[Marxism] Peak Oil and Energy Imperialism

Louis Proyect lnp3 at panix.com
Wed Jul 9 07:04:40 MDT 2008


http://www.monthlyreview.org/080707foster.php
Peak Oil and Energy Imperialism
John Bellamy Foster

The rise in overt militarism and imperialism at the outset of the 
twenty-first century can plausibly be attributed largely to attempts by 
the dominant interests of the world economy to gain control over 
diminishing world oil supplies.1 Beginning in 1998 a series of strategic 
energy initiatives were launched in national security circles in the 
United States in response to: (1) the crossing of the 50 percent 
threshold in U.S. importation of foreign oil; (2) the disappearance of 
spare world oil production capacity; (3) concentration of an increasing 
percentage of all remaining conventional oil resources in the Persian 
Gulf; and (4) looming fears of peak oil.

The response of the vested interests to this world oil supply crisis was 
to construct what Michael Klare in Blood and Oil has called a global 
“strategy of maximum extraction.”2 This required that the United States 
as the hegemonic power, with the backing of the other leading capitalist 
states, seek to extend its control over world oil reserves with the 
object of boosting production. Seen in this light, the invasion and 
occupation of Afghanistan (the geopolitical doorway to Western access to 
Caspian Sea Basin oil and natural gas) following the 9/11 attacks, the 
2003 invasion of Iraq, the rapid expansion of U.S. military activities 
in the Gulf of Guinea in Africa (where Washington sees itself as in 
competition with Beijing), and the increased threats now directed at 
Iran and Venezuela—all signal the rise of a dangerous new era of energy 
imperialism.

The Geopolitics of Oil

In April 1998 the United States for the first time imported the majority 
of the petroleum it consumed. The crossing of this threshold pointed to 
a very rapid growth in U.S. foreign oil dependency. At the same time 
fears that the world would soon reach peak oil production became 
increasingly prominent, assuming a high profile behind the scenes in 
establishment discussions. A key event was the publication in Scientific 
American in March 1998of “The End of Cheap Oil” by retired oil industry 
geologists Colin J. Campbell and Jean H. Laherrère. “The End of Cheap 
Oil” predicted that world oil production would peak “probably within 10 
years.” The Campbell and Laherrère article and the question of peak oil 
immediately drew the attention of the International Energy Agency (IEA), 
the OECD’s energy organization, in its World Energy Outlook of 1998. The 
IEA claimed that even adopting the pessimists’ assumptions on the real 
extent of world oil reserves and the existence of a bell-shaped 
production curve (but without the sharp oil price hike suggested by 
Campbell), its own long-term supply model “would not peak until around 
2008–2009.” Employing the IEA’s own assumptions on reserves, moreover, 
would push the peak back around a decade further.3 This, however, was 
still far from distant. The peaking of United Kingdom North Sea oil 
production in 1999 (Norwegian production peaked two years later) added a 
still greater sense of urgency.

Matthew Simmons, CEO of the Houston-based energy investmentbanking firm 
Simmons and Company International and a member of the National Petroleum 
Council and the Council on Foreign Relations, published an article in 
Middle East Insight in 1999 in which he emphasized the “far faster” 
depletion of major oil fields arising from high-extraction technology. 
Rather than extending the life of oil fields as previously supposed, the 
introduction of this technology most likely accelerated their depletion. 
Referring to oil fields “brought into production since 1970,” Simmons 
noted that “almost all of these new fields have already reached peak 
production and are now experiencing rapid rates of decline…fAnd when the 
stable base of old, but giant, fields also starts to deplete,” he asked, 
“what will this do to the world’s average depletion rate?”4

In 2000 Simmons’s concerns regarding diminishing oil supply led to his 
becoming an energy advisor for George W. Bush’s presidential campaign. 
As he recounted it in a February 2008 interview, he had “pulled aside” 
Bush’s “first cousin” in early March 2000 to tell him of an earlier 
conversation he had had with an assistant to Secretary of Energy Bill 
Richardson, who had been sent to examine the spare oil production 
capacity of the OPEC countries. As Simmons reported to Bush’s cousin:

     I said, “When you have someone who is the head of U.S. oil policy 
call you and [say ‘shit!’] about five times in 20 seconds, this is so 
much worse than what they’ve warned us about.” I said, “Between now and 
the election, if this all breaks out and Bush is misinformed, he can 
mispronounce every head of state in the world, but this, this will sink 
you.” And that dragged me into helping create the comprehensive energy 
plan put forth by Bush when he was running.5

Simmons was a member of the Bush-Cheney Energy Transition Advisory 
Committee, advising on the growing oil constraints. His 2005 book, 
Twilight in the Desert: The Coming Saudi Oil Shock and the World 
Economy, arguing that the Saudi oil production peak was imminent, has 
become one of the most influential works propounding the peak oil notion.6

The Energy Information Administration (EIA) of the U.S. Department of 
Energy conducted a full assessment of the peak oil issue as early as 
July 2000, considering a number of scenarios. As opposed to those who 
saw the peak occurring “as early as 2004” the EIA concluded that “world 
conventional oil production may increase two decades or more before it 
begins to decline.” The analysis itself, however, was not altogether 
reassuring to the vested interests, since it suggested that a world oil 
peak could be reached as early as 2021.7

These concerns with regard to world oil supply that began to penetrate 
the corridors of power in the 1998–2001 period led to a wide-ranging 
debate within the inner circles in the United States about the nature of 
the oil extraction problem and the strategic means with which to 
alleviate it. This was increasingly integrated with wider issues on the 
expansion of the U.S. empire raised by groups such as the Project for a 
New American Century.8

In July 1998 the Center for Strategic and International Studies (CSIS) 
launched its “Strategic Energy Initiative,” at the urging of former 
chairman of the Senate Armed Services Committee Sam Nunn and former 
secretary of defense (and former secretary of energy) James R. 
Schlesinger. In November 2000, the Strategic Energy Initiative issued a 
three volume report, The Geopolitics of Energy into the 21st Century, 
with Nunn and Schlesinger as cochairs. It stressed that the Persian Gulf 
would have to expand its energy production “by almost 80 percent during 
2000–2020” in the face of rising demand and declining oil production 
elsewhere in the world in order to meet world energy needs.

The question of a world oil peak in the decade 2000–10 was also 
examined, focusing on the arguments of Campbell and Laherrère and 
Simmons. The CSIS Strategic Energy Initiative officially rejected the 
notion that the world oil peak would be reached as early as 2010. 
Nevertheless, its report took the peak oil issue extremely seriously. As 
the “only superpower” the United States, it declared, had “special 
responsibilities for preserving worldwide energy supply” and “open 
access” to the world’s oil. Underscored throughout the report was the 
necessity of finding ways to increase oil exports from Iraq and Iran 
both then under U.S. economic sanctions.9

In 2001 the James Baker III Institute for Public Policy of Rice 
University and the Council on Foreign Relations cosponsored a study of 
Strategic Energy Policy Challenges for the 21st Century, chaired by 
energy analyst Edward L. Morse. Task force members included both oil 
optimists, such as Morse and Daniel Yergin of Cambridge Energy Research 
Associates, and oil pessimists such as peak oil proponent Simmons. The 
Baker Institute/Council on Foreign Relations report emphasized the 
adequacy of world oil reserves for decades to come but argued that world 
oil was facing “tight supply” due to “underinvestment” in new production 
capacity and “volatile states.” Excess capacity had been “wiped out,” 
falling to “negligible” amounts, partly due to oil producing countries 
devoting oil revenues to social projects rather than to investment in 
new production capacity.

In this situation, the Baker Institute/Council on Foreign Relations 
report pointed out that Iraq had emerged as a key “swing producer” of 
oil, operating well below capacity, and in the previous year “turning 
its taps on and off when it has felt such action was in its strategic 
interests to do so.” This presented a growing danger to the world 
capitalist economy, which included the “possibility that Saddam Hussein 
may remove Iraqi oil from the market for an extended period.” Indeed, 
“Iraqi reserves,” the Strategic Energy Policy report emphasized, 
“represent a major asset that can quickly add capacity to world oil 
markets and inject a more competitive tenor to oil trade.” Investment in 
the enhancement of Iraqi oil production capacity was essential. The 
problem was what to do about Saddam Hussein.

Overall, the Baker Institute/Council on Foreign Relationsreport 
emphasized, the stakes were exceedingly high, since there was a danger 
that oil price increases and supply shortages would make “the United 
States appear more similar to a poor developing country.”

The answer was for the Western powers led by the United States to play a 
more direct role in the development of world oil resources. This would 
be coupled with replacement of the current political economy of oil 
dominated by national oil companies, which had arisen with the growth of 
“resource nationalism” in the third world, with one in which the 
multinational oil corporations centered in the advanced capitalist 
economies once again took charge of reserves and investments.10

These reports by national security analysts on strategic energy policy 
were followed in May 2001 by the White House release of its National 
Energy Policy, issued under the direction of Vice President Dick Cheney. 
It too emphasized the need for U.S. petroleum security, noting that 
total U.S. oil production had fallen 39 percent below its 1970 peak and 
that U.S. reliance on foreign oil imports could increase to almost 
two-thirds of its total gasoline and heating oil consumption by 2020. 
President Bush warned in May 2001 that dependence on foreign crude oil 
put U.S. “national energy security” in the hands of “foreign nations, 
some of whom do not share our interests.”

In terms of the long-term world oil supply outlook, the U.S. Department 
of Energy’s International Energy Outlook in 2001 projected the need for 
a doubling of Persian Gulf oil production over 1999 levels by 2020 in 
order to meet expected world demand. This optimistic forecast could not 
possibly be fulfilled, however, without massive investment in an 
expansion of capacity in the Persian Gulf of a kind that key states, 
such as Iraq and Iran, and even Saudi Arabia, seemed unlikely to 
undertake. Iraqi crude oil production in 2001 was 31 percent less than 
in 1979, while Iran’s had fallen by about 37 percent since 1976. Both 
nations were viewed as underproducing due to underinvestment and the 
effects of sanctions. The IEA estimated that Persian Gulf states would 
have to invest over half a trillion dollars on new equipment and 
technology for oil production capacity expansion by 2030 in order to 
meet projected oil production levels.11

U.S. national security and energy analysts as well as energy 
corporations and the Bush administration had thus arrived at the 
conclusion by spring 2001 that, while substantial oil reserves still 
existed, capacity was extremely tight, presaging a series of oil price 
shocks. Only a vast increase of oil production in the Persian Gulf as a 
whole could prevent an enormous gap emerging between oil production and 
demand over the next two decades. Behind all of this lay the specter of 
peak oil production.

Rather than try to solve the problem on the demand side by lessening 
consumption, the Bush administration turned, as had all other 
administrations before it, to the military as the ultimate guarantor. As 
Michael Klare wrote in his Blood and Oil:

     In the months before and after 9/11, the Bush administration 
fashioned a comprehensive strategy for American domination of the 
Persian Gulf and the procurement of ever-increasing quantities of 
petroleum. It is unlikely that this strategy was ever formalized in a 
single, all-encompassing White House document. Rather, the 
administration adopted a series of policies that together formed a 
blueprint for political, economic, and military action in the Gulf. This 
approach—I call it the strategy of maximum extraction—was aimed 
primarily at boosting the oil output of the major Gulf producers. But 
since the sought-after increases could be doomed by instability and 
conflict in the region, the strategy also entailed increased military 
intervention.12

Militarily the issue was one of shoring up Saudi Arabia in the face of 
growing signs of instability, carrying out regime change in Iraq, and 
exerting maximum pressure on Iran. Key figures in the Bush 
administration such as Donald Rumsfeld and Paul Wolfowitz had been 
pushing for an invasion of Iraq even before the election. Once the 
September 2001 attacks occurred, the “War on Terrorism” led to the 
invasion first of Afghanistan, giving the United States a geopolitical 
doorway (and pipeline route) to Central Asia and the Caspian Sea Basin, 
followed by the invasion in 2003 of Iraq. From the standpoint of the 
geopolitics of oil, Saddam Hussein’s removal and the occupation of Iraq 
was seen as enhancing the security of Middle East oil, presenting the 
possibility of a big boost in Iraqi oil production, and providing a 
staging ground for increased U.S. military, political, and economic 
dominance of the Gulf. U.S. strategic control of the Middle East and its 
oil was viewed as the key to establishing the basis of a “new American 
century.”

As former Federal Reserve Board Chairman Alan Greenspan, the top U.S. 
economic official throughout this period, stated in his book The Age of 
Turbulence in 2007: “I am saddened that it is politically inconvenient 
to acknowledge what everyone knows: that the Iraq war is largely about 
oil.” The U.S. invasion of Iraq, Greenspan claimed, needed to be seen 
against the background of previous Western military interventions aimed 
at securing the oil of the region, for example: “the reaction, to and 
reversal of, Mossadeq’s nationalization of Anglo-Iranian oil in 1951 
[resulting in the CIA’s overthrow of Iranian Prime Minister Mossadeq and 
the installation of the Shah in 1953] and the aborted effort by Britain 
and France to reverse Nasser’s takeover of the key Suez Canal link for 
oil flows to Europe in 1956.” The U.S. intervention in Iraq and its 
increased military role in the Middle East was, for Greenspan—the 
leading spokesperson for financial capital in the 1990s and early 
2000s—justified by the fact that “world growth over the next quarter 
century at rates commensurate with the past quarter century will require 
between one-fourth and two-fifths more oil than we use today.” And this 
vast increase in oil production needed to come largely from the Persian 
Gulf, where two-thirds of the world’s reserves and hence most of its 
capacity for increased extraction was located.13

Although the Bush administration criticized Greenspan’s statement, the 
centrality of oil in the occupation of Iraq was not something that it 
could easily deny. In a September 13, 2007, prime time television 
speech, Bush declared that if the United States were to pull out of Iraq 
“extremists could control a key part of the global energy supply.”14

Peak Oil: A Global Turning Point?

In the five years that have elapsed since the United States invaded Iraq 
the world oil supply problem has drastically worsened. Estimates of the 
potential for increased Iraqi oil production made prior to the war had 
suggested that Iraq free of sanctions could potentially increase its 
crude oil production within a decade from its previous 1979 high of 3.5 
million barrels a day (mb/d) to 6 or even 10 mb/d.15 Instead, Iraq’s 
average annual oil production in 2007 had fallen to 13 percent below its 
2001 level, having declined from 2.4 to 2.1 mb/d. Oil production in the 
Persian Gulf as a whole increased by 2.4 mb/d on average between 2001 
and 2005 and then dropped by 4 percent in 2005–07, along with the 
stagnation of world oil production as a whole.16

At the time U.S. troops reached Baghdad peak oil was already a specter 
looming over the globe. Today it is present in all establishment 
discussions of the world oil issue. Peak oil is not the same as running 
out of oil. Rather it simply means the peaking and subsequent terminal 
decline of oil production, as determined primarily by geological and 
technological factors. The extraction of oil from any given oil well 
typically takes the form of a symmetrical, bell-shaped curve with 
extraction steadily rising, e.g., by 2 percent a year, until a peak is 
reached when about half of the accessible oil has been extracted. Since 
oil production for an entire country is simply a product of the 
aggregation of individual wells, national oil production can be expected 
to take the form of a bell-shaped curve as well. Geologists have become 
adept at estimating the point at which a peak in national production 
will occur. These methods were pioneered in the 1950s by oil geologist 
M. King Hubbert, who achieved fame for successfully predicting the U.S. 
oil peak in 1970. The eventual peak in oil production is therefore 
sometimes known as “Hubbert’s peak.”

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