oil companies, eager to invest in Iraq's petroleum
industry, wait in the wings pending the emergence of a stable government and an
improvement in physical security.
So, to date, a military intervention which eventually will cost $ 1-$ 2 tn (and
tens of thousands of Iraqi, American and other dead and wounded) has hardly paid
off in terms of US energy security.
Sceptics therefore wonder whether Mr Bush's new emphasis on disconnecting his
country from Middle East oil is just a belated recognition that his efforts to
project US power in the region have proven too costly and ineffective, and that
the pre-invasion security structure in the Gulf cannot be reinstated.
From this perspective, the new emphasis can be interpreted as a fall-back
strategy after nothing else has worked, and sceptics wonder whether this
second-term President has either the will or the political leverage to implement
it.
A credible American energy security strategy must include three
fundamental elements
Recent events suggest that any meaningful US energy security policy would
include three important elements:
-- maintaining idle capacity in critical energy facilities,
-- helping the market identify the most promising new technologies, and
-- re-establishing a positive public perception of America in the Middle East.
None of these featured in the 2006 State of the Union address.
Maintaining idle capacity
For more than two decades global oil production capacity remained well ahead of
consumption. Most of the idle production capacity was in the Middle East Gulf.
Gulf producers used this capacity to moderate upward oil price pressures, for
example during the early 1980s (the Iran-Iraq war), the autumn of 1990 (the
Iraqi invasion of Kuwait), in January 2003 (when an oil workers' strike cut
Venezuela's oil production), and in the months following the US-led invasion of
Iraq in March 2003.
To promote energy security, American policies should encourage a margin of idle
production capacity in major producing countries. This means US sanctions
restricting investment in such countries should not be imposed quite so easily
or so often. This means the US should listen carefully to reasonable pleas from
producer governments seeking recognition of and reciprocity for their
maintenance of idle capacity.
Helping the market identify the most promising new technologies
Energy technologies undoubtedly will continue to contribute to energy security
by increasing the efficiency of production and delivery of existing energies, by
making old energy sources more environmentally friendly, by bringing new energy
sources to market at competitive prices, and by making all energy network
components more reliable.
To improve energy security, the US government can and should encourage the
private development of energy technologies because there are significant
externalities (such as a cleaner environment and greater energy security) for
which the social benefits cannot be captured by private investors.
To realize the greatest technological contribution to energy security at the
least cost to society, government support should be as technology-neutral as
possible. Taxes and/or subsidies should reflect externalities rather than being
targeted to promote individual technologies or specific new energy sources.
It is extremely unlikely that the most promising new technologies will be those
selected in Congressional committees or those most promoted by lobbyists.
Democracy has many advantages but popularity is not the best guide to scientific
achievement.
Reducing hostility toward America
Under any plausible scenario, world energy markets will continue to rely on oil
from the Middle East and, increasingly, on natural gas from the same region. Our
global economic interdependence guarantees that an oil shortage anywhere will
affect the United States immediately.
While such global interdependence is expanding, the United States seems to have
forgotten the fragility of its important relationships in the Middle East.
American energy security now requires a break with the past and a new approach
to all the peoples of the Middle East. Propaganda will not achieve this; what is
needed is substance, not spin.
An America primarily concerned with energy security today would:
-- set an irreproachable example at home by strengthening American secular
democracy, enhancing racial and ethnic equality, and improving the lot of the
impoverished so clearly revealed to the world by Hurricane Katrina.
-- set an irreproachable example internationally by reasserting America's
commitment to the Geneva Conventions and their universal applicability, and by
joining the International Criminal Court.
-- withdraw American troops from Iraq as quickly as feasible. Whatever the
reasons for their original mission, their continued presence now provokes
resistance and provides justification for terrorist attacks.
-- avoid policies in the region that open the United States to accusations of
hypocrisy.
The US must no longer assert it is enforcing United Nations Security Council
resolutions in some countries (Kuwait, Iraq) while blocking implementation of UN
resolutions elsewhere (Israeli-occupied Palestine). Nuclear weapons cannot be
quietly tolerated in Israel, Pakistan and India while being fought
tooth-and-nail in Iran.
The Bush call for independence from Middle East oil is a fantasy. Instead, a
strategy including the fundamental elements recommended here would better
enhance American energy security. Unfortunately, these elements did not feature
in the Bush 2006 State of the Union address.
Dr Gault is an independent energy consultant based in Geneva.
Source: Al-Hayat